Vermont Tax Schedule IN-113 - Income Adjustments Schedules Instructions

General Informations

Supporting Documents Required: Copies of pages 1 and 2 of Federal income tax return and any Federal schedules reporting VT income or loss.

• If you recomputed the Federal return for VT purposes only, use the recomputed amounts and send a copy of the Federal income tax return filed with the IRS and the recomputed return for VT tax purposes.
• For Married Filing Separately or Civil Union Filing Separately, all income of the individual filing must be included in Column A -- not just VT income. The adjustment calculation excludes the non-VT income.

Residents: Use Part II to adjust for income exempt from VT income tax.

Part-Year Residents and Nonresidents: Complete Parts I and II. Part-Year Residents may, in some cases, be able to adjust VT income by both the VT percentage of income and credit for income tax paid to another state. The income tax paid to the other state must be for income earned in VT while a VT resident. Go to our web site at http://tax.vermont.gov or contact the Department for information on how to file for income earned in another state while a VT resident. See page 6 for a definition of nonresident and part-year VT income.

PART I (For Nonresident and some Part-Year VT Resident)

Lines 1 - 15, Column A

Enter the income for these categories of adjusted gross income as shown on your Federal income tax return.

NOTE: For Line 3A - Use amount from 1040, Line 9a or 1040A, Line 9a.

For Line 15A - Use amounts from 1040, Lines 14 and 21. Nonresidents: Use this line to adjust for non-VT state and local obligations and U.S obligation interest.

Lines 1 - 15, Column B

Enter the VT portion of your Federal adjusted gross income that is included in adjusted gross income on your Federal income tax return.

NOTE: For Line 3B - Use the amount of ordinary dividends received while a VT resident.

For Line 15B - Use the amount of other income earned or received from Vermont sources.

See examples for Line 17, Column B for proration of deductions to VT for Lines 18, 19, 21, 23, 24 and 26.

Line 16, Column A

Examples of other income: gambling winnings including lotteries, raffles or lump-sum payment from sale of right to receive future lottery annuity; reimbursement this year for items itemized last year such as medical expenses; interest; income from rental of personal property; taxable distributions from Coverdell ESA or Qualified Tuition Plan, medical savings account or Archer MSA.

Line 16, Column B

Enter the portion of Other Income earned or received from VT sources.

Line 17, Column A

Enter the Federal adjustment for Keogh, SEP, or SIMPLE deduction from 1040 Line 28; IRA deduction from 1040, Line 32 or 1040A, Line 17.

Line 17, Column B

Enter the VT portion. This is determined by using the percentage of VT earned income to the amount of earned income reported on the Federal return. Examples: 1) Charles moves to VT in July. His total Federal wages are $20,000. Charles is a VT resident for six months. He earned $10,000 in VT. The VT portion is 50% as he earned 50% of his income in VT. Charles has an IRA deduction of $1,000. The amount to enter in this column is 50% of $1,000 or $500. For a joint return, use the same allocation method, but do a separate calculation for each spouse. 2) Charlene lives in NH and earns her income in VT. Her total Federal and VT wages are $20,000 with an IRA deduction of $1,000. The amount to enter in this column is $1,000. 3) Chuck lives in NH and earns income in VT. His total Federal wages are $20,000 with $15,000 from VT. He has a $1,000 IRA deduction. The amount to enter in this column is 75% ($15,000/$20,000) of $1,000 or $750.

Line 18, Column A

Enter the amount for Student Loan Interest from 1040, Line 33 or Form 1040A, Line 18.

Line 18, Column B

Enter the portion of Student Loan Interest paid while a VT resident.

Line 19, Column A

Enter the amount of expenses for reservists, performing artists or fee-basis government officials from 1040, Line 24.

Line 19, Column B

Enter the portion of the Employee Deductions paid or incurred while a VT resident.

Line 20, Column A

Enter the combined amounts of self-employment tax from 1040, Line 27, self-employed health insurance from 1040, Line 29.

Line 20, Column B

Enter the VT portion of these self-employment deductions. Entries are based on where tax or insurance was imposed.

Line 21, Column A

Enter the deduction amount for Health Savings Account from 1040, Line 25.

Line 21, Column B

Enter the VT portion paid while a VT resident.

Line 22, Column A

Enter the amount for moving expenses from 1040, Line 26.

Line 22, Column B

The VT portion for moving expenses are expenses incurred for a move into VT.

Line 23, Column A

Enter the amount for penalty on early withdrawal of savings from 1040, Line 30.

Line 23, Column B

The VT portion of penalty on early withdrawal of savings is the penalty imposed during VT residency.

Line 24, Column A

Enter the amount for Alimony from 1040, Line 31a.

Line 24, Column B

The VT portion is the alimony paid during VT residency.

Line 25, Column A

Enter the amount for Domestic Production Activities from 1040, Line 35.

Line 25, Column B

If you used the Domestic Production Activities deduction, go to http://tax.vermont.gov or contact the Department for instructions on calculating the VT portion.

Line 26, Column A

Enter the combined amounts of Educator Expenses from 1040, Line 23 or 1040A, Line 16, and Tuition and fees from 1040, Line 34 or 1040A, Line 19.

Line 26, Column B

The VT portion of Educator Expenses and Tuition and fees during VT residency.

Deductions not listed but included on 1040, Line 36 or 1040A, Line 20

Line 27, Column A

Enter deduction(s) to AGI that are included in the total on Form 1040, Line 36 or Form 1040A, Line 20. Examples: repayment of supplemental unemployment compensation, certain attorney or court costs for unlawful discrimination claim. See Federal instructions for Form 1040, Line 36 or 1040A, Line 20 for other deductions and more information.

Line 27, Column B

Enter the portion of the deductions paid or incurred during your VT residency or resulting from VT income earned or received.

Dates of VT Residency in 2008. Enter the dates you lived in VT in 2008.

Name of State(s) During Non-VT Residency Write the names of the other states, Canadian provinces, or countries where you were a resident in 2008.

PART II Adjustment for VT Exempt Income

Line 32

If Part I completed, enter the amount on Line 29. Otherwise, enter Adjusted Gross Income from Form IN-111, Section 2, Line 10.

Line 33

Part-Year Residents and Nonresidents: Enter the amount from

Part I, Line 31. Full-Year Residents: Enter 0.

Line 34

Enter the amount of VT exempt military pay received in 2008 that is included in your Federal adjusted gross income. Exempt military pay is:

• I. Wages earned from the armed services for full-time active duty outside of VT. Supporting Documents Required: Copy of active duty orders.
• II. Up to $2,000 for National Guard or U.S. Reserve training pay earned in VT if your adjusted gross income for tax year 2008 is less than $50,000. Supporting Documents Required: Copy of DFAS form or certification statement from unit that all training was completed during the calendar year.
• III. Student loan repayment can be taken only if the amount is included in your adjusted gross income. Enter the repayment benefit made under 10 U.S.C. Chapters 109 and 1609 for 2008 year.

Supporting Documents Required: Certification statement from armed services showing your name, address, social security number, amount of student loan repayment, and payment date.

• Deployed members of the National Guard or U.S. Reserve may be eligible for exemption of both full-time military pay and monthly training.
• Persons assigned by their employer to work on a military project are not members of the armed services.

Line 35 Federal Employment Opportunity

Enter the amount of wages or expenses required to be added back to Federal AGI under IRC Sections 280C or 44.

Line 36

Enter the amount you received in 2008 for Regular Railroad Retirement Benefits (Tier 1) and Supplemental Railroad Annuity Payments (Tier 2). This income is taxable at the Federal level, but exempt from VT income tax. If you receive social security that includes Tier 1 or Tier 2 benefits, enter only the portion included in your Federal adjusted gross income. Supporting Documents Required: Copy of 1099, 1099RB, WP-4 or any other document you received showing payment of these benefits.

Line 37

Enter the amount paid by the State of VT to a family for the support of an eligible person with a developmental disability, as defined in 18 V.S.A. §8722(2). This exclusion does not apply to income of caretakers or contractors hired by the family or guardian of the person with a developmental disability, even if the payment comes directly from the State. $ This amount may be excluded only if the payment is included in your adjusted gross income.

Line 38

Enter the amount or the portion eligible for VT business expenses made to comply with the Americans with Disabilities Act under Internal Revenue Code §44. Supporting Documents Required: Copy of Federal form.

Line 39

(For Nonresidents Only) Enter the amount of VT income earned for a dramatic performance in a commercial film production that is excluded from income tax in your state of legal residence.

Line 40

Enter the amount of interest or income you received from a bond or note of the VT Telecommunications Authority.

Line 41

Add Lines 33 through 40 and enter result. This is the total amount of income not subject to VT income tax. $No entry is needed on this line if you did not have entries on Lines 33 - 40.

Line 42

Subtract Line 41 from Line 32. This is the VT income subject to tax.

Line 43

Divide Line 42 by Line 32. Enter result and also on Form IN-111, Section 4, Line 21.

• Carry out to two decimal places.

Example: (Line 42) $ 4,000 / (Line 32) $18,000 = .2222 x 100 = 22.22%

NOTE: If Line 42 (VT income) equals or exceeds Line 32 (adjusted gross income), enter 100.00% and also on Form IN-111, Section 4, Line 21.

If Line 32, 33, 41, or 42 is negative, go to the Department web site at http://tax.vermont.gov or call 866-828-2865 (toll-free in VT) or 802-828-2865 for instructions.