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2011 Income Taxes

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2011 Income Taxes

2011 income taxes 4. 2011 income taxes   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. 2011 income taxes Resident aliens are generally taxed in the same way as U. 2011 income taxes S. 2011 income taxes citizens. 2011 income taxes Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business and how it is taxed. 2011 income taxes Topics - This chapter discusses: Income that is effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes Income that is not effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes Interrupted period of residence. 2011 income taxes Expatriation tax. 2011 income taxes Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. 2011 income taxes Resident Aliens Resident aliens are generally taxed in the same way as U. 2011 income taxes S. 2011 income taxes citizens. 2011 income taxes This means that their worldwide income is subject to U. 2011 income taxes S. 2011 income taxes tax and must be reported on their U. 2011 income taxes S. 2011 income taxes tax return. 2011 income taxes Income of resident aliens is subject to the graduated tax rates that apply to U. 2011 income taxes S. 2011 income taxes citizens. 2011 income taxes Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. 2011 income taxes S. 2011 income taxes citizens. 2011 income taxes Nonresident Aliens A nonresident alien's income that is subject to U. 2011 income taxes S. 2011 income taxes income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). 2011 income taxes The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. 2011 income taxes These are the same rates that apply to U. 2011 income taxes S. 2011 income taxes citizens and residents. 2011 income taxes Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. 2011 income taxes If you were formerly a U. 2011 income taxes S. 2011 income taxes citizen or resident alien, these rules may not apply. 2011 income taxes See Expatriation Tax, later, in this chapter. 2011 income taxes Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. 2011 income taxes Whether you are engaged in a trade or business in the United States depends on the nature of your activities. 2011 income taxes The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. 2011 income taxes Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. 2011 income taxes Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. 2011 income taxes For more information, see Services Performed for Foreign Employer in chapter 3. 2011 income taxes Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. 2011 income taxes Students and trainees. 2011 income taxes   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. 2011 income taxes A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. 2011 income taxes The taxable part of any scholarship or fellowship grant that is U. 2011 income taxes S. 2011 income taxes source income is treated as effectively connected with a trade or business in the United States. 2011 income taxes Business operations. 2011 income taxes   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. 2011 income taxes Partnerships. 2011 income taxes   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. 2011 income taxes Beneficiary of an estate or trust. 2011 income taxes   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. 2011 income taxes Trading in stocks, securities, and commodities. 2011 income taxes   If your only U. 2011 income taxes S. 2011 income taxes business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. 2011 income taxes S. 2011 income taxes resident broker or other agent, you are not engaged in a trade or business in the United States. 2011 income taxes   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. 2011 income taxes   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. 2011 income taxes   This discussion does not apply if you have a U. 2011 income taxes S. 2011 income taxes office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. 2011 income taxes Trading for a nonresident alien's own account. 2011 income taxes   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. 2011 income taxes S. 2011 income taxes business activity. 2011 income taxes This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. 2011 income taxes   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. 2011 income taxes This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. 2011 income taxes Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . 2011 income taxes Effectively Connected Income If you are engaged in a U. 2011 income taxes S. 2011 income taxes trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. 2011 income taxes This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. 2011 income taxes Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. 2011 income taxes In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. 2011 income taxes For a discussion of these rules, see Foreign Income , later. 2011 income taxes Investment Income Investment income from U. 2011 income taxes S. 2011 income taxes sources that may or may not be treated as effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business generally falls into the following three categories. 2011 income taxes Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. 2011 income taxes ). 2011 income taxes Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. 2011 income taxes Timber, coal, or domestic iron ore with a retained economic interest. 2011 income taxes Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. 2011 income taxes Patents transferred before October 5, 1966. 2011 income taxes Original issue discount obligations. 2011 income taxes Capital gains (and losses). 2011 income taxes Use the two tests, described next, to determine whether an item of U. 2011 income taxes S. 2011 income taxes source income falling in one of the three categories above and received during the tax year is effectively connected with your U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. 2011 income taxes If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. 2011 income taxes Asset-use test. 2011 income taxes   This test usually applies to income that is not directly produced by trade or business activities. 2011 income taxes Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. 2011 income taxes   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. 2011 income taxes Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. 2011 income taxes Business-activities test. 2011 income taxes   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. 2011 income taxes The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. 2011 income taxes Under this test, if the conduct of the U. 2011 income taxes S. 2011 income taxes trade or business was a material factor in producing the income, the income is considered effectively connected. 2011 income taxes Personal Service Income You usually are engaged in a U. 2011 income taxes S. 2011 income taxes trade or business when you perform personal services in the United States. 2011 income taxes Personal service income you receive in a tax year in which you are engaged in a U. 2011 income taxes S. 2011 income taxes trade or business is effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. 2011 income taxes Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. 2011 income taxes The income may be paid to you in the form of cash, services, or property. 2011 income taxes If you are engaged in a U. 2011 income taxes S. 2011 income taxes trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. 2011 income taxes However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. 2011 income taxes Pensions. 2011 income taxes   If you were a nonresident alien engaged in a U. 2011 income taxes S. 2011 income taxes trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. 2011 income taxes This is true whether or not you are engaged in a U. 2011 income taxes S. 2011 income taxes trade or business in the year you receive the retirement pay. 2011 income taxes Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. 2011 income taxes You had a fixed place of business in the United States involved in earning the income. 2011 income taxes At least 90% of your U. 2011 income taxes S. 2011 income taxes source transportation income is attributable to regularly scheduled transportation. 2011 income taxes “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. 2011 income taxes “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. 2011 income taxes This definition applies to both scheduled and chartered air transportation. 2011 income taxes If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. 2011 income taxes See Transportation Tax, later, in this chapter. 2011 income taxes Business Profits and Losses and Sales Transactions All profits or losses from U. 2011 income taxes S. 2011 income taxes sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. 2011 income taxes For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. 2011 income taxes A share of U. 2011 income taxes S. 2011 income taxes source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. 2011 income taxes Real Property Gain or Loss Gains and losses from the sale or exchange of U. 2011 income taxes S. 2011 income taxes real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. 2011 income taxes You must treat the gain or loss as effectively connected with that trade or business. 2011 income taxes U. 2011 income taxes S. 2011 income taxes real property interest. 2011 income taxes   This is any interest in real property located in the United States or the U. 2011 income taxes S. 2011 income taxes Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. 2011 income taxes S. 2011 income taxes real property holding corporation. 2011 income taxes Real property includes the following. 2011 income taxes Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. 2011 income taxes Improvements on land, including buildings, other permanent structures, and their structural components. 2011 income taxes Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. 2011 income taxes U. 2011 income taxes S. 2011 income taxes real property holding corporation. 2011 income taxes   A corporation is a U. 2011 income taxes S. 2011 income taxes real property holding corporation if the fair market value of the corporation's U. 2011 income taxes S. 2011 income taxes real property interests are at least 50% of the total fair market value of: The corporation's U. 2011 income taxes S. 2011 income taxes real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. 2011 income taxes   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. 2011 income taxes S. 2011 income taxes trade or business unless you establish that the corporation is not a U. 2011 income taxes S. 2011 income taxes real property holding corporation. 2011 income taxes   A U. 2011 income taxes S. 2011 income taxes real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. 2011 income taxes An interest in a foreign corporation owning U. 2011 income taxes S. 2011 income taxes real property generally is not a U. 2011 income taxes S. 2011 income taxes real property interest unless the corporation chooses to be treated as a domestic corporation. 2011 income taxes Qualified investment entities. 2011 income taxes   Special rules apply to qualified investment entities (QIEs). 2011 income taxes A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. 2011 income taxes S. 2011 income taxes real property holding corporation. 2011 income taxes    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. 2011 income taxes S. 2011 income taxes real property interest is treated as a U. 2011 income taxes S. 2011 income taxes real property gain by the shareholder receiving the distribution. 2011 income taxes A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. 2011 income taxes S. 2011 income taxes real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. 2011 income taxes A distribution that you do not treat as gain from the sale or exchange of a U. 2011 income taxes S. 2011 income taxes real property interest is included in your gross income as a regular dividend. 2011 income taxes Note. 2011 income taxes Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. 2011 income taxes S. 2011 income taxes real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. 2011 income taxes Domestically controlled QIE. 2011 income taxes   The sale of an interest in a domestically controlled QIE is not the sale of a U. 2011 income taxes S. 2011 income taxes real property interest. 2011 income taxes The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. 2011 income taxes The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. 2011 income taxes Wash sale. 2011 income taxes    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. 2011 income taxes An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. 2011 income taxes S. 2011 income taxes real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. 2011 income taxes If this occurs, you are treated as having gain from the sale or exchange of a U. 2011 income taxes S. 2011 income taxes real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. 2011 income taxes This also applies to any substitute dividend payment. 2011 income taxes   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. 2011 income taxes Alternative minimum tax. 2011 income taxes   There may be a minimum tax on your net gain from the disposition of U. 2011 income taxes S. 2011 income taxes real property interests. 2011 income taxes Figure the amount of this tax, if any, on Form 6251. 2011 income taxes Withholding of tax. 2011 income taxes   If you dispose of a U. 2011 income taxes S. 2011 income taxes real property interest, the buyer may have to withhold tax. 2011 income taxes See the discussion of Tax Withheld on Real Property Sales in chapter 8. 2011 income taxes Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. 2011 income taxes An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. 2011 income taxes The three kinds of foreign source income are listed below. 2011 income taxes Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. 2011 income taxes Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. 2011 income taxes Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. 2011 income taxes A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2011 income taxes Income, gain, or loss from the sale outside the United States, through the U. 2011 income taxes S. 2011 income taxes office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. 2011 income taxes Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. 2011 income taxes Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes For example, foreign source interest and dividend equivalents are treated as U. 2011 income taxes S. 2011 income taxes effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. 2011 income taxes Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. 2011 income taxes S. 2011 income taxes citizens and residents. 2011 income taxes Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. 2011 income taxes However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. 2011 income taxes Example. 2011 income taxes Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. 2011 income taxes S. 2011 income taxes office of his overseas employer. 2011 income taxes He worked in the U. 2011 income taxes S. 2011 income taxes office until December 25, 2012, but did not leave this country until January 11, 2013. 2011 income taxes On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. 2011 income taxes All of Ted's income during his stay here is U. 2011 income taxes S. 2011 income taxes source income. 2011 income taxes During 2012, Ted was engaged in the trade or business of performing personal services in the United States. 2011 income taxes Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. 2011 income taxes The salary payment Ted received in January 2013 is U. 2011 income taxes S. 2011 income taxes source income to him in 2013. 2011 income taxes It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. 2011 income taxes Real property income. 2011 income taxes   You may be able to choose to treat all income from real property as effectively connected. 2011 income taxes See Income From Real Property , later, in this chapter. 2011 income taxes The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. 2011 income taxes S. 2011 income taxes sources but only if the items are not effectively connected with your U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. 2011 income taxes S. 2011 income taxes source fixed or determinable annual or periodic gains, profits, or income. 2011 income taxes Income is fixed when it is paid in amounts known ahead of time. 2011 income taxes Income is determinable whenever there is a basis for figuring the amount to be paid. 2011 income taxes Income can be periodic if it is paid from time to time. 2011 income taxes It does not have to be paid annually or at regular intervals. 2011 income taxes Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. 2011 income taxes Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. 2011 income taxes A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2011 income taxes Other items of income, such as royalties, also may be subject to the 30% tax. 2011 income taxes Some fixed or determinable income may be exempt from U. 2011 income taxes S. 2011 income taxes tax. 2011 income taxes See chapter 3 if you are not sure whether the income is taxable. 2011 income taxes Original issue discount (OID). 2011 income taxes   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. 2011 income taxes The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. 2011 income taxes The 30% tax applies in the following circumstances. 2011 income taxes You received a payment on a debt instrument. 2011 income taxes In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. 2011 income taxes But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. 2011 income taxes You sold or exchanged the debt instrument. 2011 income taxes The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. 2011 income taxes   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. 2011 income taxes S. 2011 income taxes Source Income Subject to Withholding, if you bought the debt instrument at original issue. 2011 income taxes However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. 2011 income taxes You bought the debt instrument at a premium or paid an acquisition premium. 2011 income taxes The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. 2011 income taxes S. 2011 income taxes Treasury securities). 2011 income taxes The debt instrument is a contingent payment or inflation-indexed debt instrument. 2011 income taxes For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. 2011 income taxes   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. 2011 income taxes See chapter 12. 2011 income taxes Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business and is not exempted by treaty. 2011 income taxes However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. 2011 income taxes Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes Social Security Benefits A nonresident alien must include 85% of any U. 2011 income taxes S. 2011 income taxes social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. 2011 income taxes S. 2011 income taxes source fixed or determinable annual or periodic income. 2011 income taxes Social security benefits include monthly retirement, survivor, and disability benefits. 2011 income taxes This income is exempt under some tax treaties. 2011 income taxes See Table 1 in Publication 901, U. 2011 income taxes S. 2011 income taxes Tax Treaties, for a list of tax treaties that exempt U. 2011 income taxes S. 2011 income taxes social security benefits from U. 2011 income taxes S. 2011 income taxes tax. 2011 income taxes Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. 2011 income taxes They apply even if you are engaged in a trade or business in the United States. 2011 income taxes These rules do not apply to the sale or exchange of a U. 2011 income taxes S. 2011 income taxes real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. 2011 income taxes See Real Property Gain or Loss , earlier, under Effectively Connected Income. 2011 income taxes A capital asset is everything you own except: Inventory. 2011 income taxes Business accounts or notes receivable. 2011 income taxes Depreciable property used in a trade or business. 2011 income taxes Real property used in a trade or business. 2011 income taxes Supplies regularly used in a trade or business. 2011 income taxes Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. 2011 income taxes Certain U. 2011 income taxes S. 2011 income taxes government publications. 2011 income taxes Certain commodities derivative financial instruments held by a commodities derivatives dealer. 2011 income taxes Hedging transactions. 2011 income taxes A capital gain is a gain on the sale or exchange of a capital asset. 2011 income taxes A capital loss is a loss on the sale or exchange of a capital asset. 2011 income taxes If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. 2011 income taxes S. 2011 income taxes currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. 2011 income taxes You may want to read Publication 544. 2011 income taxes However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. 2011 income taxes Specific tax treatment that applies to U. 2011 income taxes S. 2011 income taxes citizens or residents generally does not apply to you. 2011 income taxes The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. 2011 income taxes Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. 2011 income taxes Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. 2011 income taxes Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. 2011 income taxes Gains on the sale or exchange of original issue discount obligations. 2011 income taxes Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes See Income From Real Property , later. 2011 income taxes 183-day rule. 2011 income taxes   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. 2011 income taxes For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. 2011 income taxes S. 2011 income taxes sources over your capital losses from U. 2011 income taxes S. 2011 income taxes sources. 2011 income taxes This rule applies even if any of the transactions occurred while you were not in the United States. 2011 income taxes   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. 2011 income taxes S. 2011 income taxes trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. 2011 income taxes   In arriving at your net gain, do not take the following into consideration. 2011 income taxes The four types of gains listed earlier. 2011 income taxes The deduction for a capital loss carryover. 2011 income taxes Capital losses in excess of capital gains. 2011 income taxes Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). 2011 income taxes Losses from the sale or exchange of property held for personal use. 2011 income taxes However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). 2011 income taxes See Itemized Deductions in chapter 5. 2011 income taxes   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. 2011 income taxes Also, you must file your tax return on a calendar-year basis. 2011 income taxes   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. 2011 income taxes Reporting. 2011 income taxes   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. 2011 income taxes Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. 2011 income taxes Attach them to Form 1040NR. 2011 income taxes Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. 2011 income taxes The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. 2011 income taxes This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. 2011 income taxes It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. 2011 income taxes You can make this choice only for real property income that is not otherwise effectively connected with your U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. 2011 income taxes This choice does not treat a nonresident alien, who is not otherwise engaged in a U. 2011 income taxes S. 2011 income taxes trade or business, as being engaged in a trade or business in the United States during the year. 2011 income taxes Example. 2011 income taxes You are a nonresident alien and are not engaged in a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes You own a single-family house in the United States that you rent out. 2011 income taxes Your rental income for the year is $10,000. 2011 income taxes This is your only U. 2011 income taxes S. 2011 income taxes source income. 2011 income taxes As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. 2011 income taxes You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. 2011 income taxes You do not have to file a U. 2011 income taxes S. 2011 income taxes tax return (Form 1040NR) because your U. 2011 income taxes S. 2011 income taxes tax liability is satisfied by the withholding of tax. 2011 income taxes If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. 2011 income taxes (See Publication 527, Residential Rental Property, for information on rental expenses. 2011 income taxes ) Any resulting net income is taxed at graduated rates. 2011 income taxes If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. 2011 income taxes For the first year you make the choice, also attach the statement discussed next. 2011 income taxes Making the choice. 2011 income taxes   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. 2011 income taxes Include the following in your statement. 2011 income taxes That you are making the choice. 2011 income taxes Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. 2011 income taxes A complete list of all your real property, or any interest in real property, located in the United States. 2011 income taxes Give the legal identification of U. 2011 income taxes S. 2011 income taxes timber, coal, or iron ore in which you have an interest. 2011 income taxes The extent of your ownership in the property. 2011 income taxes The location of the property. 2011 income taxes A description of any major improvements to the property. 2011 income taxes The dates you owned the property. 2011 income taxes Your income from the property. 2011 income taxes Details of any previous choices and revocations of the real property income choice. 2011 income taxes   This choice stays in effect for all later tax years unless you revoke it. 2011 income taxes Revoking the choice. 2011 income taxes   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. 2011 income taxes S. 2011 income taxes Individual Income Tax Return, for the year you made the choice and for later tax years. 2011 income taxes You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. 2011 income taxes If this time period has expired for the year of choice, you cannot revoke the choice for that year. 2011 income taxes However, you may revoke the choice for later tax years only if you have IRS approval. 2011 income taxes For information on how to get IRS approval, see Regulation section 1. 2011 income taxes 871-10(d)(2). 2011 income taxes Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . 2011 income taxes If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. 2011 income taxes Attach a statement to your return that includes the following information (if applicable). 2011 income taxes Your name, taxpayer identification number, and tax year. 2011 income taxes A description of the types of services performed (whether on or off board). 2011 income taxes Names of vessels or registration numbers of aircraft on which you performed the services. 2011 income taxes Amount of U. 2011 income taxes S. 2011 income taxes source transportation income derived from each type of service for each vessel or aircraft for the calendar year. 2011 income taxes Total amount of U. 2011 income taxes S. 2011 income taxes source transportation income derived from all types of services for the calendar year. 2011 income taxes This 4% tax applies to your U. 2011 income taxes S. 2011 income taxes source gross transportation income. 2011 income taxes This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. 2011 income taxes For transportation income from personal services, the transportation must be between the United States and a U. 2011 income taxes S. 2011 income taxes possession. 2011 income taxes For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. 2011 income taxes Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. 2011 income taxes S. 2011 income taxes residence with a period of nonresidence. 2011 income taxes The special rule applies if you meet all of the following conditions. 2011 income taxes You were a U. 2011 income taxes S. 2011 income taxes resident for a period that includes at least 3 consecutive calendar years. 2011 income taxes You were a U. 2011 income taxes S. 2011 income taxes resident for at least 183 days in each of those years. 2011 income taxes You ceased to be treated as a U. 2011 income taxes S. 2011 income taxes resident. 2011 income taxes You then again became a U. 2011 income taxes S. 2011 income taxes resident before the end of the third calendar year after the end of the period described in (1) above. 2011 income taxes Under this special rule, you are subject to tax on your U. 2011 income taxes S. 2011 income taxes source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. 2011 income taxes Example. 2011 income taxes John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. 2011 income taxes On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. 2011 income taxes During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). 2011 income taxes He returned to the United States on October 5, 2013, as a lawful permanent resident. 2011 income taxes He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). 2011 income taxes Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. 2011 income taxes Reporting requirements. 2011 income taxes   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. 2011 income taxes The return is due by the due date (including extensions) for filing your U. 2011 income taxes S. 2011 income taxes income tax return for the year that you again become a U. 2011 income taxes S. 2011 income taxes resident. 2011 income taxes If you already filed returns for that period, you must file amended returns. 2011 income taxes You must attach a statement to your return that identifies the source of all of your U. 2011 income taxes S. 2011 income taxes and foreign gross income and the items of income subject to this special rule. 2011 income taxes Expatriation Tax The expatriation tax provisions apply to U. 2011 income taxes S. 2011 income taxes citizens who have renounced their citizenship and long-term residents who have ended their residency. 2011 income taxes The rules that apply are based on the dates of expatriation, which are described in the following sections. 2011 income taxes Expatriation Before June 4, 2004. 2011 income taxes Expatriation After June 3, 2004, and Before June 17, 2008. 2011 income taxes Expatriation After June 16, 2008. 2011 income taxes Long-term resident defined. 2011 income taxes   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. 2011 income taxes In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. 2011 income taxes Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. 2011 income taxes S. 2011 income taxes taxes. 2011 income taxes Unless you received a ruling from the IRS that you did not expatriate to avoid U. 2011 income taxes S. 2011 income taxes taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. 2011 income taxes The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). 2011 income taxes Table 4-1. 2011 income taxes Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . 2011 income taxes . 2011 income taxes . 2011 income taxes   THEN the rules outlined on this page apply if . 2011 income taxes . 2011 income taxes . 2011 income taxes     Your 5-year average annual net income tax was more than . 2011 income taxes . 2011 income taxes . 2011 income taxes OR Your net worth equaled or exceeded . 2011 income taxes . 2011 income taxes . 2011 income taxes 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. 2011 income taxes Reporting requirements. 2011 income taxes   If you lost your U. 2011 income taxes S. 2011 income taxes citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. 2011 income taxes If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. 2011 income taxes   Your U. 2011 income taxes S. 2011 income taxes residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. 2011 income taxes Penalties. 2011 income taxes   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. 2011 income taxes The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. 2011 income taxes The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. 2011 income taxes Expatriation tax. 2011 income taxes   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. 2011 income taxes It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. 2011 income taxes See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. 2011 income taxes Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. 2011 income taxes Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. 2011 income taxes $127,000 if you expatriated or terminated residency in 2005. 2011 income taxes $131,000 if you expatriated or terminated residency in 2006. 2011 income taxes $136,000 if you expatriated or terminated residency in 2007. 2011 income taxes $139,000 if you expatriated or terminated residency in 2008. 2011 income taxes Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2011 income taxes You fail to certify on Form 8854 that you have complied with all U. 2011 income taxes S. 2011 income taxes federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. 2011 income taxes Exception for dual-citizens and certain minors. 2011 income taxes   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. 2011 income taxes However, they still must provide the certification required in (3). 2011 income taxes Certain dual-citizens. 2011 income taxes   You may qualify for the exception described above if all of the following apply. 2011 income taxes You became at birth a U. 2011 income taxes S. 2011 income taxes citizen and a citizen of another country and you continue to be a citizen of that other country. 2011 income taxes You were never a resident alien of the United States (as defined in chapter 1). 2011 income taxes You never held a U. 2011 income taxes S. 2011 income taxes passport. 2011 income taxes You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. 2011 income taxes S. 2011 income taxes citizenship. 2011 income taxes Certain minors. 2011 income taxes   You may qualify for the exception described above if you meet all of the following requirements. 2011 income taxes You became a U. 2011 income taxes S. 2011 income taxes citizen at birth. 2011 income taxes Neither of your parents was a U. 2011 income taxes S. 2011 income taxes citizen at the time of your birth. 2011 income taxes You expatriated before you were 18½. 2011 income taxes You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. 2011 income taxes Tax consequences of presence in the United States. 2011 income taxes   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. 2011 income taxes   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. 2011 income taxes Instead, you are treated as a U. 2011 income taxes S. 2011 income taxes citizen or resident and taxed on your worldwide income for that tax year. 2011 income taxes You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. 2011 income taxes   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. 2011 income taxes However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. 2011 income taxes You have ties with other countries. 2011 income taxes You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. 2011 income taxes You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. 2011 income taxes Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. 2011 income taxes See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. 2011 income taxes Related employer. 2011 income taxes   If your employer in the United States is any of the following, then your employer is related to you. 2011 income taxes You must count any days you performed services in the United States for that employer as days of presence in the United States. 2011 income taxes Members of your family. 2011 income taxes This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. 2011 income taxes ), and lineal descendants (children, grandchildren, etc. 2011 income taxes ). 2011 income taxes A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. 2011 income taxes A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. 2011 income taxes (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. 2011 income taxes ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. 2011 income taxes Date of tax expatriation. 2011 income taxes   For purposes of U. 2011 income taxes S. 2011 income taxes tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. 2011 income taxes You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. 2011 income taxes You file Form 8854 in accordance with the form instructions. 2011 income taxes Annual return. 2011 income taxes   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. 2011 income taxes You must file this form even if you owe no U. 2011 income taxes S. 2011 income taxes tax. 2011 income taxes Penalty. 2011 income taxes   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. 2011 income taxes You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. 2011 income taxes How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. 2011 income taxes S. 2011 income taxes source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2011 income taxes S. 2011 income taxes trade or business. 2011 income taxes For this purpose, U. 2011 income taxes S. 2011 income taxes source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. 2011 income taxes S. 2011 income taxes domestic corporation, and Debt obligations of U. 2011 income taxes S. 2011 income taxes persons or of the United States, a state or political subdivision thereof, or the District of Columbia. 2011 income taxes U. 2011 income taxes S. 2011 income taxes source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. 2011 income taxes The income or gain is considered U. 2011 income taxes S. 2011 income taxes source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. 2011 income taxes Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. 2011 income taxes S. 2011 income taxes source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. 2011 income taxes Other information. 2011 income taxes   For more information on the expatriation tax provisions, including exceptions to the tax and special U. 2011 income taxes S. 2011 income taxes source rules, see section 877 of the Internal Revenue Code. 2011 income taxes Expatriation Tax Return If you expatriated or terminated your U. 2011 income taxes S. 2011 income taxes residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. 2011 income taxes Attach it to Form 1040NR if you are required to file that form. 2011 income taxes If you are present in the United States following your expatriation and are subject to tax as a U. 2011 income taxes S. 2011 income taxes citizen or resident, file Form 8854 with Form 1040. 2011 income taxes Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. 2011 income taxes Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. 2011 income taxes $145,000 if you expatriated or terminated residency in 2009 or 2010. 2011 income taxes $147,000 if you expatriated or terminated residency in 2011. 2011 income taxes $151,000 if you expatriated or terminated residency in 2012. 2011 income taxes $155,000 if you expatriated or terminated residency in 2013. 2011 income taxes Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2011 income taxes You fail to certify on Form 8854 that you have complied with all U. 2011 income taxes S. 2011 income taxes federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. 2011 income taxes Exception for dual-citizens and certain minors. 2011 income taxes   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. 2011 income taxes However, they still must provide the certification required in (3) above. 2011 income taxes Certain dual-citizens. 2011 income taxes   You may qualify for the exception described above if both of the following apply. 2011 income taxes You became at birth a U. 2011 income taxes S. 2011 income taxes citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. 2011 income taxes You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. 2011 income taxes For the purpose of determining U. 2011 income taxes S. 2011 income taxes residency, use the substantial presence test described in chapter 1. 2011 income taxes Certain minors. 2011 income taxes   You may qualify for the exception described earlier if you meet both of the following requirements. 2011 income taxes You expatriated before you were 18½. 2011 income taxes You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. 2011 income taxes For the purpose of determining U. 2011 income taxes S. 2011 income taxes residency, use the substantial presence test described in chapter 1. 2011 income taxes Expatriation date. 2011 income taxes   Your expatriation date is the date you relinquish U. 2011 income taxes S. 2011 income taxes citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. 2011 income taxes S. 2011 income taxes resident). 2011 income taxes Former U. 2011 income taxes S. 2011 income taxes citizen. 2011 income taxes   You are considered to have relinquished your U. 2011 income taxes S. 2011 income taxes citizenship on the earliest of the following dates. 2011 income taxes The date you renounced U. 2011 income taxes S. 2011 income taxes citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). 2011 income taxes The date you furnished to the State Department a signed statement of voluntary relinquishment of U. 2011 income taxes S. 2011 income taxes nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). 2011 income taxes The date the State Department issued a certificate of loss of nationality. 2011 income taxes The date that a U. 2011 income taxes S. 2011 income taxes court canceled your certificate of naturalization. 2011 income taxes Former long-term resident. 2011 income taxes   You are considered to have terminated your long-term residency on the earliest of the following dates. 2011 income taxes The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. 2011 income taxes S. 2011 income taxes consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. 2011 income taxes The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. 2011 income taxes If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. 2011 income taxes See Effect of Tax Treaties in chapter 1 for more information about dual residents. 2011 income taxes How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). 2011 income taxes This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. 2011 income taxes But see Exceptions , later. 2011 income taxes Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. 2011 income taxes S. 2011 income taxes internal revenue laws. 2011 income taxes Losses from deemed sales must be taken into account to the extent otherwise provided under U. 2011 income taxes S. 2011 income taxes internal revenue laws. 2011 income taxes However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. 2011 income taxes The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. 2011 income taxes $626,000 if you expatriated or terminated residency in 2009. 2011 income taxes $627,000 if you expatriated or terminated residency in 2010. 2011 income taxes $636,000 if you expatriated or terminated residency in 2011. 2011 income taxes $651,000 if you expatriated or terminated residency in 2012. 2011 income taxes $668,000 if you expatriated or terminated residency in 2013. 2011 income taxes Exceptions. 2011 income taxes   The mark-to-market tax does not apply to the following. 2011 income taxes Eligible deferred compensation items. 2011 income taxes Ineligible deferred compensation items. 2011 income taxes Interests in nongrantor trusts. 2011 income taxes Specified tax deferred accounts. 2011 income taxes Instead, items (1) and (3) may be subject to withholding at source. 2011 income taxes In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. 2011 income taxes In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. 2011 income taxes See paragraphs (d), (e), and (f) of section 877A for more information. 2011 income taxes Expatriation Tax Return If you expatriated or terminated your U. 2011 income taxes S. 2011 income taxes residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. 2011 income taxes Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. 2011 income taxes Deferral of payment of mark-to-market tax. 2011 income taxes   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. 2011 income taxes If you make this election, the following rules apply. 2011 income taxes You can make the election on a property-by-property basis. 2011 income taxes The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. 2011 income taxes Interest is charged for the period the tax is deferred. 2011 income taxes The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. 2011 income taxes The due date of the return required for the year of death. 2011 income taxes The time that the security provided for the property fails to be adequate. 2011 income taxes See item (6) below. 2011 income taxes You make the election on Form 8854. 2011 income taxes You must provide adequate security (such as a bond). 2011 income taxes You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. 2011 income taxes   For more information about the deferral of payment, see the Instructions for Form 8854. 2011 income taxes Prev  Up  Next   Home   More Online Publications
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Lottery Results

In the United States, 43 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have lotteries. Lotteries are a form of gambling run by the state including instant-win scratch-off games, Lotto and daily games.

The 2011 Income Taxes

2011 income taxes 5. 2011 income taxes   Taxes Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: When To Deduct Taxes Real Estate TaxesSeparate elections. 2011 income taxes Making the election. 2011 income taxes Form 3115. 2011 income taxes Income TaxesAccrual of contested income taxes. 2011 income taxes Employment Taxes Other TaxesAdditional Medicare Tax. 2011 income taxes What's New Additional Medicare Tax. 2011 income taxes  Beginning in 2013, you must withhold a 0. 2011 income taxes 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2011 income taxes Also, self-employed individuals may be required to pay Additional Medicare Tax on self-employment income. 2011 income taxes See Employment Taxes , and Self-employment tax , later. 2011 income taxes Introduction You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses. 2011 income taxes You cannot deduct federal income taxes, estate and gift taxes, or state inheritance, legacy, and succession taxes. 2011 income taxes Topics - This chapter discusses: When to deduct taxes Real estate taxes Income taxes Employment taxes Other taxes Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 334 Tax Guide for Small Business 510 Excise Taxes 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch SE (Form 1040) Self-Employment Tax 3115 Application for Change in Accounting Method 8959 Additional Medicare Tax See chapter 12 for information about getting publications and forms. 2011 income taxes When To Deduct Taxes Generally, you can only deduct taxes in the year you pay them. 2011 income taxes This applies whether you use the cash method or an accrual method of accounting. 2011 income taxes Under an accrual method, you can deduct a tax before you pay it if you meet the exception for recurring items discussed under Economic Performance in Publication 538. 2011 income taxes You can also elect to ratably accrue real estate taxes as discussed later under Real Estate Taxes . 2011 income taxes Limit on accrual of taxes. 2011 income taxes   A taxing jurisdiction can require the use of a date for accruing taxes that is earlier than the date it originally required. 2011 income taxes However, if you use an accrual method, and can deduct the tax before you pay it, use the original accrual date for the year of change and all future years to determine when you can deduct the tax. 2011 income taxes Example. 2011 income taxes Your state imposes a tax on personal property used in a trade or business conducted in the state. 2011 income taxes This tax is assessed and becomes a lien as of July 1 (accrual date). 2011 income taxes In 2013, the state changed the assessment and lien dates from July 1, 2014, to December 31, 2013, for property tax year 2014. 2011 income taxes Use the original accrual date (July 1, 2014) to determine when you can deduct the tax. 2011 income taxes You must also use the July 1 accrual date for all future years to determine when you can deduct the tax. 2011 income taxes Uniform capitalization rules. 2011 income taxes   Uniform capitalization rules apply to certain taxpayers who produce real property or tangible personal property for use in a trade or business or for sale to customers. 2011 income taxes They also apply to certain taxpayers who acquire property for resale. 2011 income taxes Under these rules, you either include certain costs in inventory or capitalize certain expenses related to the property, such as taxes. 2011 income taxes For more information, see chapter 1. 2011 income taxes Carrying charges. 2011 income taxes   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. 2011 income taxes You can elect to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. 2011 income taxes For more information, see chapter 7. 2011 income taxes Refunds of taxes. 2011 income taxes   If you receive a refund for any taxes you deducted in an earlier year, include the refund in income to the extent the deduction reduced your federal income tax in the earlier year. 2011 income taxes For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1. 2011 income taxes    You must include in income any interest you receive on tax refunds. 2011 income taxes Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. 2011 income taxes The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. 2011 income taxes Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. 2011 income taxes See Taxes for local benefits , later. 2011 income taxes If you use an accrual method, you generally cannot accrue real estate taxes until you pay them to the government authority. 2011 income taxes However, you can elect to ratably accrue the taxes during the year. 2011 income taxes See Electing to ratably accrue , later. 2011 income taxes Taxes for local benefits. 2011 income taxes   Generally, you cannot deduct taxes charged for local benefits and improvements that tend to increase the value of your property. 2011 income taxes These include assessments for streets, sidewalks, water mains, sewer lines, and public parking facilities. 2011 income taxes You should increase the basis of your property by the amount of the assessment. 2011 income taxes   You can deduct taxes for these local benefits only if the taxes are for maintenance, repairs, or interest charges related to those benefits. 2011 income taxes If part of the tax is for maintenance, repairs, or interest, you must be able to show how much of the tax is for these expenses to claim a deduction for that part of the tax. 2011 income taxes Example. 2011 income taxes To improve downtown commercial business, Waterfront City converted a downtown business area street into an enclosed pedestrian mall. 2011 income taxes The city assessed the full cost of construction, financed with 10-year bonds, against the affected properties. 2011 income taxes The city is paying the principal and interest with the annual payments made by the property owners. 2011 income taxes The assessments for construction costs are not deductible as taxes or as business expenses, but are depreciable capital expenses. 2011 income taxes The part of the payments used to pay the interest charges on the bonds is deductible as taxes. 2011 income taxes Charges for services. 2011 income taxes   Water bills, sewerage, and other service charges assessed against your business property are not real estate taxes, but are deductible as business expenses. 2011 income taxes Purchase or sale of real estate. 2011 income taxes   If real estate is sold, the real estate taxes must be allocated between the buyer and the seller. 2011 income taxes   The buyer and seller must allocate the real estate taxes according to the number of days in the real property tax year (the period to which the tax imposed relates) that each owned the property. 2011 income taxes Treat the seller as paying the taxes up to but not including the date of sale. 2011 income taxes Treat the buyer as paying the taxes beginning with the date of sale. 2011 income taxes You can usually find this information on the settlement statement you received at closing. 2011 income taxes   If you (the seller) use an accrual method and have not elected to ratably accrue real estate taxes, you are considered to have accrued your part of the tax on the date you sell the property. 2011 income taxes Example. 2011 income taxes Alberto Verde, a calendar year accrual method taxpayer, owns real estate in Olmo County. 2011 income taxes He has not elected to ratably accrue property taxes. 2011 income taxes November 30 of each year is the assessment and lien date for the current real property tax year, which is the calendar year. 2011 income taxes He sold the property on June 30, 2013. 2011 income taxes Under his accounting method he would not be able to claim a deduction for the taxes because the sale occurred before November 30. 2011 income taxes He is treated as having accrued his part of the tax, 181/366  (January 1–June 29), on June 30, and he can deduct it for 2013. 2011 income taxes Electing to ratably accrue. 2011 income taxes   If you use an accrual method, you can elect to accrue real estate tax related to a definite period ratably over that period. 2011 income taxes Example. 2011 income taxes Juan Sanchez is a calendar year taxpayer who uses an accrual method. 2011 income taxes His real estate taxes for the real property tax year, July 1, 2013, to June 30, 2014, are $1,200. 2011 income taxes July 1 is the assessment and lien date. 2011 income taxes If Juan elects to ratably accrue the taxes, $600 will accrue in 2013 ($1,200 × 6/12, July 1–December 31) and the balance will accrue in 2014. 2011 income taxes Separate elections. 2011 income taxes   You can elect to ratably accrue the taxes for each separate trade or business and for nonbusiness activities if you account for them separately. 2011 income taxes Once you elect to ratably accrue real estate taxes, you must use that method unless you get permission from the IRS to change. 2011 income taxes See Form 3115 , later. 2011 income taxes Making the election. 2011 income taxes   If you elect to ratably accrue the taxes for the first year in which you incur real estate taxes, attach a statement to your income tax return for that year. 2011 income taxes The statement should show all the following items. 2011 income taxes The trades or businesses to which the election applies and the accounting method or methods used. 2011 income taxes The period to which the taxes relate. 2011 income taxes The computation of the real estate tax deduction for that first year. 2011 income taxes   Generally, you must file your return by the due date (including extensions). 2011 income taxes However, if you timely filed your return for the year without electing to ratably accrue, you can still make the election by filing an amended return within 6 months after the due date of the return (excluding extensions). 2011 income taxes Attach the statement to the amended return and write “Filed pursuant to section 301. 2011 income taxes 9100-2” on the statement. 2011 income taxes File the amended return at the same address where you filed the original return. 2011 income taxes Form 3115. 2011 income taxes    If you elect to ratably accrue real estate taxes for a year after the first year in which you incur real estate taxes, or if you want to revoke your election to ratably accrue real estate taxes, file Form 3115. 2011 income taxes For more information, including applicable time frames for filing, see the Instructions for Form 3115. 2011 income taxes Note. 2011 income taxes If you are filing an application for a change in accounting method filed after January 9, 2011, for a year of change ending after April 29, 2010, see Revenue Procedure 2011-14, 2011-4 I. 2011 income taxes R. 2011 income taxes B. 2011 income taxes 330, as modified and clarified by Revenue Procedure 2012-19, 2012-14 I. 2011 income taxes R. 2011 income taxes B. 2011 income taxes 689, and Revenue Procedure 2012-20, 2012-14 I. 2011 income taxes R. 2011 income taxes B. 2011 income taxes 700, or any successor. 2011 income taxes Revenue Procedure 2011-14 is available at  www. 2011 income taxes irs. 2011 income taxes gov/irb/2011-04IRB/ar08. 2011 income taxes html. 2011 income taxes Income Taxes This section discusses federal, state, local, and foreign income taxes. 2011 income taxes Federal income taxes. 2011 income taxes   You cannot deduct federal income taxes. 2011 income taxes State and local income taxes. 2011 income taxes   A corporation or partnership can deduct state and local income taxes imposed on the corporation or partnership as business expenses. 2011 income taxes An individual can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). 2011 income taxes   However, an individual can deduct a state tax on gross income (as distinguished from net income) directly attributable to a trade or business as a business expense. 2011 income taxes Accrual of contested income taxes. 2011 income taxes   If you use an accrual method, and you contest a state or local income tax liability, you must accrue and deduct any contested amount in the tax year in which the liability is finally determined. 2011 income taxes   If additional state or local income taxes for a prior year are assessed in a later year, you can deduct the taxes in the year in which they were originally imposed (the prior year) if the tax liability is not contested. 2011 income taxes You cannot deduct them in the year in which the liability is finally determined. 2011 income taxes    The filing of an income tax return is not considered a contest and, in the absence of an overt act of protest, you can deduct the tax in the prior year. 2011 income taxes Also, you can deduct any additional taxes in the prior year if you do not show some affirmative evidence of denial of the liability. 2011 income taxes   However, if you consistently deduct additional assessments in the year they are paid or finally determined (including those for which there was no contest), you must continue to do so. 2011 income taxes You cannot take a deduction in the earlier year unless you receive permission to change your method of accounting. 2011 income taxes For more information on accounting methods, see When Can I Deduct an Expense in chapter 1. 2011 income taxes Foreign income taxes. 2011 income taxes   Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. 2011 income taxes S. 2011 income taxes possession. 2011 income taxes However, an individual cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. 2011 income taxes S. 2011 income taxes tax under the foreign earned income exclusion or the foreign housing exclusion. 2011 income taxes For information on these exclusions, see Publication 54, Tax Guide for U. 2011 income taxes S. 2011 income taxes Citizens and Resident Aliens Abroad. 2011 income taxes For information on the foreign tax credit, see Publication 514, Foreign Tax Credit for Individuals. 2011 income taxes Employment Taxes If you have employees, you must withhold various taxes from your employees' pay. 2011 income taxes Most employers must withhold their employees' share of social security, Medicare taxes, and Additional Medicare Tax (if applicable) along with state and federal income taxes. 2011 income taxes You may also need to pay certain employment taxes from your own funds. 2011 income taxes These include your share of social security and Medicare taxes as an employer, along with unemployment taxes. 2011 income taxes Note. 2011 income taxes Additional Medicare Tax is only imposed on the employee. 2011 income taxes There is no employer share of Additional Medicare Tax. 2011 income taxes Your deduction for wages paid is not reduced by the social security and Medicare taxes, Additional Medicare Tax, and income taxes you withhold from your employees. 2011 income taxes You can deduct the employment taxes you must pay from your own funds as taxes. 2011 income taxes Example. 2011 income taxes You pay your employee $18,000 a year. 2011 income taxes However, after you withhold various taxes, your employee receives $14,500. 2011 income taxes You also pay an additional $1,500 in employment taxes. 2011 income taxes You should deduct the full $18,000 as wages. 2011 income taxes You can deduct the $1,500 you pay from your own funds as taxes. 2011 income taxes For more information on employment taxes, see Publication 15 (Circular E). 2011 income taxes Unemployment fund taxes. 2011 income taxes   As an employer, you may have to make payments to a state unemployment compensation fund or to a state disability benefit fund. 2011 income taxes Deduct these payments as taxes. 2011 income taxes Other Taxes The following are other taxes you can deduct if you incur them in the ordinary course of your trade or business. 2011 income taxes Excise taxes. 2011 income taxes   Generally, you can deduct as a business expense all excise taxes that are ordinary and necessary expenses of carrying on your trade or business. 2011 income taxes However, see Fuel taxes , later. 2011 income taxes   For more information on excise taxes, see Publication 510. 2011 income taxes Franchise taxes. 2011 income taxes   You can deduct corporate franchise taxes as a business expense. 2011 income taxes Fuel taxes. 2011 income taxes   Generally, taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are included as part of the cost of the fuel. 2011 income taxes Do not deduct these taxes as a separate item. 2011 income taxes   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. 2011 income taxes For more information, see Publication 510. 2011 income taxes Occupational taxes. 2011 income taxes   You can deduct as a business expense an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. 2011 income taxes Personal property tax. 2011 income taxes   You can deduct any tax imposed by a state or local government on personal property used in your trade or business. 2011 income taxes Sales tax. 2011 income taxes   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. 2011 income taxes If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. 2011 income taxes If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. 2011 income taxes If the property is depreciable, add the sales tax to the basis for depreciation. 2011 income taxes For more information on basis, see Publication 551. 2011 income taxes    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. 2011 income taxes Also, do not include these taxes in gross receipts or sales. 2011 income taxes Self-employment tax. 2011 income taxes   You can deduct part of your self-employment tax as a business expense in figuring your adjusted gross income. 2011 income taxes This deduction only affects your income tax. 2011 income taxes It does not affect your net earnings from self-employment or your self-employment tax. 2011 income taxes   To deduct the tax, enter on Form 1040, line 27, the amount shown on the Deduction for one-half of self-employment tax line of Schedule SE (Form 1040). 2011 income taxes   For more information on self-employment tax, see Publication 334. 2011 income taxes Additional Medicare Tax. 2011 income taxes   Beginning in 2013, you may be required to pay Additional Medicare Tax on self-employment income. 2011 income taxes See Form 8959 and the Instructions for Form 8959 for more information on the Additional Medicare Tax. 2011 income taxes Prev  Up  Next   Home   More Online Publications