You have to file a Utah state income tax return if you are a resident of Utah all or part of the year and have to file a federal income tax return, or if you are not a Utah resident but have income from sources in Utah. You should file a Utah return if Utah state income tax was withheld from your pay and you are due a refund.
You must complete Form TC-40W – Utah Withholding Tax Schedule to claim the tax that was withheld. You do not have to send W-2s or 1099s. According to the Utah State Tax Commission, if you do not complete this form, the processing of your return could be delayed and your withholding credit could be disallowed. If you use tax software you will probably be prompted to enter this information.
Your Utah state income tax is based on your federal adjusted gross income. But there are certain adjustments you must make, and there are deductions and credits you can take on your Utah return that are different than those on your federal return.
The following are some of the deductions you can claim on your Utah state tax return. These subtractions from your federal adjusted gross income are reported on Form TC-40A.
Interest on federal obligations
On your Utah tax return you can deduct any interest on U.S. Government obligations that you included as income on your federal tax return. This includes interest income from mutual funds that invest in U.S. Government obligations.
If you are an enrolled member of a Native American tribe or nation in Utah, the income you earn while on the reservation where you live is exempt from Utah state income tax. If you are a member of the Ute Tribe and work on the Uintah and Ouray Reservation, the income you earn there is exempt from Utah income tax even if you life off that reservation.
Railroad retirement, disability, unemployment and sickness benefits are not subject to Utah state income tax. If you had to include any of these benefits as income on your federal tax return, you can subtract that amount on your Utah return.
Active duty military pay for a nonresident
If you are not a Utah resident but are stationed in Utah on active duty, your military pay in Utah is not subject to Utah state income tax. If you included it on your federal return you can subtract it on your Utah state return.
Spouses of military service members
If you are the spouse of a military service member who is stationed in Utah and you are in Utah only to be with your service member spouse, you may be able to exclude the income you earn in Utah from Utah state income tax.
The following are some of the credits you may qualify to claim on your Utah state income tax return. These credits are claimed on Form TC-40A.
Capital gain transaction credit
If you have a short or long term capital gain and within 12 months you use at least 70% of the gross proceeds from the transaction to buy stock in a qualified small business corporation in Utah, you can claim a credit on your Utah return for 5% of the amount of the capital gain.
Retirement tax credit
If you are 65 or older, you can claim a retirement credit of up to $450. If you file jointly, you and your spouse can each claim the credit if you are both age 65 or older. If you are 58 or older at the end of the tax year and are receiving retirement income such as a pension or annuity, you can claim a credit for 6% of the retirement income, up to a maximum credit of $288 per person. A surviving spouse can also claim this retirement tax credit.
The credit is phased out if your income is over a certain amount based on your filing status. The limits (for 2010) are $25,000 for single, $32,000 for married filing jointly, qualifying widow(er) and head of household, and $16,000 for married filing separately. The credit is reduced by 2.5% of income in excess of those amounts.
529 plan credit
If you made contributions to a Utah Educational Savings Plan, you can claim a credit on your Utah tax return. The credit is 5% of contributions of up to $1,710 per beneficiary, and up to $3,420 per beneficiary on a joint return.
Medical care savings account
If you contributed to a medical care savings account, you can claim a credit on your Utah tax return for 5% of the eligible amount, provided you did not claim a deduction on your federal tax return.
Health benefit plan
If you pay for your own health insurance when you do not have health coverage at work, you can claim a credit on your Utah tax return. The credit is 5% of the cost of the coverage, up to a maximum credit of $300 if you are single, $600 if married with no dependents and $900 if you have dependents. The amount eligible for the credit has to be reduced by any medical expenses you claimed as an itemized deduction on your federal tax return. And dental, vision, and Medicare supplemental insurance are not eligible for this credit.
If you are a parent who stays at home to care for your child not more than 12 months old, you can claim a tax credit of $100 for each child. To qualify, you must not have earned more than a total of $3,000 in wages, tips, compensation and profit from a business, and your federal adjusted gross income must not be more than $50,000.
Credit for taxes paid to another state
If your Utah income tax return includes income on which you paid income taxes to another state, you can claim a credit for those taxes on your Utah return. This credit is claimed on Form TC-40S.
Renewable energy systems
If you install a renewable energy system, you can claim a tax credit for the costs up to $2,000. To claim this credit, you must obtain Form TC-40E from the Utah Geological Survey to certify the renewable energy system and approve the credit.
Special needs adoption
If you adopt a child with special needs, you can claim a credit of $1,000 on your Utah return. To qualify, the child must be 5 years of age or older, under age 18 with a physical, mental or emotional disability, or part of a sibling group placed together for adoption.
There are various credits that business owners and others may qualify to claim on their individual Utah income tax returns. These credits are claimed on Form TC-40A.
Application for Tax Credit Certification – Utah Geological Survey
Form TC-40 – Utah Individual Income Tax Return – Utah State Tax Commission
Form TC-40A – Income Tax Supplemental Schedule – Utah State Tax Commission
Form TC-40C – Retirement Credit Schedule – Utah State Tax Commission
Form TC-40S – Credit for Income Tax Paid to Another State – Utah State Tax Commission
Form TC-40W – Utah Withholding Tax Schedule – Utah State Tax Commission
Individual Income Tax TC-40 Forms & Instructions – Utah State Tax Commission