Fillable Schedule P - Kentucky Pension Income Exclusion

INSTRUCTIONS—SCHEDULE P

Types of Income Subject to Exclusion—All pension and

by the exempt percentage, enter the result (exempt amount) in

retirement income paid under a written retirement plan is

Column A or Column B. Use the worksheet below to compute

eligible for exclusion. This includes pensions, annuities, IRA

the exempt percentage in the year of retirement.

accounts, 401(k) and similar deferred compensation plans,

Note: Subtract the exempt amount from the taxable pension

death benefits, and other similar accounts or plans. As a

amount and include the difference with other retirement

general rule, if the income is reported on the federal income

income in Part II.

tax return, Form 1040, line 15(b) or 16(b); Form 1040A, line

PART II—Other Retirement Income, Line 2—Enter the

11(b) or 12(b); Form 4972; or is a disability retirement benefit

amount reported on federal Form 1040 or 1040A of non-

or deferred compensation distribution reported on Form 1040,

lump-sum pension and retirement income not reported

line 7 or 1040A, line 7, then it qualifies for the exclusion.

on line 1(c). Also include amounts from Schedule M, line 7

(Form 740-NP , page 4, line 16) that reflect pension and IRA

Form 740-NP filers report only pension income received while

bases differences.

a resident of Kentucky.

PART III—Total to Be Excluded This Year, Line 3—Enter the

LINE-BY-LINE INSTRUCTIONS

lesser of the amount on line 2 or $41,110.

Line 4—Enter the total of lines 1(c) and 3. This is your pension

Column A, Column B—This exclusion is for each taxpayer.

income exclusion. Enter on line 4 and as follows: Schedule

A taxpayer and spouse must compute and claim their own

M, line 11; Form 740-NP , page 4, line 10(b); or Form 741,

exclusion, regardless of filing status.

page 1, line 11.

PART I—Exempt Retirement Income—Enter the federally

DEFINITIONS—For use with Schedule P and the worksheet

taxable portion of pension income paid by the federal govern-

below.

ment, by the Commonwealth of Kentucky, or by any Kentucky

Service Credit—Number of months (years) used by your

local government. Also include supplemental (Tier 2) U.S.

retirement system to determine retirement benefits.

Railroad Retirement Board benefits reported on Form 1040,

line 16(b) (Form 1040A, line 12(b)) and federal or Kentucky

Purchased Service Credit—Voluntary purchases of service

disability retirement income included on federal Form 1040,

credit as allowed by your retirement system (i.e., military

line 7 (Form 1040A, line 7). Do not include income from

service or prior service with the same or similar system). Note:

deferred compensation plans in Part I.

Purchased time is credited based on the dates of service.

Use Line 1(a) if retired before January 1, 1998, to report fully

Purchased Service Credit (Air-time)—Certain retirement

exempt pension benefits.

plans allow for the purchase of up to five years of service

credit unrelated to prior work history. These purchases are

Use Line 1(b) if retired after December 31, 1997, to compute

commonly known as air-time. Air-time is not included in total

the amount of pension income attributable to service credits

service earned after December 31, 1997, regardless of when

earned before January 1, 1998. Multiply the taxable pension

purchased.

Worksheet for Federal, Kentucky State and Kentucky Local Government Retirees

Who Retired After 12/31/97

Complete this worksheet only if you retired in 2015 or have not computed your exempt percentage in prior years.

Keep this worksheet in your records. The percentage will be used this year and in future years to determine the

amount of exempt retirement income.

Complete this worksheet to determine what percentage of your pension income is exempt. This percentage must be calculated

for each pension.

If your retirement system has computed the exempt amount (earned before January 1, 1998), enter the amount on page 1, line

1(b), column A or B. If your retirement system has computed the exempt percentage, enter the exempt percentage on page 1,

line 1(b) in the exempt percentage column. Use a separate worksheet for each governmental pension. Retain this worksheet with

your tax records. Use the percentage on line 4 to compute the exempt portion of your pension in future years.

1. Enter total months of service credit including purchased service .......................................................

2. Enter months of service credit earned after 12/31/97. Include sick leave credited at date of

retirement, and service credit from purchase of military and other service earned after

12/31/97. Do not include purchased credit unrelated to prior work history (air-time) ........................

3. Subtract line 2 from line 1. Total months of service before January 1, 1998.......................................

4. Divide line 3 by line 1. Enter here and on page 1, line 1(b), in the exempt percentage column .......

Use this percentage to determine the amount of pension attributable to service earned

before 1/1/98.

Schedule P - Kentucky Pension Income Exclusion - 2015 Page 2

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