Oklahoma allows the following Subtractions from Income:
Interest on U.S. Government Obligations
Interest on US bonds reported on the federal return may be subtracted from the Oklahoma return.
Social Security
Social Security benefits that are included in the Federal AGI shall be subtracted.
Federal Civil Service Retirement in Lieu of Social Security
If your retirement benefits received from the Federal Civil Service Retirement System is included on your Federal Adjusted Gross Income amount, you can exclude the income on the state return.
Military Retirement
Each individual may exclude 100% of retirement benefits from any branch of the United States Armed Forces.
Oklahoma Government or Federal Civil Service Retirement
Up to $10,000, but not more than what is included in Federal Adjusted Gross Income, of retirement benefits may be excluded from income. The benefits must be received from:
- The Civil Service of the US
- Oklahoma Public Employees Retirement System of Oklahoma
- Oklahoma Teacher’s Retirement System
- Oklahoma Law Enforcement Retirement System
- Oklahoma Firefighters Pension and Retirement System
- Oklahoma Police Pension and Retirement System
- Employee retirement systems created by counties pursuant to 19 OS Sec. 951
- Uniform Retirement System created for Justices and Judges
- Oklahoma Wildlife Conservation Department Retirement Fund
- Oklahoma Employment Security Commission Retirement Plan, or
- Employee retirement systems created by municipalities pursuant to 11 OS Sec. 48-101
Other Retirement Income
You may exclude up to $10,000 in retirement benefits, not to exceed the amount included in Federal Adjusted Gross Income. The retirement benefits must be received from:
- An employee pension benefit plan under IRC Section 401
- An eligible deferred compensation plan under IRC Section 457
- An individual retirement account, annuity or trust or simplified employee pension under IRC Section 408
- An employee annuity under IRC Section 403 (a) or (b)
- United States Retirement Bonds under IRC Section 86, or
- Lump-sum distributions from a retirement plan under IRC Section 402
U.S. Railroad Retirement Board Benefits
All qualified U.S. Railroad Retirement Board benefits that are included in the Federal AGI may be excluded.
Oklahoma Depletion
Oklahoma instructions state, "Oklahoma depletion on oil and gas well production, at the option of the taxpayer, may be computed at 22% of gross income derived from each Oklahoma property during the taxable year. Any depletion deduction allowable is the amount so computed minus the Federal depletion claimed. If Oklahoma options are exercised, the Federal depletion not used due to the 65% limitation may not be carried over for Oklahoma purposes."
Oklahoma Net Operating Loss
Enter carryover(s) from previous years, along with the loss year(s). The loss year return must be filed to establish the Oklahoma NOL. See the “Net Operating Loss” section on page 5. Also see Schedule 511-B, line 4.
Exempt Tribal Income
Income earned on Indian country may be deducted if the tribal member's principal residence is on "Indian Country" as defined in 18 .U.S.C Section 1151.
Gains from the Sale of Exempt Government Obligations
The capital gain/loss from the sale of an U.S. Government Obligation is exempt.
Oklahoma Capital Gain Deduction
You can deduct qualifying gains receiving capital treatment which are included in Federal Adjusted Gross Income.
Oklahoma Income Distributed by an Electing PTE
Income covered by the election pursuant to the provisions of the Pass Through Entity Act of 2019 may be subtracted if you are a member either directly or indirectly of an electing pass-through entity.
Miscellaneous Oklahoma Other Subtractions
- Royalty Earned by an Inventor (supporting documents required)
- Manufacturer's Exclusion
- Small Business Incubator Exclusion
- Death of Military Member Killed in Combat Zone
- Death of Military Spouse Killed in Combat Zone
- Allowable Subtractions not included in (1) through (5) (supporting documents required)