Ohio I-File

OHIO I-FILE TAX RETURN
REPORT YEAR 2003

Schedule A - Deductions

State or Municipal Refund (line 35)

If you filed a Federal 1040 tax return, you may be entitled to a deduction on your Ohio tax return for state or municipal income tax refunds. You are not entitled to a deduction if you filed a federal Form 1040EZ, 1040A, or 1040TEL. Complete the worksheet below to determine if you are entitled to a deduction.

State or Municipal Refund Worksheet

If you filed a federal Form 1040 tax return, you may be entitled to a deduction on your Ohio tax return this year for state or municipal income tax refunds you received in 2003. You are not entitled to a deduction this year if you filed a federal Form 1040EZ, 1040A, or 1040TEL. Complete this worksheet to determine if you are entitled to a deduction on line 2 of this return.

a) Did you file a 2003 federal Form 1040EZ or
Did you file a 2003 federal Form 1040A or
Did you file a 2003 federal form by telephone?
c Yes. STOP and enter -0- on line 35 of this return.
c No. Complete line b.

b) Did you file a 2003 federal Form 1040?
c No. Enter -0- on line 35.
c Yes. Go to line 10 of your federal Form 1040 to determine if you are entitled to a deduction on your Ohio return. The deduction is for state or local income tax refunds that you claimed as an itemized deduction (Schedule A) on your 2001 federal Form 1040 and added back on your 2003 federal Form 1040. Enter the amount from line 10 of your 2003 federal Form 1040 here and on line 35 of this return. $ ____________

Disability and Survivorship Benefits (line 36)

Certain disability and survivorship benefits may be deducted on your Ohio income tax return.

You MAY DEDUCT:

Benefits from an employee's disability plan paid as the result of a permanent physical or mental disability. Note that the disability must be (or presumed to be) permanent. Disability means a permanent physical or mental impairment which makes you unable to work for pay in the jobs for which you are qualified by training and experience.
Survivorship benefits paid from a qualified survivorship plan as the result of the death of a covered employee.

YOU MAY NOT DEDUCT:

Payments which otherwise qualify as retirement or pension benefits. Upon reaching minimum retirement age, disability benefits which are under an employee disability plan are considered retirement or pension benefits and are no longer deductible. (See instructions for line 46 for the proper treatment of retirement benefits.)
Temporary wage continuation plans.
Payments for temporary illnesses or injuries.

See Tax Commissioner Rule 5703-7-08 for additional information about this deduction.

Social Security and Some Railroad Benefits (line 37)

Deduct the following benefits only if and to the extent they are included in your Federal Adjusted Gross Income.

Social Security Benefits
Tier I and Tier II Railroad Retirement Benefits
Supplemental Railroad Retirement Benefits
Dual Railroad Retirement Benefits
Railroad Disability and Unemployment Benefits

College Guaranteed Variable Savings Account and Ohio Tuition Credits (line 38)

You may deduct contributions made in 2003 to the Ohio Tuition Trust Authority's College Advantage Savings Plan to the extent the contributions were not deducted in computing your federal adjusted gross income. Up to $2,000 per beneficiary may be deducted. Qualifying amounts exceeding the $2,000 limitation may be deducted on future returns until all unused portions are deducted. Married taxpayers may deduct up to a maximum of $2,000 per beneficiary whether their filing status is married joint or married separate.

Note: This deduction does not apply to investments in Section 529 qualified tuition plans offered by other states.

The earnings from a CollegeAdvantage account are excluded from Federal Adjusted Gross Income. Therefore, Ohio does not tax any participants (account owners, other contributors, or beneficiaries) in a CollegeAdvantage Account on the earnings of the Account before the earnings are distributed and no additional adjustment will be necessary to exclude these earnings from your Ohio Taxable Income.

If you receive a distribution from a CollegeAdvantage account (either used for qualified higher education expenses or not), a portion of the distribution will be considered earnings and a portion will be considered a return of principal (amounts originally contributed by someone to the Account). For 2003, the earnings portion should have been reported to the recipient by the CollegeAdvantage Savings Plan on Form 1099G, Box 5. For federal income tax purposes, the amount in Box 5 should be included by the recipient in their Federal Adjusted Gross Income. If all or a portion of the distribution was used for qualified higher education expenses (as defined in IRC Section 529), the earnings attributable to that portion may be deducted on Line 38. Earnings that were not used to pay for qualified higher education expenses are subject to both Ohio and federal income tax and no adjustment should be made on Line 38 for that portion. If you are unsure of the portion of your distribution used for qualified higher education expenses, contact CollegeAdvantage at 1-800-233-6734.

CollegeAdvantage is a federal section 529 Qualified Tuition Program administered by the Ohio Tuition Trust Authority. For more information about CollegeAdvantage please call 1-800-AFFORD-IT (233-6734) or log on to the Tuition Trust web site at www.collegeadvantage.com.

Tuition Expenses Paid to Qualified Ohio Educational Institution (line 39)

If you are an Ohio resident and if you are either a single taxpayer with a federal adjusted gross income of less than $50,000 or a married taxpayer filing a joint return with a federal adjusted gross income of less than $100,000, then you may qualify for the new tuition expense deduction.

Married taxpayers who file separate returns and all nonresidents cannot claim this deduction.

If you met the limitations noted, you may deduct up to $2,500 of tuition paid to an Ohio-based educational institution for the first two years of post-secondary education leading to a degree for yourself, your spouse and your dependents. The dollar limitation is $2,500 per student each year with a maximum deduction of $5,000 per student over a five-year period.

The first two years of post-secondary education must be completed within a five-year period.

Example: Jim and Martha Brown are Ohio residents who have three dependent children attending college. Two of the children are freshmen at Ohio University and you paid in excess of $2,500 each in tuition and fees in 2003. The third child has attended Columbus State Community College on a part-time basis for the past three years and has earned enough credits to be considered a sophomore. The third child's tuition and fees totaled $1,750 in 2003. Jim and Martha can deduct $6,750 on their 2003 return ($2,500 for the first child, $2,500 for the second child, and $1,750 for the third child).

Unsubsidized Health Insurance, Long Term Care Insurance & Excess Medical Expenses (line 40)

There are three separate deductions shown on this line:

Unsubsidized Health Insurance Premiums;
Unreimbursed Long-Term Care Insurance Premiums;
Excess Medical Expenses.

Please read the following instructions carefully to see if you qualify for any or all three deductions. If you qualify for any of the deductions, you must use the worksheet to determine the amount of your deduction.

Unsubsidized Health Insurance Premiums:

Enter on line 1 of the worksheet the amount you paid during 2003 for unsubsidized health insurance premiums for you, your spouse and your dependents. Do not include any amounts excluded from federal adjusted gross income under a cafeteria plan or any flexible-spending plan.

A subsidized health insurance plan is a plan where your current or former employer or your spouse's current or former employer pays part of the plan's costs. Most people who receive wage or salary income from an employer participate in a subsidized plan. If you are unsure, check with your employer.

Example: Joan has a health insurance plan through her employer. She has $50.00 deducted from her paycheck each month to pay for her portion of her health insurance premium costs. Her employer contributes $450.00 each month towards the health insurance premium costs that actually total $500.00 each month. This is a subsidized health plan and Joan may not use her $50.00 monthly payment on line 1 of the worksheet.

Note: You may not use line 1 of the worksheet to report any health insurance premiums if you qualify for Social Security health benefits under Medicare.

Example: Joan is retired and qualifies for Medicare. She pays $50.00 dollars each month for supplemental health insurance and $20.00 each month for Medicare B premiums. Joan may not use her $50.00 or $20.00 monthly payments on line 1 of the worksheet.

Unreimbursed Long-Term Care Insurance Premiums:

Enter line 1 of the worksheet the amount you paid during 2002 for unreimbursed long-term care insurance premiums.

Insurance & Medical Cost Worksheet

1. Enter the amount paid in 2003 for unsub-
sidized health insurance premiums and
unreimbursed long-term care insurance
premiums for you, your spouse and your
dependents 1. __________

2. Enter your unreimbursed medical and
dental expenses, health insurance
premiums and long-term care insurance
premiums 2. __________

4. Excess medical and dental expenses
(line 2 minus line 3 or the amount from
line 4 of your federal Form 1040,Schedule A) 4. __________

6. Net excess medical care deduction (line
4 minus line 5 but not less than zero) 6. __________

7. Ohio health care deduction (add lines 1
and 6). Enter here and on line 40 of your
Ohio income tax return 7. __________

Excess Medical Expenses:

If you have completed federal 1040, Schedule A - Itemized deductions for 2003, you may skip lines 2 and 3 of the worksheet and enter on line 4 of the worksheet the amount of your excess medical and dental expenses reported on line 4 of your federal Schedule A. Note: You may also include any long-term care insurance premiums included on line 4 of federal 1040 Schedule A.

If you did not complete federal Form 1040, Schedule A - Itemized Deductions for 2003, proceed as follows.

Enter on line 2 of the worksheet the costs for qualifying medical and dental expenses. Some examples of qualifying medical and dental expenses include unreimbursed costs for:

insurance premiums for medical and dental care plans (including both unsubsidized and subsidized health plans, Medicare premiums and supplemental Medicare insurance),

long-term care insurance ,

prescription medicine or insulin,

medical examinations and treatment by a certified health professional,

hospital costs and nursing care,

eyeglasses, hearing aids, braces, crutches and wheelchairs.

Note: You must reduce the amount of health insurance premiums by the amount of the self-employed health insurance deduction that you claimed on line 28 of your federal Form 1040.

Ohio Medical Savings Account (line 41)

You may be able to deduct the amount of funds you deposited into a medical savings account or the amount deposited by your employer on your behalf. If filing a joint return, your spouse may also be able to deduct his/her funds deposited into his/her medical savings account. For 2003, the maximum amount of deposited funds you may be able to deduct is $3,575. If filing a joint return, each spouse may be able to deduct up to $3,575 of deposited funds into his/her separate account for a maximum of $7,150.

Also, any investment income or interest earned on the funds deposited into a medical savings account is deductible if the income is included in your federal adjusted gross income, line 1 of your Ohio Form IT-1040.

To determine if you are eligible for this deduction, complete the medical savings account worksheet on this page.

For further information, please see the question "What is a Medical Savings Account and what are the qualifications?" on page 7 of this booklet.

Example: John and Mary Brown file a joint tax return for 2003. John contributed $2,000 to his medical savings account while Mary contributed $5,000 to hers. John's account earned $120 in interest, and Mary's earned $300 which were included in their federal adjusted gross income. They would be entitled to a Medical Savings Account deduction of $5,995 ($2,000 for John and $3,575 for Mary plus the interest income of $420).

Medical Savings Account Worksheet

1. Amount you contributed during 2003 but no more than $3,575 1. __________

2. If joint return, amount your spouse contributed to a separate account during 2003 but no more than $3,575 2. __________

3. Amount of Medical Savings Account earnings included in line 1 of your earnings included in line 1 of your 2003 Ohio Form It-1040 3. __________

5. 2003 withdrawals from the account for non-medical purposes 5. __________

Note: If any prior year contribution exceeded the deductible limit for that year, please contact the Ohio Department of Taxation to help you determine the amount you should enter on line 5 of this worksheet. See pages 39 and 40 for a listing of our offices.

ESBT Deductions (line 42)

Grantors and beneficiaries of an Electing Small Business Trust (ESBT) which, absent ESBT treatment, would otherwise qualify as a grantor trust, may deduct the distributive share of losses attributable to S corporations to the extent the ESBT loss is excluded from their federal adjusted gross income. If the ESBT loss was used to compute federal adjusted gross income, no deduction is allowed.

Other Deductions (line 43)

Check the box that applies. If more than one box applies, attach an explanation to your return.

a) Employers may deduct the amount of wage and salary expenses not otherwise deducted for federal tax purposes because of the federal targeted jobs tax credit or the work opportunity tax credits.
b) Deduct interest income earned from Ohio Public Obligations and Ohio Purchase Obligations if the interest income was included in your federal adjusted gross income. You may also deduct any gains resulting from the sale or disposition of Ohio Public Obligations to the extent the income was included in your federal adjusted gross income.
c) Deduct refunds or reimbursements of expenses you originally deducted on a prior year federal income tax return if the following conditions are met:

The refund or reimbursement was included in your federal adjusted gross income on your 2003 federal income tax return, Form 1040, line 21 AND
The expense for which you were refunded or reimbursed was deducted as an itemized deduction on Schedule A of a prior year federal income tax return, Form 1040.

Example: John Brown claimed an itemized deduction of $500 for medical expenses on his 2001 federal income tax return. In 2003, he received a reimbursement for $200 of the medical expenses from his insurance company which he reported on line 21 of his 2003 federal income tax return. Mr. Brown is entitled to deduct the $200 reimbursement on this line.

d) Deduct any amount that you received and included in your federal adjusted gross income in a prior year and paid back in 2003 if the following three conditions are met:

For federal income tax purposes, you claimed an itemized deduction on Schedule A of your 2003 federal income tax return for the amount repaid or you claimed a tax credit on your 2003 federal income tax return based upon the amount repaid and
The repayment has not otherwise reduced your federal adjusted gross income for 2003 or any other taxable year and
In the year you received the income, the income did not qualify for either the resident or non-resident/part year resident credits on Schedules C or D on your Ohio income tax return.

Example: John Brown received a $1,000 bonus from his employer in 2002 and included the bonus in his 2002 Federal Adjusted Gross Income. In 2003, John had to repay $200 of the bonus because the amount was computed in error. John repaid the amount in 2003. John is entitled to a deduction of $200 on this line.

e) Deduct matching contributions that you made to another person's Individual Development Account when the account has been established by a County Department of Human Services. This program was established to provide matching funds to qualified applicants. For further information, contact your local County Department of Human Services.