Rhode Island allows certain modifications that decrease income when calculating Rhode Island taxable income. These subtractions are entered on the Rhode Island return and may reduce Rhode Island tax liability.
Pathway to this entry is:
Rhode Island State Return > Subtractions from Income
What Are the Subtractions Specific to Rhode Island?
Subtractions from income are amounts that Rhode Island law allows taxpayers to deduct from income when calculating Rhode Island taxable income.
These modifications may include:
- Income from obligations of the United States government included in federal adjusted gross income but exempt from Rhode Island income tax.
- Rhode Island fiduciary adjustments as a beneficiary of an estate or trust.
- Elective deduction for new research and development facilities.
- Railroad Retirement benefits included in federal income but exempt from state taxation.
- Qualifying investments in a certified venture capital partnership.
- Family Education Account adjustments.
- Tuition Savings Program (Section 529) contributions, subject to applicable limitations.
- Exemptions from tax on profit or gain for qualifying writers.
- Depreciation not taken for federal purposes because of bonus depreciation adjustments.
- Section 179 depreciation that was not originally deducted for federal purposes.
- Allowable modification for performance-based compensation realized by an eligible employee under the Rhode Island Jobs Growth Act.
- Modification for investments in small businesses.
- Modification for tax incentives for employers.
- Historic Tax Credit income, Motion Picture Production Company Tax Credit income, or Musical Theater Production Tax Credit income reported on the federal return that is exempt from Rhode Island tax.
- Contributions to a Scituate Medical Savings Account that are taxable federally but exempt for Rhode Island purposes.
- Insurance benefits for dependents and domestic partners included in federal adjusted gross income.
- Modification for unreimbursed organ transplantation expenses incurred by a Rhode Island resident.
- Income from the discharge of business indebtedness previously recognized under Rhode Island law.
- Deduction for Pass-Through Entity Tax (PTE) claimed in a prior year.
- Modification for taxpayers receiving qualifying military service pensions.
- Modification for certain pensions and annuities, subject to Rhode Island limitations.
- Active-duty military pay of nonresidents stationed in Rhode Island and qualifying income earned in Rhode Island by a servicemember's spouse.
What Is the Section 174A Adjustment?
Rhode Island also provides adjustments related to Section 174A research and experimental expenditures.
Taxpayers who are required to amortize research and experimental expenditures for federal purposes may be required to complete Rhode Island Schedule 174A.
Pathway to this entry is:
Rhode Island State Return > Subtractions from Income > Schedule 174A
Who May Need Schedule 174A?
You may need to complete Schedule 174A if:
- You incurred research and experimental expenditures.
- You elected or were required to amortize those expenditures for federal purposes.
- You are claiming the Rhode Island adjustment related to those expenditures.
This commonly affects taxpayers with:
- Schedule C businesses.
- Partnership income.
- S Corporation income.
- Pass-through entity income reported on a Schedule K-1.
What Information Is Needed for Schedule 174A?
Section 174A Expenditures Claimed on the Federal Return
Enter the total Section 174A expenditures claimed on the current year's federal return.
Amortization Entries
For each expenditure, you may need to provide:
- Description.
- Date amortization begins.
- Amortizable amount.
- Amortization period or percentage.
- Current-year amortization amount.
The program uses this information to calculate the Rhode Island adjustment.
How Do Subtractions Affect My Return?
Rhode Island subtractions may:
- Reduce Rhode Island taxable income.
- Lower Rhode Island tax liability.
- Increase a Rhode Island refund.
- Create differences between federal and Rhode Island taxable income.
Important Information
- Rhode Island does not always follow federal tax treatment for certain deductions and adjustments.
- Some subtractions require additional schedules or supporting documentation.
- Taxpayers with business income, Schedule K-1 income, or research and experimental expenditures should carefully review Schedule 174A requirements.
- Supporting documentation should be retained with your tax records.
- Only qualifying amounts should be entered as Rhode Island subtractions.
Additional Information
Review all federal schedules, Rhode Island schedules, and Schedule K-1 information before completing the Subtractions from Income section. Taxpayers with research and experimental expenditures may need to complete Schedule 174A to determine the allowable Rhode Island adjustment.