I think you misunderstood my question. I wasn’t referring to the general $31,110 exclusion but a separate exclusion that is reported on Schedule P. Notice line 9 on Schedule M specifically states “(enclose Schedule P if more than $31,110 per taxpayer).”
Part I line 1 of KY Schedule P includes the following: “Enter on line (a) or (b) the amount of federal, Kentucky state and local government pension income attributable to service credit earned before January 1, 1998.” There follows a few other items that can be excluded. Below this statement, using either section (a) or section (b), one is able to determine their service credit and therefore exclude a portion of their pension that is above and beyond the $31,110 general exclusion.
I did find how to accomplish this in TurboTax. However, I would never have figured this out if I wasn’t aware of this exclusion. Perhaps TurboTax personnel should make finding state deductions easier.
Here are the steps required in the Kentucky state section of TurboTax:
- Select “Update” in the Adjustments section
- Skip the “addition to income” sections (I had to skip two)
- At the “Any Other Kentucky Subtractions?” section, check the box for “Other Subtractions”
- Skip the first screen where a description and amount are requested
- Now you are at the “Government Pension Income” section which states the other types that can be excluded. Click the appropriate button(s) for the individual(s) who earned the credit
- You will then be guided to enter information pertaining to the retirement date, pension amount, and the number of months of service credit after which TurboTax does the Schedule P calculations
- This amount is transferred to line 9 of Schedule M where it is included with the subtractions from taxable income on form 740, line 8.
