561: 2024 Form 561 Oklahoma Capital Gain Deduction for Residents Filing Form 511 (2024)
Oklahoma · Oklahoma Tax Commission · Used for tax years 2024
Oklahoma Form 561 calculates the capital gain deduction for residents filing Form 511. It reports qualifying Oklahoma capital gains and losses, accounts for qualifying capital loss carryovers, and determines the deduction entered on Schedule 511-A.
Who files this form
Form 561 is for Oklahoma residents filing Form 511 who claim the Oklahoma capital gain deduction. Individual taxpayers can deduct qualifying net capital gains included in federal adjusted gross income.
Qualifying gains must come from one of these sales:
- Oklahoma real or tangible personal property: You must have owned the property for at least five uninterrupted years before the sale.
- Stock or an ownership interest in an Oklahoma company, limited liability company, or partnership: You must have owned the stock or interest for at least two uninterrupted years before the sale.
- Oklahoma property sold as part of all or substantially all of a business’s assets: The property must have been owned by the qualifying entity, business, or its owners for at least two uninterrupted years before the sale.
For these rules, an Oklahoma company, limited liability company, partnership, or proprietorship business must have had its primary headquarters in Oklahoma for at least three uninterrupted years before the sale.
Gains passed through to you may also qualify. Both your membership in the pass-through entity and the entity’s ownership of the asset must meet the applicable two- or five-year uninterrupted holding period.
What you'll need
Provide Federal Form 1040, Schedule D, and Form(s) 8949 with Form 561. Also provide these documents when they apply:
- Form(s) 1099-B: For qualifying gains or losses reported on Federal Schedule D, line 8a.
- Federal Form 6252: For installment-sale gains reported on line 2.
- Federal Form 4797: For business-property gains reported on line 3.
- Federal Schedule K-1 and the page 2 worksheet: For K-1 gains or losses reported on line 3, and qualifying gains or losses reported on line 5. Complete a separate worksheet for each property sold.
- Applicable federal forms: For other qualifying gains reported on line 4. If those forms do not show the property type and location, sale date, and acquisition date, provide a schedule with that information.
- The page 2 line 9 worksheet: To calculate Oklahoma net capital gain included in federal adjusted gross income.
You will also need property descriptions, acquisition and sale dates, proceeds, cost or adjusted basis, and either the Oklahoma property address or the entity’s federal identification number. Use the prior year’s return to find any qualifying Oklahoma capital loss carryover. A pass-through entity must provide supplemental information identifying qualifying capital gains passed through to you.
Common mistakes
- Counting the same gain or loss twice: Do not include on line 1 any gains or losses reported on lines 2 through 5.
- Using “VARIOUS” or “INHERITED” instead of an acquisition date: If your federal form uses either term, enter the date you actually acquired the property in Column B.
- Including gains or losses covered by a pass-through entity election: If you are a direct or indirect member of an electing PTE, do not include gains or losses covered by that election on Form 561. They belong on the PTE’s Form 561-PTE.
- Entering a negative deduction: Enter zero on lines 8 and 9 if the result is zero or less. Line 10 must be the smaller of lines 8 and 9, and cannot be less than zero.
- Overlooking the bond worksheet note: For U.S. Government and municipal bonds exempt from Oklahoma tax, include capital gains on the line 9 worksheet’s out-of-state capital gains line and capital losses on its out-of-state capital losses line.
Questions people ask
Can an installment sale qualify?
Yes. Use the current year’s taxable portion of the installment payment. The property must have met the applicable holding period when it was sold. Provide Federal Form 6252.
Does a capital loss carryover affect the deduction?
Yes. A capital loss carryover from qualified property reduces current-year gains from eligible property. Enter the qualifying Oklahoma capital loss carryover from the prior year’s return on line 7.
How much can I deduct, and where does it go on Form 511?
The deduction cannot exceed the Oklahoma net capital gain included in federal adjusted gross income. Enter the smaller of Form 561 lines 8 and 9 on line 10, but not less than zero. Also enter that amount on Form 511, Schedule 511-A, line 12.
What property code should I use if several types of property were sold?
For lines 2 through 5, enter code “99” if the net gain or loss comes from the sale of more than one type of property.