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IRS Extensions and How They Affect Kentucky Individual Income Tax

The Internal Revenue Service has issued retroactive extensions of several tax matters that include the following: treatment of mortgage insurance premiums as qualified residence interest, exclusion from gross income of discharge of qualified principal residence indebtedness, and deduction of qualified tuition and related expenses. Since these are extensions of the 12/31/18 IRC code, with which Kentucky conforms, they could have an impact on your Kentucky Individual Income Tax Return. Kentucky Individual Income Tax Forms for 2018 and 2019 have already been finalized and released. 

These changes will not be reflected on the forms as separately stated line items and should be claimed according to the directions below.

  • Qualified Mortgage Insurance Premiums- For tax year 2018 and 2019 this deduction can be claimed on Kentucky Schedule A as an "other deduction" and noted as 'qualified mortgage insurance premiums'. This deduction was extended to 12/31/2020 and made retroactive.
  • Tuition and Fees Deduction – For tax year 2018 and 2019 this deduction will be reflected in the Federal Adjusted Gross Income (FAGI). For part-year and non-resident filers this deduction can be claimed on Form 740-NP as an "other deduction" on page 3 (TY2018) or page 4 (TY2019) and noted as 'Tuition and Fees Deduction'. This deduction was extended through 12/31/2020 and made retroactive.
  • Mortgage Debt Forgiveness - Mortgage Debt Forgiveness will be excluded from FAGI and therefore will not be taxed on the Kentucky Return. This was extended through 12/31/2021 and made retroactive. 

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The Kentucky Department of Revenue conducts work
under the authority of the Finance and Administration Cabinet.