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2012 Tax Return

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2012 Tax Return

2012 tax return Publication 969 - Introductory Material Table of Contents What's New Reminders IntroductionOrdering forms and publications. 2012 tax return Tax questions. 2012 tax return What's New Federal tax benefits for same-sex married couples. 2012 tax return   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. 2012 tax return For more information, see Publication 501. 2012 tax return Health flexible spending arrangements (FSAs). 2012 tax return  The following rules apply to health FSAs for plan years beginning after December 31, 2012. 2012 tax return Salary reduction contributions to your health FSA cannot be more than $2,500 a year (indexed for inflation). 2012 tax return Your employer may choose to change your cafeteria plan to allow you to carry over up to $500 of unused amounts remaining at the end of the plan year in a health FSA to be paid or reimbursed for qualified medical expenses incurred during the following plan year. 2012 tax return For more information, see Balance in an FSA under Flexible Spending Arrangements (FSAs), later. 2012 tax return Reminders Future Developments. 2012 tax return  For the latest information about developments related to Publication 969, such as legislation enacted after it was published, go to www. 2012 tax return IRS. 2012 tax return gov/pub969. 2012 tax return Photographs of missing children. 2012 tax return  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. 2012 tax return Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. 2012 tax return You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. 2012 tax return Introduction Various programs are designed to give individuals tax advantages to offset health care costs. 2012 tax return This publication explains the following programs. 2012 tax return Health savings accounts (HSAs). 2012 tax return Medical savings accounts (Archer MSAs and Medicare Advantage MSAs). 2012 tax return Health flexible spending arrangements (FSAs). 2012 tax return Health reimbursement arrangements (HRAs). 2012 tax return An HSA may receive contributions from an eligible individual or any other person, including an employer or a family member, on behalf of an eligible individual. 2012 tax return Contributions, other than employer contributions, are deductible on the eligible individual's return whether or not the individual itemizes deductions. 2012 tax return Employer contributions are not included in income. 2012 tax return Distributions from an HSA that are used to pay qualified medical expenses are not taxed. 2012 tax return An Archer MSA may receive contributions from an eligible individual and his or her employer, but not both in the same year. 2012 tax return Contributions by the individual are deductible whether or not the individual itemizes deductions. 2012 tax return Employer contributions are not included in income. 2012 tax return Distributions from an Archer MSA that are used to pay qualified medical expenses are not taxed. 2012 tax return A Medicare Advantage MSA is an Archer MSA designated by Medicare to be used solely to pay the qualified medical expenses of the account holder who is enrolled in Medicare. 2012 tax return Contributions can only be made by Medicare. 2012 tax return The contributions are not included in your income. 2012 tax return Distributions from a Medicare Advantage MSA that are used to pay qualified medical expenses are not taxed. 2012 tax return A health FSA may receive contributions from an eligible individual. 2012 tax return Employers may also contribute. 2012 tax return Contributions are not includible in income. 2012 tax return Reimbursements from an FSA that are used to pay qualified medical expenses are not taxed. 2012 tax return An HRA must receive contributions from the employer only. 2012 tax return Employees may not contribute. 2012 tax return Contributions are not includible in income. 2012 tax return Reimbursements from an HRA that are used to pay qualified medical expenses are not taxed. 2012 tax return Comments and suggestions. 2012 tax return   We welcome your comments about this publication and your suggestions for future editions. 2012 tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2012 tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2012 tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2012 tax return   You can send your comments from www. 2012 tax return irs. 2012 tax return gov/formspubs. 2012 tax return Click on “More Information” and then on “Comment on Tax Forms and Publications. 2012 tax return ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 2012 tax return Ordering forms and publications. 2012 tax return   Visit www. 2012 tax return irs. 2012 tax return gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 2012 tax return Internal Revenue Service 1201 N. 2012 tax return Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2012 tax return   If you have a tax question, check the information available on IRS. 2012 tax return gov or call 1-800-829-1040. 2012 tax return We cannot answer tax questions sent to either of the above addresses. 2012 tax return Prev  Up  Next   Home   More Online Publications
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The 2012 Tax Return

2012 tax return 2. 2012 tax return   Taxable and Nontaxable Income Table of Contents Compensation for Services Retirement Plan DistributionsIndividual Retirement Arrangements (IRAs) Pensions and Annuities Social Security and Equivalent Railroad Retirement BenefitsAre Any of Your Benefits Taxable? How Much Is Taxable? How To Report Your Benefits Lump-Sum Election Repayments More Than Gross Benefits Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Life Insurance ProceedsInstallments for life. 2012 tax return Surviving spouse. 2012 tax return Endowment Contract Proceeds Accelerated Death Benefits Sale of HomeMaximum Amount of Exclusion Ownership and Use Tests Married Persons Business Use or Rental of Home Reporting the Sale Reverse Mortgages Other ItemsWelfare benefits. 2012 tax return Payments from a state fund for victims of crime. 2012 tax return Home Affordable Modification Program (HAMP). 2012 tax return Mortgage assistance payments. 2012 tax return Payments to reduce cost of winter energy use. 2012 tax return Nutrition Program for the Elderly. 2012 tax return Reemployment Trade Adjustment Assistance (RTAA). 2012 tax return Generally, income is taxable unless it is specifically exempt (not taxed) by law. 2012 tax return Your taxable income may include compensation for services, interest, dividends, rents, royalties, income from partnerships, estate or trust income, gain from sales or exchanges of property, and business income of all kinds. 2012 tax return Under special provisions of the law, certain items are partially or fully exempt from tax. 2012 tax return Provisions that are of special interest to older taxpayers are discussed in this chapter. 2012 tax return Compensation for Services Generally, you must include in gross income everything you receive in payment for personal services. 2012 tax return In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. 2012 tax return You need not receive the compensation in cash for it to be taxable. 2012 tax return Payments you receive in the form of goods or services generally must be included in gross income at their fair market value. 2012 tax return Volunteer work. 2012 tax return   Do not include in your gross income amounts you receive for supportive services or reimbursements for out-of-pocket expenses under any of the following volunteer programs. 2012 tax return Retired Senior Volunteer Program (RSVP). 2012 tax return Foster Grandparent Program. 2012 tax return Senior Companion Program. 2012 tax return Service Corps of Retired Executives (SCORE). 2012 tax return Unemployment compensation. 2012 tax return   You must include in income all unemployment compensation you or your spouse (if married filing jointly) received. 2012 tax return More information. 2012 tax return   See Publication 525, Taxable and Nontaxable Income, for more detailed information on specific types of income. 2012 tax return Retirement Plan Distributions This section summarizes the tax treatment of amounts you receive from traditional individual retirement arrangements (IRA), employee pensions or annuities, and disability pensions or annuities. 2012 tax return A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. 2012 tax return A Roth IRA is an individual retirement plan that can be either an account or an annuity and features nondeductible contributions and tax-free distributions. 2012 tax return A SIMPLE IRA is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. 2012 tax return More detailed information can be found in Publication 590, Individual Retirement Arrangements (IRAs), and Publication 575, Pension and Annuity Income. 2012 tax return Individual Retirement Arrangements (IRAs) In general, distributions from a traditional IRA are taxable in the year you receive them. 2012 tax return Exceptions to the general rule are rollovers, tax-free withdrawals of contributions, and the return of nondeductible contributions. 2012 tax return These are discussed in Publication 590. 2012 tax return If you made nondeductible contributions to a traditional IRA, you must file Form 8606, Nondeductible IRAs. 2012 tax return If you do not file Form 8606 with your return, you may have to pay a $50 penalty. 2012 tax return Also, when you receive distributions from your traditional IRA, the amounts will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. 2012 tax return Early distributions. 2012 tax return   Generally, early distributions are amounts distributed from your traditional IRA account or annuity before you are age 59½, or amounts you receive when you cash in retirement bonds before you are age  59½. 2012 tax return You must include early distributions of taxable amounts in your gross income. 2012 tax return These taxable amounts are also subject to an additional 10% tax unless the distribution qualifies for an exception. 2012 tax return For purposes of the additional 10% tax, an IRA is a qualified retirement plan. 2012 tax return For more information about this tax, see Tax on Early Distributions under Pensions and Annuities, later. 2012 tax return After age 59½ and before age 70½. 2012 tax return   After you reach age 59½, you can receive distributions from your traditional IRA without having to pay the 10% additional tax. 2012 tax return Even though you can receive distributions after you reach age 59½, distributions are not required until you reach  age 70½. 2012 tax return Required distributions. 2012 tax return   If you are the owner of a traditional IRA, you generally must receive the entire balance in your IRA or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 70½. 2012 tax return See When Must You Withdraw Assets? (Required Minimum Distributions) in Publication 590. 2012 tax return If distributions from your traditional IRA(s) are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required. 2012 tax return For purposes of the 50% excise tax, an IRA is a qualified retirement plan. 2012 tax return For more information about this tax, see Tax on Excess Accumulation under Pensions and Annuities, later. 2012 tax return See also Excess Accumulations (Insufficient Distributions) in Publication 590. 2012 tax return Pensions and Annuities Generally, if you did not pay any part of the cost of your employee pension or annuity, and your employer did not withhold part of the cost of the contract from your pay while you worked, the amounts you receive each year are fully taxable. 2012 tax return However, see Insurance Premiums for Retired Public Safety Officers , later. 2012 tax return If you paid part of the cost of your pension or annuity plan (see Cost , later), you can exclude part of each annuity payment from income as a recovery of your cost (investment in the contract). 2012 tax return This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. 2012 tax return The rest of each payment is taxable. 2012 tax return However, see Insurance Premiums for Retired Public Safety Officers , later. 2012 tax return You figure the tax-free part of the payment using one of the following methods. 2012 tax return Simplified Method. 2012 tax return You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). 2012 tax return You cannot use this method if your annuity is paid under a nonqualified plan. 2012 tax return General Rule. 2012 tax return You must use this method if your annuity is paid under a nonqualified plan. 2012 tax return You generally cannot use this method if your annuity is paid under a qualified plan. 2012 tax return Contact your employer or plan administrator to find out if your pension or annuity is paid under a qualified or nonqualified plan. 2012 tax return You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. 2012 tax return Exclusion limit. 2012 tax return   If your annuity starting date is after 1986, the total amount of annuity income you can exclude over the years as a recovery of the cost cannot exceed your total cost. 2012 tax return Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. 2012 tax return This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. 2012 tax return   If you contributed to your pension or annuity and your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. 2012 tax return If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. 2012 tax return The total exclusion may be more than your cost. 2012 tax return Cost. 2012 tax return   Before you can figure how much, if any, of your pension or annuity benefits are taxable, you must determine your cost in the plan (your investment in the contract). 2012 tax return Your total cost in the plan includes everything that you paid. 2012 tax return It also includes amounts your employer contributed that were taxable to you when paid. 2012 tax return However, see Foreign employment contributions , later. 2012 tax return   From this total cost, subtract any refunded premiums, rebates, dividends, unrepaid loans, or other tax-free amounts you received by the later of the annuity starting date or the date on which you received your first payment. 2012 tax return   The annuity starting date is the later of the first day of the first period for which you received a payment from the plan or the date on which the plan's obligations became fixed. 2012 tax return    The amount of your contributions to the plan may be shown in box 9b of any Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 2012 tax return , that you receive. 2012 tax return Foreign employment contributions. 2012 tax return   If you worked abroad, certain amounts your employer paid into your retirement plan that were not includible in your gross income may be considered part of your cost. 2012 tax return For details, see Foreign employment contributions in Publication 575. 2012 tax return Withholding. 2012 tax return   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable part of amounts paid to you. 2012 tax return However, you can choose not to have tax withheld on the payments you receive, unless they are eligible rollover distributions. 2012 tax return (These are distributions that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. 2012 tax return ) See Withholding Tax and Estimated Tax and Rollovers in Publication 575 for more information. 2012 tax return   For payments other than eligible rollover distributions, you can tell the payer how much to withhold by filing a Form W-4P, Withholding Certificate for Pension or Annuity Payments. 2012 tax return Simplified Method. 2012 tax return   Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. 2012 tax return For an annuity that is payable over the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. 2012 tax return For any other annuity, this number is the number of monthly annuity payments under the contract. 2012 tax return Who must use the Simplified Method. 2012 tax return   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you receive your pension or annuity payments from a qualified plan or annuity, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments (defined next). 2012 tax return   In addition, if your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use the Simplified Method for payments from a qualified plan, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments. 2012 tax return If you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. 2012 tax return Guaranteed payments. 2012 tax return   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. 2012 tax return If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. 2012 tax return Who cannot use the Simplified Method. 2012 tax return   You cannot use the Simplified Method and must use the General Rule if you receive pension or annuity payments from: A nonqualified plan, such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan, or A qualified plan if you are age 75 or older on your annuity starting date and you are entitled to at least 5 years of guaranteed payments (defined above). 2012 tax return   In addition, you had to use the General Rule for either circumstance described above if your annuity starting date is after July 1, 1986, and before November 19, 1996. 2012 tax return If you did not have to use the General Rule, you could have chosen to use it. 2012 tax return You also had to use the General Rule for payments from a qualified plan if your annuity starting date is before July 2, 1986, and you did not qualify to use the Three-Year Rule. 2012 tax return   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. 2012 tax return   Unless your annuity starting date was before 1987, once you have recovered all of your non-taxable investment, all of each remaining payment you receive is fully taxable. 2012 tax return Once your remaining payments are fully taxable, there is no longer a concern with the General Rule or Simplified Method. 2012 tax return   Complete information on the General Rule, including the actuarial tables you need, is contained in Publication 939, General Rule for Pensions and Annuities. 2012 tax return How to use the Simplified Method. 2012 tax return   Complete the Simplified Method Worksheet in the Form 1040, Form 1040A, or Form 1040NR instructions or in Publication 575 to figure your taxable annuity for 2013. 2012 tax return Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. 2012 tax return   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. 2012 tax return How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. 2012 tax return For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. 2012 tax return    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. 2012 tax return Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. 2012 tax return Single-life annuity. 2012 tax return   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. 2012 tax return Enter on line 3 the number shown for your age on your annuity starting date. 2012 tax return This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. 2012 tax return Multiple-lives annuity. 2012 tax return   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. 2012 tax return Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. 2012 tax return For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. 2012 tax return For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. 2012 tax return Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. 2012 tax return   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. 2012 tax return Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. 2012 tax return This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. 2012 tax return Fixed-period annuities. 2012 tax return   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. 2012 tax return Line 6. 2012 tax return   The amount on line 6 should include all amounts that could have been recovered in prior years. 2012 tax return If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. 2012 tax return    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity in later years. 2012 tax return Example. 2012 tax return Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. 2012 tax return Bill's annuity starting date is January 1, 2013. 2012 tax return The benefits are to be paid over the joint lives of Bill and his wife, Kathy, age 65. 2012 tax return Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. 2012 tax return Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. 2012 tax return Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. 2012 tax return See the illustrated Worksheet 2-A, Simplified Method Worksheet, later. 2012 tax return You can find a blank version of this worksheet in Publication 575. 2012 tax return (The references in the illustrated worksheet are to sections in Publication 575). 2012 tax return His annuity is payable over the lives of more than one annuitant, so Bill uses his and Kathy's combined ages, 130 (65 + 65), and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet and finds the line 3 amount to be 310. 2012 tax return Bill's tax-free monthly amount is $100 ($31,000 ÷ 310 as shown on line 4 of the worksheet). 2012 tax return Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. 2012 tax return The full amount of any annuity payments received after 310 payments are paid must generally be included in gross income. 2012 tax return If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. 2012 tax return This deduction is not subject to the 2%-of-adjusted-gross-income limit. 2012 tax return Worksheet 2-A. 2012 tax return Simplified Method Worksheet—Illustrated 1. 2012 tax return Enter the total pension or annuity payments received this year. 2012 tax return Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. 2012 tax return $ 14,400 2. 2012 tax return Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion* See Cost (Investment in the Contract), earlier 2. 2012 tax return 31,000   Note. 2012 tax return If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). 2012 tax return Otherwise, go to line 3. 2012 tax return     3. 2012 tax return Enter the appropriate number from Table 1 below. 2012 tax return But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. 2012 tax return 310 4. 2012 tax return Divide line 2 by the number on line 3 4. 2012 tax return 100 5. 2012 tax return Multiply line 4 by the number of months for which this year's payments were made. 2012 tax return If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. 2012 tax return Otherwise, go to line 6 5. 2012 tax return 1,200 6. 2012 tax return Enter any amount previously recovered tax free in years after 1986. 2012 tax return This is the amount shown on line 10 of your worksheet for last year 6. 2012 tax return 0 7. 2012 tax return Subtract line 6 from line 2 7. 2012 tax return 31,000 8. 2012 tax return Enter the smaller of line 5 or line 7 8. 2012 tax return 1,200 9. 2012 tax return Taxable amount for year. 2012 tax return Subtract line 8 from line 1. 2012 tax return Enter the result, but not less than zero. 2012 tax return Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. 2012 tax return Note. 2012 tax return If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. 2012 tax return If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers, earlier, before entering an amount on your tax return. 2012 tax return 9. 2012 tax return $ 13,200 10. 2012 tax return Was your annuity starting date before 1987? □ Yes. 2012 tax return STOP. 2012 tax return Do not complete the rest of this worksheet. 2012 tax return  ☑ No. 2012 tax return Add lines 6 and 8. 2012 tax return This is the amount you have recovered tax free through 2013. 2012 tax return You will need this number if you need to fill out this worksheet next year. 2012 tax return 10. 2012 tax return 1,200 11. 2012 tax return Balance of cost to be recovered. 2012 tax return Subtract line 10 from line 2. 2012 tax return If zero, you will not have to complete this worksheet next year. 2012 tax return The payments you receive next year will generally be fully taxable 11. 2012 tax return $ 29,800 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. 2012 tax return   Table 1 for Line 3 Above       AND your annuity starting date was—   IF your age on your annuity starting date was . 2012 tax return . 2012 tax return . 2012 tax return   BEFORE November 19, 1996, enter on line 3 . 2012 tax return . 2012 tax return . 2012 tax return AFTER November 18, 1996, enter on line 3 . 2012 tax return . 2012 tax return . 2012 tax return   55 or under 300 360   56-60 260 310   61-65 240 260   66-70 170 210   71 or over 120 160 Table 2 for Line 3 Above   IF the annuitants' combined ages on your annuity starting date were . 2012 tax return . 2012 tax return . 2012 tax return   THEN enter on line 3 . 2012 tax return . 2012 tax return . 2012 tax return         110 or under   410         111-120   360         121-130   310         131-140   260         141 or over   210       Survivors of retirees. 2012 tax return   Benefits paid to you as a survivor under a joint and survivor annuity must be included in your gross income in the same way the retiree would have included them in gross income. 2012 tax return   If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule, include the total received in your income. 2012 tax return The retiree's cost has already been recovered tax free. 2012 tax return   If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage the retiree used to your initial payment called for in the contract. 2012 tax return The resulting tax-free amount will then remain fixed. 2012 tax return Any increases in the survivor annuity are fully taxable. 2012 tax return   If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. 2012 tax return See Simplified Method , earlier. 2012 tax return How to report. 2012 tax return   If you file Form 1040, report your total annuity on line 16a, and the taxable part on line 16b. 2012 tax return If your pension or annuity is fully taxable, enter it on line 16b. 2012 tax return Do not make an entry on line 16a. 2012 tax return   If you file Form 1040A, report your total annuity on line 12a, and the taxable part on line 12b. 2012 tax return If your pension or annuity is fully taxable, enter it on line 12b. 2012 tax return Do not make an entry on line 12a. 2012 tax return   If you file Form 1040NR, report your total annuity on line 17a, and the taxable part on line 17b. 2012 tax return If your pension or annuity is fully taxable, enter it on line 17b. 2012 tax return Do not make an entry on line 17a. 2012 tax return Example. 2012 tax return You are a Form 1040 filer and you received monthly payments totaling $1,200 (12 months x $100) during 2013 from a pension plan that was completely financed by your employer. 2012 tax return You had paid no tax on the payments that your employer made to the plan, and the payments were not used to pay for accident, health, or long-term care insurance premiums (as discussed later under Insurance Premiums for Retired Public Safety Officers ). 2012 tax return The entire $1,200 is taxable. 2012 tax return You include $1,200 only on Form 1040, line 16b. 2012 tax return Joint return. 2012 tax return   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on line 16a of Form 1040, line 12a of Form 1040A, or line 17a of Form 1040NR. 2012 tax return Report the total of the taxable parts on line 16b of Form 1040, line 12b of Form 1040A, or line 17b of Form 1040NR. 2012 tax return Form 1099-R. 2012 tax return   You should receive a Form 1099-R for your pension or annuity. 2012 tax return Form 1099-R shows your pension or annuity for the year and any income tax withheld. 2012 tax return You should receive a Form W-2 if you receive distributions from certain nonqualified plans. 2012 tax return You must attach Forms 1099-R or Forms W-2 to your 2013 tax return if federal income tax was withheld. 2012 tax return Generally, you should be sent these forms by January 31, 2014. 2012 tax return Nonperiodic Distributions If you receive a nonperiodic distribution from your retirement plan, you may be able to exclude all or part of it from your income as a recovery of your cost. 2012 tax return Nonperiodic distributions include cash withdrawals, distributions of current earnings (dividends) on your investment, and certain loans. 2012 tax return For information on how to figure the taxable amount of a nonperiodic distribution, see Taxation of Nonperiodic Payments in Publication 575. 2012 tax return The taxable part of a nonperiodic distribution may be subject to an additional 10% tax. 2012 tax return See Tax on Early Distributions, later. 2012 tax return Lump-sum distributions. 2012 tax return   If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. 2012 tax return The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. 2012 tax return The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. 2012 tax return You may be able to use the 10-year tax option to figure tax on the ordinary income part. 2012 tax return Form 1099-R. 2012 tax return   If you receive a total distribution from a plan, you should receive a Form 1099-R. 2012 tax return If the distribution qualifies as a lump-sum distribution, box 3 shows the capital gain part of the distribution. 2012 tax return The amount in box 2a, Taxable amount, minus the amount in box 3, Capital gain, is the ordinary income part. 2012 tax return More information. 2012 tax return   For more detailed information on lump-sum distributions, see Publication 575 or Form 4972, Tax on Lump-Sum Distributions. 2012 tax return Tax on Early Distributions Most distributions you receive from your qualified retirement plan and nonqualified annuity contracts before you reach age 59½ are subject to an additional tax of 10%. 2012 tax return The tax applies to the taxable part of the distribution. 2012 tax return For this purpose, a qualified retirement plan is: A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)), A qualified employee annuity plan, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). 2012 tax return  An IRA is also a qualified retirement plan for purposes of this tax. 2012 tax return General exceptions to tax. 2012 tax return   The early distribution tax does not apply to any distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. 2012 tax return Additional exceptions. 2012 tax return   There are additional exceptions to the early distribution tax for certain distributions from qualified retirement plans and nonqualified annuity contracts. 2012 tax return See Publication 575 for details. 2012 tax return Reporting tax. 2012 tax return   If you owe only the tax on early distributions and distribution code 1 (early distribution, no known exception) is correctly shown in Form 1099-R, box 7, multiply the taxable part of the early distribution by 10% (. 2012 tax return 10) and enter the result on Form 1040, line 58, or Form 1040NR, line 56. 2012 tax return See the instructions for line 58 of Form 1040 or line 56 of Form 1040NR for more information about reporting the early distribution tax. 2012 tax return Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date. 2012 tax return Unless the rule for 5% owners applies, this is generally April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. 2012 tax return However, your plan may require you to begin to receive payments by April 1 of the year that follows the year in which you reach 70½, even if you have not retired. 2012 tax return For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan) (for benefits accruing after 1986). 2012 tax return  An IRA is also a qualified retirement plan for purposes of this tax. 2012 tax return An excess accumulation is the undistributed remainder of the required minimum distribution that was left in your qualified retirement plan. 2012 tax return 5% owners. 2012 tax return   If you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the company maintaining your qualified retirement plan, you must begin to receive distributions from the plan by April 1 of the year after the calendar year in which you reach age 70½. 2012 tax return See Publication 575 for more information. 2012 tax return Amount of tax. 2012 tax return   If you do not receive the required minimum distribution, you are subject to an additional tax. 2012 tax return The tax equals 50% of the difference between the amount that must be distributed and the amount that was distributed during the tax year. 2012 tax return You can get this excise tax excused if you establish that the shortfall in distributions was due to reasonable error and that you are taking reasonable steps to remedy the shortfall. 2012 tax return Form 5329. 2012 tax return   You must file a Form 5329 if you owe a tax because you did not receive a minimum required distribution from your qualified retirement plan. 2012 tax return Additional information. 2012 tax return   For more detailed information on the tax on excess accumulation, see Publication 575. 2012 tax return Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. 2012 tax return The premiums can be for coverage for you, your spouse, or dependent(s). 2012 tax return The distribution must be made directly from the plan to the insurance provider. 2012 tax return You can exclude from income the smaller of the amount of the insurance premiums or $3,000. 2012 tax return You can only make this election for amounts that would otherwise be included in your income. 2012 tax return The amount excluded from your income cannot be used to claim a medical expense deduction. 2012 tax return An eligible retirement plan is a governmental plan that is a: Qualified trust, Section 403(a) plan, Section 403(b) annuity, or Section 457(b) plan. 2012 tax return If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. 2012 tax return The taxable amount shown in box 2a of any Form 1099-R that you receive does not reflect the exclusion. 2012 tax return Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. 2012 tax return Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. 2012 tax return Enter “PSO” next to the appropriate line on which you report the taxable amount. 2012 tax return Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. 2012 tax return These categories are treated differently for income tax purposes. 2012 tax return Social security equivalent benefits. 2012 tax return   The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. 2012 tax return This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and is treated for tax purposes like social security benefits. 2012 tax return (See Social Security and Equivalent Railroad Retirement Benefits , later. 2012 tax return ) Non-social security equivalent benefits. 2012 tax return   The second category contains the rest of the tier 1 benefits, called the non-social security equivalent benefit (NSSEB). 2012 tax return It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. 2012 tax return This category of benefits is treated as an amount received from a qualified employee plan. 2012 tax return This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. 2012 tax return Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. 2012 tax return More information. 2012 tax return   For more information about railroad retirement benefits, see Publication 575. 2012 tax return Military Retirement Pay Military retirement pay based on age or length of service is taxable and must be included in income as a pension on Form 1040, lines 16a and 16b; on Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. 2012 tax return But, certain military and government disability pensions that are based on a percentage of disability from active service in the Armed Forces of any country generally are not taxable. 2012 tax return For more information, including information about veterans' benefits and insurance, see Publication 525. 2012 tax return Social Security and Equivalent Railroad Retirement Benefits This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. 2012 tax return Social security benefits include monthly retirement, survivor, and disability benefits. 2012 tax return They do not include supplemental security income (SSI) payments, which are not taxable. 2012 tax return Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. 2012 tax return They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits. 2012 tax return If you received these benefits during 2013, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits. 2012 tax return Are Any of Your Benefits Taxable? Note. 2012 tax return When the term “benefits” is used in this section, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. 2012 tax return  To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. 2012 tax return When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. 2012 tax return S. 2012 tax return savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned in American Samoa or Puerto Rico by bona fide residents. 2012 tax return Figuring total income. 2012 tax return   To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. 2012 tax return If that total amount is more than your base amount, part of your benefits may be taxable. 2012 tax return If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. 2012 tax return Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. 2012 tax return If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. 2012 tax return If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. 2012 tax return Worksheet 2-B. 2012 tax return A Quick Way To Check if Your Benefits May Be Taxable A. 2012 tax return Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. 2012 tax return Include  the full amount of any lump-sum benefit payments received in 2013, for 2013 and  earlier years. 2012 tax return (If you received more than one form, combine the amounts from box 5  and enter the total. 2012 tax return ) A. 2012 tax return     Note. 2012 tax return If the amount on line A is zero or less, stop here; none of your benefits are  taxable this year. 2012 tax return     B. 2012 tax return Enter one-half of the amount on line A B. 2012 tax return   C. 2012 tax return Enter your taxable pensions, wages, interest, dividends, and other taxable income C. 2012 tax return   D. 2012 tax return Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for: •Interest from qualified U. 2012 tax return S. 2012 tax return savings bonds, •Employer-provided adoption benefits, •Foreign earned income or foreign housing, or •Income earned in American Samoa or Puerto Rico by bona fide residents D. 2012 tax return   E. 2012 tax return Add lines B, C, and D and enter the total E. 2012 tax return   F. 2012 tax return If you are: •Married filing jointly, enter $32,000 •Single, head of household, qualifying widow(er), or married filing separately and you  lived apart from your spouse for all of 2013, enter $25,000 •Married filing separately and you lived with your spouse at any time during 2013,  enter -0- F. 2012 tax return   G. 2012 tax return Is the amount on line F less than or equal to the amount on line E? □ No. 2012 tax return None of your benefits are taxable this year. 2012 tax return  □ Yes. 2012 tax return Some of your benefits may be taxable. 2012 tax return To figure how much of your benefits  are taxable, see Which worksheet to use under How Much Is Taxable. 2012 tax return     Base Amount Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er) with dependent child, $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $0 if you are married filing separately and lived with your spouse at any time during 2013. 2012 tax return Repayment of Benefits Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. 2012 tax return It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. 2012 tax return If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. 2012 tax return Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. 2012 tax return Your repayments are shown in box 4. 2012 tax return The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). 2012 tax return Use the amount in box 5 to figure whether any of your benefits are taxable. 2012 tax return Tax Withholding and Estimated Tax You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. 2012 tax return If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. 2012 tax return If you do not choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. 2012 tax return For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. 2012 tax return How Much Is Taxable? If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. 2012 tax return Generally, the higher that total amount, the greater the taxable part of your benefits. 2012 tax return Maximum taxable part. 2012 tax return   The taxable part of your benefits usually cannot be more than 50%. 2012 tax return However, up to 85% of your benefits can be taxable if either of the following situations applies to you. 2012 tax return The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). 2012 tax return You are married filing separately and lived with your spouse at any time during 2013. 2012 tax return   If you are a nonresident alien, 85% of your benefits are taxable. 2012 tax return However, this income is exempt under some tax treaties. 2012 tax return Which worksheet to use. 2012 tax return   A worksheet to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. 2012 tax return However, you will need to use a different worksheet(s) if any of the following situations applies to you. 2012 tax return You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse were covered by a retirement plan at work. 2012 tax return In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. 2012 tax return Situation (1) does not apply and you take one or more of the following exclusions. 2012 tax return Interest from qualified U. 2012 tax return S. 2012 tax return savings bonds (Form 8815). 2012 tax return Employer-provided adoption benefits (Form 8839). 2012 tax return Foreign earned income or housing (Form 2555 or Form 2555-EZ). 2012 tax return Income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. 2012 tax return In these situations, you must use Worksheet 1 in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure your taxable benefits. 2012 tax return You received a lump-sum payment for an earlier year. 2012 tax return In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. 2012 tax return See Lump-Sum Election , later. 2012 tax return How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040, Form 1040A, or Form 1040NR. 2012 tax return You cannot use Form 1040EZ. 2012 tax return Reporting on Form 1040. 2012 tax return   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable part on line 20b. 2012 tax return If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. 2012 tax return Reporting on Form 1040A. 2012 tax return   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable part on line 14b. 2012 tax return If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. 2012 tax return Reporting on Form 1040NR. 2012 tax return   Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of Form 1040NR, Schedule NEC, line 8. 2012 tax return Benefits not taxable. 2012 tax return   If you are filing Form 1040EZ, do not report any benefits on your tax return. 2012 tax return If you are filing Form 1040 or Form 1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. 2012 tax return Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. 2012 tax return If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. 2012 tax return Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. 2012 tax return This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. 2012 tax return No part of the lump-sum death benefit is subject to tax. 2012 tax return For more information about the lump-sum death benefit, visit the Social Security Administration website at www. 2012 tax return SSA. 2012 tax return gov, and use keyword: death benefit. 2012 tax return Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. 2012 tax return However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. 2012 tax return You can elect this method if it lowers your taxable benefits. 2012 tax return See Publication 915 for more information. 2012 tax return Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. 2012 tax return If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. 2012 tax return If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. 2012 tax return If you have any questions about this negative figure, contact your local Social Security Administration office or your local U. 2012 tax return S. 2012 tax return Railroad Retirement Board field office. 2012 tax return Joint return. 2012 tax return   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's does not, subtract the box 5 amount on your form from the box 5 amount on your spouse's form. 2012 tax return You do this to get your net benefits when figuring if your combined benefits are taxable. 2012 tax return Repayment of benefits received in an earlier year. 2012 tax return   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. 2012 tax return   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. 2012 tax return Claim it on Schedule A (Form 1040), line 23. 2012 tax return   If this deduction is more than $3,000, you have to follow some special instructions. 2012 tax return See Publication 915 for those instructions. 2012 tax return Sickness and Injury Benefits Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. 2012 tax return If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. 2012 tax return However, certain payments may not be taxable to you. 2012 tax return Some of these payments are discussed later in this section. 2012 tax return Also, see Military and Government Disability Pensions and Other Sickness and Injury Benefits in Publication 525. 2012 tax return Cost paid by you. 2012 tax return   If you pay the entire cost of an accident or health plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. 2012 tax return If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. 2012 tax return Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. 2012 tax return You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. 2012 tax return Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. 2012 tax return If you were 65 or older by the end of 2013 or you were retired on permanent and total disability and received taxable disability income, you may be able to claim the credit for the elderly or the disabled. 2012 tax return See Credit for the Elderly or the Disabled, later. 2012 tax return For more information on this credit, see Publication 524, Credit for the Elderly or the Disabled. 2012 tax return Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. 2012 tax return Report the payments on lines 16a and 16b of Form 1040, on lines 12a and 12b of Form 1040A, or on lines 17a and 17b of Form 1040NR. 2012 tax return For more information on pensions and annuities, see Publication 575. 2012 tax return Retirement and profit-sharing plans. 2012 tax return   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. 2012 tax return The payments must be reported as a pension or annuity. 2012 tax return Accrued leave payment. 2012 tax return   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. 2012 tax return The payment is not a disability payment. 2012 tax return Include it in your income in the tax year you receive it. 2012 tax return Long-Term Care Insurance Contracts In most cases, long-term care insurance contracts generally are treated as accident and health insurance contracts. 2012 tax return Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. 2012 tax return However, the amount you can exclude may be limited. 2012 tax return Long-term care insurance contracts are discussed in more detail in Publication 525. 2012 tax return Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. 2012 tax return The exemption also applies to your survivors. 2012 tax return The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. 2012 tax return If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. 2012 tax return For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. 2012 tax return Return to work. 2012 tax return   If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. 2012 tax return Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. 2012 tax return Federal Employees' Compensation Act (FECA). 2012 tax return   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. 2012 tax return However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. 2012 tax return Report this income on Form 1040, line 7; Form 1040A, line 7; on Form 1040EZ, line 1; or Form 1040NR, line 8. 2012 tax return Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. 2012 tax return    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. 2012 tax return For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. 2012 tax return Other compensation. 2012 tax return   Many other amounts you receive as compensation for sickness or injury are not taxable. 2012 tax return These include the following amounts. 2012 tax return Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. 2012 tax return Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. 2012 tax return Compensation you receive for permanent loss or loss of use of a part or function of your body, for your permanent disfigurement, or for such loss or disfigurement suffered by your spouse or dependent(s). 2012 tax return This compensation must be based only on the injury and not on the period of your absence from work. 2012 tax return These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. 2012 tax return Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. 2012 tax return This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. 2012 tax return Proceeds not received in installments. 2012 tax return   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. 2012 tax return If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. 2012 tax return Proceeds received in installments. 2012 tax return   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. 2012 tax return   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. 2012 tax return Include anything over this excluded part in your income as interest. 2012 tax return Installments for life. 2012 tax return   If, as the beneficiary under an insurance contract, you are entitled to receive the proceeds in installments for the rest of your life without a refund or period-certain guarantee, you figure the excluded part of each installment by dividing the amount held by the insurance company by your life expectancy. 2012 tax return If there is a refund or period-certain guarantee, the amount held by the insurance company for this purpose is reduced by the actuarial value of the guarantee. 2012 tax return Surviving spouse. 2012 tax return   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude, in any year, up to $1,000 of the interest included in the installments. 2012 tax return If you remarry, you can continue to take the exclusion. 2012 tax return Surrender of policy for cash. 2012 tax return   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. 2012 tax return In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. 2012 tax return You should receive a Form 1099-R showing the total proceeds and the taxable part. 2012 tax return Report these amounts on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or Form 1040NR, lines 17a and 17b. 2012 tax return Endowment Contract Proceeds An endowment contract is a policy that pays over to you a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. 2012 tax return Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. 2012 tax return To determine your cost, subtract from the total premiums (or other consideration) paid for the contract any amount that you previously received under the contract and excluded from your income. 2012 tax return Include in your income the part of the lump-sum payment that is more than your cost. 2012 tax return Endowment proceeds that you choose to receive in installments instead of a lump-sum payment at the maturity of the policy are taxed as an annuity. 2012 tax return The tax treatment of an annuity is explained in Publication 575. 2012 tax return For this treatment to apply, you must choose to receive the proceeds in installments before receiving any part of the lump sum. 2012 tax return This election must be made within 60 days after the lump-sum payment first becomes payable to you. 2012 tax return Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are generally excluded from income if the insured is terminally or chronically ill. 2012 tax return However, see Exception , later. 2012 tax return For a chronically ill individual, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. 2012 tax return Accelerated death benefits paid on a per diem or other periodic basis without regard to the costs are excludable up to a limit. 2012 tax return In addition, if any portion of a death benefit under a life insurance contract on the life of a terminally or chronically ill individual is sold or assigned to a viatical settlement provider, the amount received also is excluded from income. 2012 tax return Generally, a viatical settlement provider is one who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill. 2012 tax return To report taxable accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. 2012 tax return Terminally or chronically ill defined. 2012 tax return   A terminally ill person is one who has been certified by a physician as having an illness or physical condition that reasonably can be expected to result in death within 24 months from the date of the certification. 2012 tax return A chronically ill person is one who is not terminally ill but has been certified (within the previous 12 months) by a licensed health care practitioner as meeting either of the following conditions. 2012 tax return The person is unable to perform (without substantial help) at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) for a period of 90 days or more because of a loss of functional capacity. 2012 tax return The person requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment. 2012 tax return Exception. 2012 tax return   The exclusion does not apply to any amount paid to a person other than the insured if that other person has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the other person, or Has a financial interest in the business of the other person. 2012 tax return Sale of Home You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return in most cases) on the sale of your main home. 2012 tax return Generally, if you can exclude all of the gain, you do not need to report the sale on your tax return. 2012 tax return You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. 2012 tax return Main home. 2012 tax return   Usually, your main home is the home you live in most of the time and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. 2012 tax return Repaying the first-time homebuyer credit because you sold your home. 2012 tax return   If you claimed a first-time homebuyer credit for your main home and you sell it, you may have to repay the credit. 2012 tax return For a home purchased in 2008 and used as your main home until sold in 2013, you must file Form 5405 and repay the balance of the unpaid credit on your 2013 tax return. 2012 tax return   For a home purchased after 2008, you generally must repay the entire credit if the home was sold (or otherwise ceased to be your main home) within 36 months of the purchase date. 2012 tax return If you purchased your home in 2009 and used it as your main home until sold in 2013, you do not have to repay the credit or file Form 5405. 2012 tax return If you purchased your home in 2010 and used it as your main home until sold in 2013, you may have to file Form 5405 and repay the entire credit on your 2013 tax return. 2012 tax return   See the Instructions for Form 5405 for more information about repaying the credit and exceptions to repayment that may apply to you. 2012 tax return Maximum Amount of Exclusion You can generally exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. 2012 tax return You meet the ownership test. 2012 tax return You meet the use test. 2012 tax return During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. 2012 tax return You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . 2012 tax return Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. 2012 tax return This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). 2012 tax return Exception to ownership and use tests. 2012 tax return   If you owned and lived in the property as your main home for less than 2 years, you still can claim an exclusion in some cases. 2012 tax return Generally, you must have sold the home due to a change in place of employment, health, or unforeseen circumstances. 2012 tax return The maximum amount you can exclude will be reduced. 2012 tax return See Publication 523, Selling Your Home, for more information. 2012 tax return Exception to use test for individuals with a disability. 2012 tax return   There is an exception to the use test if, during the 5-year period before the sale of your home: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year. 2012 tax return Under this exception, you are considered to live in your home during any time that you own the home and live in a facility (including a nursing home) that is licensed by a state or political subdivision to care for persons in your condition. 2012 tax return   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. 2012 tax return Exception to ownership test for property acquired in a like-kind exchange. 2012 tax return   You must have owned your main home for at least 5 years to qualify for the exclusion if you acquired your main home in a like-kind exchange. 2012 tax return This special 5-year ownership rule continues to apply to a home you acquired in a like-kind exchange and gave to another person. 2012 tax return A like-kind exchange is an exchange of property held for productive use in a trade or business or for investment. 2012 tax return See Publication 523 for more information. 2012 tax return Period of nonqualified use. 2012 tax return   Generally, the gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gain is allocated to periods of nonqualified use. 2012 tax return Nonqualified use is any period after December 31, 2008, during which the property is not used as the main home. 2012 tax return See Publication 523 for more information. 2012 tax return Married Persons In the special situations discussed below, if you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use test, you can exclude up to $250,000 of gain. 2012 tax return However, see Special rules for joint returns , next. 2012 tax return Special rules for joint returns. 2012 tax return   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. 2012 tax return You are married and file a joint return for the year. 2012 tax return Either you or your spouse meets the ownership test. 2012 tax return Both you and your spouse meet the use test. 2012 tax return During the 2-year period ending on the date of the sale, neither you nor your spouse exclude gain from the sale of another home. 2012 tax return Sale of home by surviving spouse. 2012 tax return   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. 2012 tax return   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home in 2013. 2012 tax return The sale or exchange took place no more than 2 years after the date of death of your spouse. 2012 tax return You have not remarried. 2012 tax return You and your spouse met the use test at the time of your spouse's death. 2012 tax return You or your spouse met the ownership test at the time of your spouse's death. 2012 tax return Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. 2012 tax return Home transferred from spouse. 2012 tax return   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. 2012 tax return Use of home after divorce. 2012 tax return   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. 2012 tax return Business Use or Rental of Home You may be able to exclude gain from the sale of a home that you have used for business or to produce rental income. 2012 tax return However, you must meet the ownership and use tests. 2012 tax return See Publication 523 for more information. 2012 tax return Depreciation after May 6, 1997. 2012 tax return   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. 2012 tax return See Publication 523 for more information. 2012 tax return Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and you do not qualify to exclude all of it, You have a gain and you choose not to exclude it, or You received Form 1099-S. 2012 tax return If you have a gain that you cannot or choose not to exclude, if you received a Form 1099-S, or if you have a deductible loss, report the sale on your tax return. 2012 tax return Report the sale on Part I or Part II of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home. 2012 tax return If you used your home for business or to produce rental income, you may have to use Form 4797, Sales of Business Property, to report the sale of the business or rental part. 2012 tax return See Publication 523 for more information. 2012 tax return Reverse Mortgages A revers