Why is my schedule k-1, box 13 code AE showing as other taxes on schedule A, line 11?

[PatriciaV]

Form 1040 Schedule A Line 11 is for charitable contributions. Schedule K-1 Box 13 Code AE reports a credit for small employer pension plans. Have you reviewed your K-1 entry to be sure you chose the correct box and code? 

[a0458959]

Thanks for the response.

I have review the K-1 from the partnership.  Box 13, Code AE is what was on the K-1 document.

I misstated Line 11 on Schedule A.  TurboTax put it on line 6 and listed as "Other taxes from Schedule K-1".   Given that it was Code AE, I expected TurboTax to put as "charitable contribution" or it would fall under "deducts" limited by the 2% AGI. 

Any thoughts on why it went under  schedule A, other taxes?

[PatriciaV]

Is the number on Schedule A a negative? Does it reduce the taxes you paid?

[a0458959]

Box 13 on  schedule K-1 is labeled as "other deductions".     It typically has items such as code H (interest expense), line 9 on schedule A,  code W (other misc deducts) line 16 on schedule A with 2% AGI limit.  

These total up to increase you itemized deductions.  So to answer your question, most items in Box 13 increase your itemized deductions and offset income.

My question regarding box 13 code AE is why this shows on line 6 (other taxes)?

I don't know of a scenario where code AE would be considered a tax and show up on line 6 of schedule A.

[PatriciaV]

Please clarify if this is a 1065 K-1 or 1120S K-1? Also, is there a description for the amount on Box 13 Code AE?

[a0458959]

1065-K1

Description in the K-1 is as follows:

Box 13, Code AE - Deductions - Portfolio Income  

Deductions - Portfolio (Formerly deductible by Individuals under IRC Section 67 subject to 2% AGI floor)

[PatriciaV]

As the description says, portfolio deductions are no longer deductible on individual returns. For partners other than individuals, amounts that are clearly and directly allocable to portfolio income (other than investment interest expense and section 212 expenses from a REMIC) can be deducted on those partners’ income tax returns. (IRS Instructions for Form 1065)

To be accurate, you should omit this code and amount from the K-1 on your 1040 return.

[Moneymom]

Hi - as stated in your reply :

To be accurate, you should omit this code and amount from the K-1 on your 1040 return.

Question: where does it go - if anywhere?

Thank you! 

[PatriciaV]

Amounts reported on Form 1065 Schedule K-1 Box 13 Code AE are no longer deductible by individuals. Therefore, you will not enter this anywhere on your Form 1040 return.

@Moneymom 

[Katie-P]

To add to what Patricia said, it is possible that your state allows a miscellaneous itemized deduction, even though the federal return no longer allows it (for example, California). In this case, it is important to enter the K-1 Box 13 code AE properly in the tax return. 

If you are using TurboTax Online for tax year 2024, you will be prompted during the Review to indicate if any of the Box 13 code AE is "Other taxes". Leave the amount blank and re-run the review. There should be a new error/flag that asks you to enter the amount of Box 13 code AE that is "Other miscellaneous itemized deductions (2% floor)". That is where you should enter the amount.

If you are using TurboTax Desktop for tax year 2024, you will hit a flag during the Review. It will ask you to enter a dollar amount on the appropriate lines, as shown below. In the example I've shown, you would enter the dollar amount in Code W to ZZ, in line 2, for "Other miscellaneous itemized deductions (2% floor)".

I hope this additional context is helpful!