561: 2025 Form 561 Oklahoma Capital Gain Deduction for Residents Filing Form 511 (2025)
Oklahoma · Oklahoma Tax Commission · Used for tax years 2025
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 types of sales:
- Oklahoma real or tangible personal property: The property must have been owned for at least five uninterrupted years before the sale.
- Stock or an ownership interest in an Oklahoma company, limited liability company, or partnership: The stock or interest must have been owned 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 qualifying real, tangible personal, or intangible personal property must have been owned by the entity, business, or its owners for at least two uninterrupted years before the sale.
An Oklahoma company, limited liability company, partnership, or proprietorship business enterprise must have had its primary headquarters in Oklahoma for at least three uninterrupted years before the sale.
What you'll need
Provide federal Form 1040, Schedule D, and Form(s) 8949 with Form 561. Include the following supporting documents when they apply:
- Gains or losses reported on Schedule D, line 8a: Copies of Form(s) 1099-B.
- Installment sales on line 2: Federal Form 6252.
- Business property sales on line 3: Federal Form 4797.
- Schedule K-1 gains or losses on line 3 or line 5: A copy of the federal Schedule K-1 and the page 2 worksheet. Complete a separate worksheet for each property sold.
- Other qualifying gains on line 4: The applicable federal forms. If those forms do not show the information, provide a schedule identifying the property’s type and location, sale date, and acquisition date.
- Line 9 calculation: The page 2 Oklahoma net capital gain worksheet, provided with Form 561.
For property entries, have the description, Oklahoma address or applicable federal identification number, actual acquisition date, sale date, proceeds, and cost or other basis and adjustments. For qualifying pass-through gains, the entity must provide supplemental information identifying those gains.
Common mistakes
- Repeating gains or losses: Do not include on line 1 amounts reported on lines 2 through 5.
- Using “VARIOUS” or “INHERITED” as the acquisition date: In column B, enter the date you actually acquired the property instead.
- 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 enter gains or losses covered by that election on Form 561. They belong on the entity’s Form 561-PTE.
- Claiming more than the allowed deduction: The deduction cannot exceed Oklahoma net capital gain included in federal adjusted gross income. Complete the line 9 worksheet, then enter the smaller of lines 8 and 9 on line 10 and Form 511, Schedule 511-A, line 12. Do not enter less than zero.
- Treating exempt bond gains or losses incorrectly on the worksheet: For U.S. Government and municipal bonds exempt from Oklahoma tax, include capital gains on the Out-of-State Capital Gains line and capital losses on the Out-of-State Capital Losses line.
Questions people ask
Can an installment sale qualify for the deduction?
Yes. Use the current year’s taxable portion of the installment payment included in federal adjusted gross income. The property must have met the applicable holding period as of the sale date. Provide federal Form 6252.
Can gains passed through from an entity qualify?
Yes, if the property qualifies, you were a member of the entity for the applicable two or five uninterrupted years, and the entity held the asset for the applicable two or five uninterrupted years before the sale. Gains or losses covered by an electing PTE’s election are reported on Form 561-PTE, not your Form 561.
Do prior-year capital losses 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.
What property type code should I use if an amount includes more than one type of property?
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.