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E file taxes free 2. E file taxes free   Roth IRAs Table of Contents What's New for 2013 What's New for 2014 Reminders Introduction What Is a Roth IRA? When Can a Roth IRA Be Opened? Can You Contribute to a Roth IRA?How Much Can Be Contributed? When Can You Make Contributions? What if You Contribute Too Much? Can You Move Amounts Into a Roth IRA?Conversions Rollover From Employer's Plan Into a Roth IRA Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments Rollover From a Roth IRA Rollover of Exxon Valdez Settlement Income Rollover of Airline Payments Are Distributions Taxable?What Are Qualified Distributions? Additional Tax on Early Distributions Ordering Rules for Distributions How Do You Figure the Taxable Part? Must You Withdraw or Use Assets?Minimum distributions. E file taxes free Recognizing Losses on Investments Distributions After Owner's Death What's New for 2013 Roth IRA contribution limit. E file taxes free  If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $5,500, or Your taxable compensation for the year. E file taxes free If you were age 50 or older before 2014 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2013 will generally be the lesser of: $6,500, or Your taxable compensation for the year. E file taxes free However, if your modified adjusted gross income (AGI) is above a certain amount, your contribution limit may be reduced. E file taxes free For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in this chapter. E file taxes free Modified AGI limit for Roth IRA contributions increased. E file taxes free  For 2013, your Roth IRA contribution limit is reduced (phased out) in the following situations. E file taxes free Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $178,000. E file taxes free You cannot make a Roth IRA contribution if your modified AGI is $188,000 or more. E file taxes free Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2013 and your modified AGI is at least $112,000. E file taxes free You cannot make a Roth IRA contribution if your modified AGI is $127,000 or more. E file taxes free Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. E file taxes free You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. E file taxes free See Can You Contribute to a Roth IRA? in this chapter. E file taxes free Net Investment Income Tax. E file taxes free  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). E file taxes free However, these distributions are taken into account when determining the modified adjusted gross income threshold. E file taxes free Distributions from a nonqualified retirement plan are included in net investment income. E file taxes free See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. E file taxes free What's New for 2014 Modified AGI limit for Roth IRA contributions increased. E file taxes free  For 2014, your Roth IRA contribution limit is reduced (phased out) in the following situations. E file taxes free Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $181,000. E file taxes free You cannot make a Roth IRA contribution if your modified AGI is $191,000 or more. E file taxes free Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2014 and your modified AGI is at least $114,000. E file taxes free You cannot make a Roth IRA contribution if your modified AGI is $129,000 or more. E file taxes free Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. E file taxes free You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more. E file taxes free Reminders Deemed IRAs. E file taxes free  For plan years beginning after 2002, a qualified employer plan (retirement plan) can maintain a separate account or annuity under the plan (a deemed IRA) to receive voluntary employee contributions. E file taxes free If the separate account or annuity otherwise meets the requirements of an IRA, it will be subject only to IRA rules. E file taxes free An employee's account can be treated as a traditional IRA or a Roth IRA. E file taxes free For this purpose, a “qualified employer plan” includes: A qualified pension, profit-sharing, or stock bonus plan (section 401(a) plan), A qualified employee annuity plan (section 403(a) plan), A tax-sheltered annuity plan (section 403(b) plan), and A deferred compensation plan (section 457 plan) maintained by a state, a political subdivision of a state, or an agency or instrumentality of a state or political subdivision of a state. E file taxes free Designated Roth accounts. E file taxes free  Designated Roth accounts are separate accounts under 401(k), 403(b), or 457(b) plans that accept elective deferrals that are referred to as Roth contributions. E file taxes free These elective deferrals are included in your income, but qualified distributions from these accounts are not included in your income. E file taxes free Designated Roth accounts are not IRAs and should not be confused with Roth IRAs. E file taxes free Contributions, up to their respective limits, can be made to Roth IRAs and designated Roth accounts according to your eligibility to participate. E file taxes free A contribution to one does not impact your eligibility to contribute to the other. E file taxes free See Publication 575, for more information on designated Roth accounts. E file taxes free Introduction Regardless of your age, you may be able to establish and make nondeductible contributions to an individual retirement plan called a Roth IRA. E file taxes free Contributions not reported. E file taxes free   You do not report Roth IRA contributions on your return. E file taxes free What Is a Roth IRA? A Roth IRA is an individual retirement plan that, except as explained in this chapter, is subject to the rules that apply to a traditional IRA (defined next). E file taxes free It can be either an account or an annuity. E file taxes free Individual retirement accounts and annuities are described in chapter 1 under How Can a Traditional IRA Be Opened. E file taxes free To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is opened. E file taxes free A deemed IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA. E file taxes free Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. E file taxes free But, if you satisfy the requirements, qualified distributions (discussed later) are tax free. E file taxes free Contributions can be made to your Roth IRA after you reach age 70½ and you can leave amounts in your Roth IRA as long as you live. E file taxes free Traditional IRA. E file taxes free   A traditional IRA is any IRA that is not a Roth IRA or SIMPLE IRA. E file taxes free Traditional IRAs are discussed in chapter 1. E file taxes free When Can a Roth IRA Be Opened? You can open a Roth IRA at any time. E file taxes free However, the time for making contributions for any year is limited. E file taxes free See When Can You Make Contributions , later under Can You Contribute to a Roth IRA. E file taxes free Can You Contribute to a Roth IRA? Generally, you can contribute to a Roth IRA if you have taxable compensation (defined later) and your modified AGI (defined later) is less than: $188,000 for married filing jointly or qualifying widow(er), $127,000 for single, head of household, or married filing separately and you did not live with your spouse at any time during the year, and $10,000 for married filing separately and you lived with your spouse at any time during the year. E file taxes free You may be able to claim a credit for contributions to your Roth IRA. E file taxes free For more information, see chapter 4. E file taxes free Is there an age limit for contributions?   Contributions can be made to your Roth IRA regardless of your age. E file taxes free Can you contribute to a Roth IRA for your spouse?   You can contribute to a Roth IRA for your spouse provided the contributions satisfy the Kay Bailey Hutchison Spousal IRA limit discussed in chapter 1 under How Much Can Be Contributed, you file jointly, and your modified AGI is less than $188,000. E file taxes free Compensation. E file taxes free   Compensation includes wages, salaries, tips, professional fees, bonuses, and other amounts received for providing personal services. E file taxes free It also includes commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments. E file taxes free For more information, see What Is Compensation? under Who Can Open a Traditional IRA? in chapter 1. E file taxes free Modified AGI. E file taxes free   Your modified AGI for Roth IRA purposes is your adjusted gross income (AGI) as shown on your return with some adjustments. E file taxes free Use Worksheet 2-1 , later, to determine your modified AGI. E file taxes free    Do not subtract conversion income when figuring your other AGI-based phaseouts and taxable income, such as your deduction for medical and dental expenses. E file taxes free Subtract them from AGI only for the purpose of figuring your modified AGI for Roth IRA purposes. E file taxes free How Much Can Be Contributed? The contribution limit for Roth IRAs generally depends on whether contributions are made only to Roth IRAs or to both traditional IRAs and Roth IRAs. E file taxes free Worksheet 2-1. E file taxes free Modified Adjusted Gross Income for Roth IRA Purposes Use this worksheet to figure your modified adjusted gross income for Roth IRA purposes. E file taxes free 1. E file taxes free Enter your adjusted gross income from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37 1. E file taxes free   2. E file taxes free Enter any income resulting from the conversion of an IRA (other than a Roth IRA) to a Roth IRA (included on Form 1040, line 15b, Form 1040A, line 11b, or Form 1040NR, line 16b) and a rollover from a qualified retirement plan to a Roth IRA (included on Form 1040, line 16b, Form 1040A, line 12b, or Form 1040NR, line 17b) 2. E file taxes free   3. E file taxes free Subtract line 2 from line 1 3. E file taxes free   4. E file taxes free Enter any traditional IRA deduction from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 4. E file taxes free   5. E file taxes free Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 5. E file taxes free   6. E file taxes free Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 6. E file taxes free   7. E file taxes free Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 7. E file taxes free   8. E file taxes free Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 8. E file taxes free   9. E file taxes free Enter any foreign housing deduction from Form 2555, line 50 9. E file taxes free   10. E file taxes free Enter any excludable qualified savings bond interest from Form 8815, line 14 10. E file taxes free   11. E file taxes free Enter any excluded employer-provided adoption benefits from Form 8839, line 28 11. E file taxes free   12. E file taxes free Add the amounts on lines 3 through 11 12. E file taxes free   13. E file taxes free Enter: $188,000 if married filing jointly or qualifying widow(er), $10,000 if married filing separately and you lived with your spouse at any time during the year, or $127,000 for all others 13. E file taxes free   Is the amount on line 12 more than the amount on line 13? If yes, see the note below. E file taxes free  If no, the amount on line 12 is your modified adjusted gross income for Roth IRA purposes. E file taxes free       Note. E file taxes free If the amount on line 12 is more than the amount on line 13 and you have other income or loss items, such as social security income or passive activity losses, that are subject to AGI-based phaseouts, you can refigure your AGI solely for the purpose of figuring your modified AGI for Roth IRA purposes. E file taxes free (If you receive social security benefits, use Worksheet 1 in Appendix B to refigure your AGI. E file taxes free ) Then go to line 3 above in this Worksheet 2-1 to refigure your modified AGI. E file taxes free If you do not have other income or loss items subject to AGI-based phaseouts, your modified adjusted gross income for Roth IRA purposes is the amount on line 12 above. E file taxes free Roth IRAs only. E file taxes free   If contributions are made only to Roth IRAs, your contribution limit generally is the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation. E file taxes free   However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained later under Contribution limit reduced . E file taxes free Roth IRAs and traditional IRAs. E file taxes free   If contributions are made to both Roth IRAs and traditional IRAs established for your benefit, your contribution limit for Roth IRAs generally is the same as your limit would be if contributions were made only to Roth IRAs, but then reduced by all contributions for the year to all IRAs other than Roth IRAs. E file taxes free Employer contributions under a SEP or SIMPLE IRA plan do not affect this limit. E file taxes free   This means that your contribution limit is the lesser of: $5,500 ($6,500 if you are age 50 or older) minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs, or Your taxable compensation minus all contributions (other than employer contributions under a SEP or SIMPLE IRA plan) for the year to all IRAs other than Roth IRAs. E file taxes free   However, if your modified AGI is above a certain amount, your contribution limit may be reduced, as explained below under Contribution limit reduced . E file taxes free   Simplified employee pensions (SEPs) are discussed in Publication 560. E file taxes free Savings incentive match plans for employees (SIMPLEs) are discussed in chapter 3. E file taxes free Repayment of reservist distributions. E file taxes free   You can repay qualified reservist distributions even if the repayments would cause your total contributions to the Roth IRA to be more than the general limit on contributions. E file taxes free However, the total repayments cannot be more than the amount of your distribution. E file taxes free Note. E file taxes free If you make repayments of qualified reservist distributions to a Roth IRA, increase your basis in the Roth IRA by the amount of the repayment. E file taxes free For more information, see Qualified reservist repayments under How Much Can Be Contributed? in chapter 1. E file taxes free Contribution limit reduced. E file taxes free   If your modified AGI is above a certain amount, your contribution limit is gradually reduced. E file taxes free Use Table 2-1, later, to determine if this reduction applies to you. E file taxes free Table 2-1. E file taxes free Effect of Modified AGI on Roth IRA Contribution This table shows whether your contribution to a Roth IRA is affected by the amount of your modified adjusted gross income (modified AGI). E file taxes free IF you have taxable compensation and your filing status is . E file taxes free . E file taxes free . E file taxes free AND your modified AGI is . E file taxes free . E file taxes free . E file taxes free THEN . E file taxes free . E file taxes free . E file taxes free married filing jointly or  qualifying widow(er) less than $178,000 you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . E file taxes free at least $178,000 but less than $188,000 the amount you can contribute is reduced as explained under Contribution limit reduced . E file taxes free $188,000 or more you cannot contribute to a Roth IRA. E file taxes free married filing separately and you lived with your spouse at any time during the year zero (-0-) you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . E file taxes free more than zero (-0-) but less than $10,000 the amount you can contribute is reduced as explained under Contribution limit reduced . E file taxes free $10,000 or more you cannot contribute to a Roth IRA. E file taxes free single, head of household,  or married filing separately and you did not live with your spouse at any time during the year less than $112,000 you can contribute up to $5,500 ($6,500 if you are age 50 or older) as explained under How Much Can Be Contributed . E file taxes free at least $112,000 but less than $127,000 the amount you can contribute is reduced as explained under Contribution limit reduced . E file taxes free $127,000 or more you cannot contribute to a Roth IRA. E file taxes free Figuring the reduction. E file taxes free   If the amount you can contribute must be reduced, use Worksheet 2-2, later, to figure your reduced contribution limit. E file taxes free Worksheet 2-2. E file taxes free Determining Your Reduced Roth IRA Contribution Limit Before using this worksheet, check Table 2-1, earlier, to determine whether or not your Roth IRA contribution limit is reduced. E file taxes free If it is, use this worksheet to determine how much it is reduced. E file taxes free 1. E file taxes free Enter your modified AGI for Roth IRA purposes (Worksheet 2-1, line 12) 1. E file taxes free   2. E file taxes free Enter: $178,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2013, or $112,000 for all others 2. E file taxes free   3. E file taxes free Subtract line 2 from line 1 3. E file taxes free   4. E file taxes free Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others 4. E file taxes free   5. E file taxes free Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). E file taxes free If the result is 1. E file taxes free 000 or more, enter 1. E file taxes free 000 5. E file taxes free   6. E file taxes free Enter the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation 6. E file taxes free   7. E file taxes free Multiply line 5 by line 6 7. E file taxes free   8. E file taxes free Subtract line 7 from line 6. E file taxes free Round the result up to the nearest $10. E file taxes free If the result is less than $200, enter $200 8. E file taxes free   9. E file taxes free Enter contributions for the year to other IRAs 9. E file taxes free   10. E file taxes free Subtract line 9 from line 6 10. E file taxes free   11. E file taxes free Enter the lesser of line 8 or line 10. E file taxes free This is your reduced Roth IRA contribution limit 11. E file taxes free      Round your reduced contribution limit up to the nearest $10. E file taxes free If your reduced contribution limit is more than $0, but less than $200, increase the limit to $200. E file taxes free Example. E file taxes free You are a 45-year-old, single individual with taxable compensation of $113,000. E file taxes free You want to make the maximum allowable contribution to your Roth IRA for 2013. E file taxes free Your modified AGI for 2013 is $113,000. E file taxes free You have not contributed to any traditional IRA, so the maximum contribution limit before the modified AGI reduction is $5,500. E file taxes free You figure your reduced Roth IRA contribution of $5,140 as shown on Worksheet 2-2. E file taxes free Example—Illustrated, later. E file taxes free   Worksheet 2-2. E file taxes free Example—Illustrated Before using this worksheet, check Table 2-1, earlier, to determine whether or not your Roth IRA contribution limit is reduced. E file taxes free If it is, use this worksheet to determine how much it is reduced. E file taxes free 1. E file taxes free Enter your modified AGI for Roth IRA purposes (Worksheet 2-1, line 12) 1. E file taxes free 113,000 2. E file taxes free Enter: $178,000 if filing a joint return or qualifying widow(er), $-0- if married filing a separate return and you lived with your spouse at any time in 2013, or $112,000 for all others 2. E file taxes free 112,000 3. E file taxes free Subtract line 2 from line 1 3. E file taxes free 1,000 4. E file taxes free Enter: $10,000 if filing a joint return or qualifying widow(er) or married filing a separate return and you lived with your spouse at any time during the year, or $15,000 for all others 4. E file taxes free 15,000 5. E file taxes free Divide line 3 by line 4 and enter the result as a decimal (rounded to at least three places). E file taxes free If the result is 1. E file taxes free 000 or more, enter 1. E file taxes free 000 5. E file taxes free . E file taxes free 067 6. E file taxes free Enter the lesser of: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation 6. E file taxes free 5,500 7. E file taxes free Multiply line 5 by line 6 7. E file taxes free 369 8. E file taxes free Subtract line 7 from line 6. E file taxes free Round the result up to the nearest $10. E file taxes free If the result is less than $200, enter $200 8. E file taxes free 5,140 9. E file taxes free Enter contributions for the year to other IRAs 9. E file taxes free 0 10. E file taxes free Subtract line 9 from line 6 10. E file taxes free 5,500 11. E file taxes free Enter the lesser of line 8 or line 10. E file taxes free This is your reduced Roth IRA contribution limit 11. E file taxes free 5,140 When Can You Make Contributions? You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions). E file taxes free You can make contributions for 2013 by the due date (not including extensions) for filing your 2013 tax return. E file taxes free This means that most people can make contributions for 2013 by April 15, 2014. E file taxes free What if You Contribute Too Much? A 6% excise tax applies to any excess contribution to a Roth IRA. E file taxes free Excess contributions. E file taxes free   These are the contributions to your Roth IRAs for a year that equal the total of: Amounts contributed for the tax year to your Roth IRAs (other than amounts properly and timely rolled over from a Roth IRA or properly converted from a traditional IRA or rolled over from a qualified retirement plan, as described later) that are more than your contribution limit for the year (explained earlier under How Much Can Be Contributed? ), plus Any excess contributions for the preceding year, reduced by the total of: Any distributions out of your Roth IRAs for the year, plus Your contribution limit for the year minus your contributions to all your IRAs for the year. E file taxes free Withdrawal of excess contributions. E file taxes free   For purposes of determining excess contributions, any contribution that is withdrawn on or before the due date (including extensions) for filing your tax return for the year is treated as an amount not contributed. E file taxes free This treatment only applies if any earnings on the contributions are also withdrawn. E file taxes free The earnings are considered earned and received in the year the excess contribution was made. E file taxes free   If you timely filed your 2013 tax return without withdrawing a contribution that you made in 2013, you can still have the contribution returned to you within 6 months of the due date of your 2013 tax return, excluding extensions. E file taxes free If you do, file an amended return with “Filed pursuant to section 301. E file taxes free 9100-2” written at the top. E file taxes free Report any related earnings on the amended return and include an explanation of the withdrawal. E file taxes free Make any other necessary changes on the amended return. E file taxes free Applying excess contributions. E file taxes free    If contributions to your Roth IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. E file taxes free Can You Move Amounts Into a Roth IRA? You may be able to convert amounts from either a traditional, SEP, or SIMPLE IRA into a Roth IRA. E file taxes free You may be able to roll over amounts from a qualified retirement plan to a Roth IRA. E file taxes free You may be able to recharacterize contributions made to one IRA as having been made directly to a different IRA. E file taxes free You can roll amounts over from a designated Roth account or from one Roth IRA to another Roth IRA. E file taxes free Conversions You can convert a traditional IRA to a Roth IRA. E file taxes free The conversion is treated as a rollover, regardless of the conversion method used. E file taxes free Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another , apply to these rollovers. E file taxes free However, the 1-year waiting period does not apply. E file taxes free Conversion methods. E file taxes free   You can convert amounts from a traditional IRA to a Roth IRA in any of the following three ways. E file taxes free Rollover. E file taxes free You can receive a distribution from a traditional IRA and roll it over (contribute it) to a Roth IRA within 60 days after the distribution. E file taxes free Trustee-to-trustee transfer. E file taxes free You can direct the trustee of the traditional IRA to transfer an amount from the traditional IRA to the trustee of the Roth IRA. E file taxes free Same trustee transfer. E file taxes free If the trustee of the traditional IRA also maintains the Roth IRA, you can direct the trustee to transfer an amount from the traditional IRA to the Roth IRA. E file taxes free Same trustee. E file taxes free   Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract. E file taxes free Income. E file taxes free   You must include in your gross income distributions from a traditional IRA that you would have had to include in income if you had not converted them into a Roth IRA. E file taxes free These amounts are normally included in income on your return for the year that you converted them from a traditional IRA to a Roth IRA. E file taxes free If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. E file taxes free See Publication 505, Tax Withholding and Estimated Tax. E file taxes free More information. E file taxes free   For more information on conversions, see Converting From Any Traditional IRA Into a Roth IRA in chapter 1. E file taxes free Rollover From Employer's Plan Into a Roth IRA You can roll over into a Roth IRA all or part of an eligible rollover distribution you receive from your (or your deceased spouse's): Employer's qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan); Annuity plan; Tax-sheltered annuity plan (section 403(b) plan); or Governmental deferred compensation plan (section 457 plan). E file taxes free Any amount rolled over is subject to the same rules for converting a traditional IRA into a Roth IRA. E file taxes free See Converting From Any Traditional IRA Into a Roth IRA in chapter 1. E file taxes free Also, the rollover contribution must meet the rollover requirements that apply to the specific type of retirement plan. E file taxes free Rollover methods. E file taxes free   You can roll over amounts from a qualified retirement plan to a Roth IRA in one of the following ways. E file taxes free Rollover. E file taxes free You can receive a distribution from a qualified retirement plan and roll it over (contribute) to a Roth IRA within 60 days after the distribution. E file taxes free Since the distribution is paid directly to you, the payer generally must withhold 20% of it. E file taxes free Direct rollover option. E file taxes free Your employer's qualified plan must give you the option to have any part of an eligible rollover distribution paid directly to a Roth IRA. E file taxes free Generally, no tax is withheld from any part of the designated distribution that is directly paid to the trustee of the Roth IRA. E file taxes free Rollover by nonspouse beneficiary. E file taxes free   If you are a designated beneficiary (other than a surviving spouse) of a deceased employee, you can roll over all or part of an eligible rollover distribution from one of the types of plans listed above into a Roth IRA. E file taxes free You must make the rollover by a direct trustee-to-trustee transfer into an inherited Roth IRA. E file taxes free   You will determine your required minimum distributions in years after you make the rollover based on whether the employee died before his or her required beginning date for taking distributions from the plan. E file taxes free For more information, see Distributions after the employee’s death under Tax on Excess Accumulation in Publication 575. E file taxes free Income. E file taxes free   You must include in your gross income distributions from a qualified retirement plan that you would have had to include in income if you had not rolled them over into a Roth IRA. E file taxes free You do not include in gross income any part of a distribution from a qualified retirement plan that is a return of contributions (after-tax contributions) to the plan that were taxable to you when paid. E file taxes free These amounts are normally included in income on your return for the year of the rollover from the qualified employer plan to a Roth IRA. E file taxes free If you must include any amount in your gross income, you may have to increase your withholding or make estimated tax payments. E file taxes free See Publication 505, Tax Withholding and Estimated Tax. E file taxes free For more information on eligible rollover distributions from qualified retirement plans and withholding, see Rollover From Employer's Plan Into an IRA in chapter 1. E file taxes free Military Death Gratuities and Servicemembers' Group Life Insurance (SGLI) Payments If you received a military death gratuity or SGLI payment with respect to a death from injury that occurred after October 6, 2001, you can contribute (roll over) all or part of the amount received to your Roth IRA. E file taxes free The contribution is treated as a qualified rollover contribution. E file taxes free The amount you can roll over to your Roth IRA cannot exceed the total amount that you received reduced by any part of that amount that was contributed to a Coverdell ESA or another Roth IRA. E file taxes free Any military death gratuity or SGLI payment contributed to a Roth IRA is disregarded for purposes of the 1-year waiting period between rollovers. E file taxes free The rollover must be completed before the end of the 1-year period beginning on the date you received the payment. E file taxes free The amount contributed to your Roth IRA is treated as part of your cost basis (investment in the contract) in the Roth IRA that is not taxable when distributed. E file taxes free Rollover From a Roth IRA You can withdraw, tax free, all or part of the assets from one Roth IRA if you contribute them within 60 days to another Roth IRA. E file taxes free Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another , apply to these rollovers. E file taxes free However, rollovers from retirement plans other than Roth IRAs are disregarded for purposes of the 1-year waiting period between rollovers. E file taxes free A rollover from a Roth IRA to an employer retirement plan is not allowed. E file taxes free A rollover from a designated Roth account can only be made to another designated Roth account or to a Roth IRA. E file taxes free If you roll over an amount from one Roth IRA to another Roth IRA, the 5-year period used to determine qualified distributions does not change. E file taxes free The 5-year period begins with the first taxable year for which the contribution was made to the initial Roth IRA. E file taxes free See What are Qualified Distributions , later. E file taxes free Rollover of Exxon Valdez Settlement Income If you are a qualified taxpayer (defined in chapter 1, earlier) and you received qualified settlement income (defined in chapter 1, earlier), you can contribute all or part of the amount received to an eligible retirement plan which includes a Roth IRA. E file taxes free The rules for contributing qualified settlement income to a Roth IRA are the same as the rules for contributing qualified settlement income to a traditional IRA with the following exception. E file taxes free Qualified settlement income that is contributed to a Roth IRA, or to a designated Roth account, will be: Included in your taxable income for the year the qualified settlement income was received, and Treated as part of your cost basis (investment in the contract) in the Roth IRA that is not taxable when distributed. E file taxes free For more information, see Rollover of Exxon Valdez Settlement Income in chapter 1. E file taxes free Rollover of Airline Payments If you are a qualified airline employee (defined next), you may contribute any portion of an airline payment (defined below) you receive to a Roth IRA. E file taxes free The contribution must be made within 180 days from the date you received the payment. E file taxes free The contribution will be treated as a qualified rollover contribution. E file taxes free The rollover contribution is included in income to the extent it would be included in income if it were not part of the rollover contribution. E file taxes free Also, any reduction in the airline payment amount on account of employment taxes shall be disregarded when figuring the amount you can contribute to your Roth IRA. E file taxes free Qualified airline employee. E file taxes free    A current or former employee of a commercial airline carrier who was a participant in a qualified defined benefit plan maintained by the carrier which was terminated or became subject to restrictions under Section 402(b) of the Pension Protection Act of 2006. E file taxes free These provisions also apply to surviving spouses of qualified airline employees. E file taxes free Airline payment. E file taxes free    An airline payment is any payment of money or other property that is paid to a qualified airline employee from a commercial airline carrier. E file taxes free The payment also must be made both: Under the approval of an order of federal bankruptcy court in a case filed after September 11, 2001, and before January 1, 2007, and In respect of the qualified airline employee’s interest in a bankruptcy claim against the airline carrier, any note of the carrier (or amount paid in lieu of a note being issued), or any other fixed obligation of the carrier to pay a lump sum amount. E file taxes free Any reduction in the airline payment amount on account of employment taxes shall be disregarded when figuring the amount you can roll over to your traditional IRA. E file taxes free Also, an airline payment shall not include any amount payable on the basis of the airline carrier’s future earnings or profits. E file taxes free Are Distributions Taxable? You do not include in your gross income qualified distributions or distributions that are a return of your regular contributions from your Roth IRA(s). E file taxes free You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. E file taxes free You may have to include part of other distributions in your income. E file taxes free See Ordering Rules for Distributions , later. E file taxes free Basis of distributed property. E file taxes free   The basis of property distributed from a Roth IRA is its fair market value (FMV) on the date of distribution, whether or not the distribution is a qualified distribution. E file taxes free Withdrawals of contributions by due date. E file taxes free   If you withdraw contributions (including any net earnings on the contributions) by the due date of your return for the year in which you made the contribution, the contributions are treated as if you never made them. E file taxes free If you have an extension of time to file your return, you can withdraw the contributions and earnings by the extended due date. E file taxes free The withdrawal of contributions is tax free, but you must include the earnings on the contributions in income for the year in which you made the contributions. E file taxes free What Are Qualified Distributions? A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements. E file taxes free It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and The payment or distribution is: Made on or after the date you reach age 59½, Made because you are disabled (defined earlier), Made to a beneficiary or to your estate after your death, or One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit). E file taxes free Additional Tax on Early Distributions If you receive a distribution that is not a qualified distribution, you may have to pay the 10% additional tax on early distributions as explained in the following paragraphs. E file taxes free Distributions of conversion and certain rollover contributions within 5-year period. E file taxes free   If, within the 5-year period starting with the first day of your tax year in which you convert an amount from a traditional IRA or rollover an amount from a qualified retirement plan to a Roth IRA, you take a distribution from a Roth IRA, you may have to pay the 10% additional tax on early distributions. E file taxes free You generally must pay the 10% additional tax on any amount attributable to the part of the amount converted or rolled over (the conversion or rollover contribution) that you had to include in income (recapture amount). E file taxes free A separate 5-year period applies to each conversion and rollover. E file taxes free See Ordering Rules for Distributions , later, to determine the recapture amount, if any. E file taxes free   The 5-year period used for determining whether the 10% early distribution tax applies to a distribution from a conversion or rollover contribution is separately determined for each conversion and rollover, and is not necessarily the same as the 5-year period used for determining whether a distribution is a qualified distribution. E file taxes free See What Are Qualified Distributions , earlier. E file taxes free   For example, if a calendar-year taxpayer makes a conversion contribution on February 25, 2013, and makes a regular contribution for 2012 on the same date, the 5-year period for the conversion begins January 1, 2013, while the 5-year period for the regular contribution begins on January 1, 2012. E file taxes free   Unless one of the exceptions listed later applies, you must pay the additional tax on the portion of the distribution attributable to the part of the conversion or rollover contribution that you had to include in income because of the conversion or rollover. E file taxes free   You must pay the 10% additional tax in the year of the distribution, even if you had included the conversion or rollover contribution in an earlier year. E file taxes free You also must pay the additional tax on any portion of the distribution attributable to earnings on contributions. E file taxes free Other early distributions. E file taxes free   Unless one of the exceptions listed below applies, you must pay the 10% additional tax on the taxable part of any distributions that are not qualified distributions. E file taxes free Exceptions. E file taxes free   You may not have to pay the 10% additional tax in the following situations. E file taxes free You have reached age 59½. E file taxes free You are totally and permanently disabled. E file taxes free You are the beneficiary of a deceased IRA owner. E file taxes free You use the distribution to buy, build, or rebuild a first home. E file taxes free The distributions are part of a series of substantially equal payments. E file taxes free You have unreimbursed medical expenses that are more than 10% (or 7. E file taxes free 5% if you or your spouse was born before January 2, 1949) of your adjusted gross income (defined earlier) for the year. E file taxes free You are paying medical insurance premiums during a period of unemployment. E file taxes free The distributions are not more than your qualified higher education expenses. E file taxes free The distribution is due to an IRS levy of the qualified plan. E file taxes free The distribution is a qualified reservist distribution. E file taxes free Most of these exceptions are discussed earlier in chapter 1 under Early Distributions . E file taxes free Please click here for the text description of the image. E file taxes free Is Roth Distributions a Qualified Distribution? Ordering Rules for Distributions If you receive a distribution from your Roth IRA that is not a qualified distribution, part of it may be taxable. E file taxes free There is a set order in which contributions (including conversion contributions and rollover contributions from qualified retirement plans) and earnings are considered to be distributed from your Roth IRA. E file taxes free For these purposes, disregard the withdrawal of excess contributions and the earnings on them (discussed earlier under What if You Contribute Too Much ). E file taxes free Order the distributions as follows. E file taxes free Regular contributions. E file taxes free Conversion and rollover contributions, on a first-in, first-out basis (generally, total conversions and rollovers from the earliest year first). E file taxes free See Aggregation (grouping and adding) rules, later. E file taxes free Take these conversion and rollover contributions into account as follows: Taxable portion (the amount required to be included in gross income because of the conversion or rollover) first, and then the Nontaxable portion. E file taxes free Earnings on contributions. E file taxes free Disregard rollover contributions from other Roth IRAs for this purpose. E file taxes free Aggregation (grouping and adding) rules. E file taxes free   Determine the taxable amounts distributed (withdrawn), distributions, and contributions by grouping and adding them together as follows. E file taxes free Add all distributions from all your Roth IRAs during the year together. E file taxes free Add all regular contributions made for the year (including contributions made after the close of the year, but before the due date of your return) together. E file taxes free Add this total to the total undistributed regular contributions made in prior years. E file taxes free Add all conversion and rollover contributions made during the year together. E file taxes free For purposes of the ordering rules, in the case of any conversion or rollover in which the conversion or rollover distribution is made in 2013 and the conversion or rollover contribution is made in 2014, treat the conversion or rollover contribution as contributed before any other conversion or rollover contributions made in 2014. E file taxes free Add any recharacterized contributions that end up in a Roth IRA to the appropriate contribution group for the year that the original contribution would have been taken into account if it had been made directly to the Roth IRA. E file taxes free   Disregard any recharacterized contribution that ends up in an IRA other than a Roth IRA for the purpose of grouping (aggregating) both contributions and distributions. E file taxes free Also disregard any amount withdrawn to correct an excess contribution (including the earnings withdrawn) for this purpose. E file taxes free Example. E file taxes free On October 15, 2009, Justin converted all $80,000 in his traditional IRA to his Roth IRA. E file taxes free His Forms 8606 from prior years show that $20,000 of the amount converted is his basis. E file taxes free Justin included $60,000 ($80,000 − $20,000) in his gross income. E file taxes free On February 23, 2013, Justin made a regular contribution of $5,000 to a Roth IRA. E file taxes free On November 8, 2013, at age 60, Justin took a $7,000 distribution from his Roth IRA. E file taxes free The first $5,000 of the distribution is a return of Justin's regular contribution and is not includible in his income. E file taxes free The next $2,000 of the distribution is not includible in income because it was included previously. E file taxes free Figuring your recapture amount. E file taxes free   If you had an early distribution from your Roth IRAs in 2013, you must allocate the early distribution by using the Recapture Amount—Allocation Chart, later. E file taxes free Recapture Amount—Allocation Chart Enter the amount from your 2013 Form 8606, line 19   Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below. E file taxes free   You will now allocate the amount you entered above (2013 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the extent a prior year distribution was not allocable to the amount). E file taxes free The maximum amount you can enter on each line below is the amount entered on the referenced lines of the form for that year. E file taxes free Note. E file taxes free Once you have allocated the full amount from your 2013 Form 8606, line 19, STOP. E file taxes free See the Example , earlier. E file taxes free Tax Year Your Form 2013 Form 8606, line 20   Form 8606, line 22   1998 Form 8606, line 16   Form 8606, line 15   1999 Form 8606, line 16   Form 8606, line 15   2000 Form 8606, line 16   Form 8606, line 15   2001 Form 8606, line 18   Form 8606, line 17   2002 Form 8606, line 18   Form 8606, line 17   2003 Form 8606, line 18   Form 8606, line 17   2004 Form 8606, line 18   Form 8606, line 17   2005 Form 8606, line 18   Form 8606, line 17   2006 Form 8606, line 18   Form 8606, line 17   2007 Form 8606, line 18   Form 8606, line 17   2008 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2009 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2010 Form 8606, lines 18 and 23   Form 8606, lines 17 and 22   2011 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2012 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 25       *Only include those amounts rolled over to a Roth IRA. E file taxes free  **Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA. E file taxes free Amount to include on Form 5329, line 1. E file taxes free   Include on line 1 of your 2013 Form 5329 the following four amounts from the Recapture Amount—Allocation Chart that you filled out. E file taxes free The amount you allocated to line 20 of your 2013 Form 8606. E file taxes free The amount(s) allocated to your 2009 through 2013 Forms 8606, line 18, and your 2010 Form 8606, line 23. E file taxes free The amount(s) allocated to your 2009, 2011, 2012, and 2013 Forms 1040, line 16b; Forms 1040A, line 12b; and Forms 1040NR, line 17b. E file taxes free The amount from your 2013 Form 8606, line 25. E file taxes free   Also, include any amount you allocated to line 20 of your 2013 Form 8606 on your 2013 Form 5329, line 2, and enter exception number 09. E file taxes free Example. E file taxes free Ishmael, age 32, opened a Roth IRA in 2000. E file taxes free He made the maximum contributions to it every year. E file taxes free In addition, he made the following transactions into his Roth IRA. E file taxes free In 2005, he converted $10,000 from his traditional IRA into his Roth IRA. E file taxes free He filled out a 2005 Form 8606 and attached it with his 2005 Form 1040. E file taxes free He entered $0 on line 17 of Form 8606 because he took a deduction for all the contributions to the traditional IRA, therefore he has no basis. E file taxes free He entered $10,000 on line 18 of Form 8606. E file taxes free In 2011, he rolled over the entire balance of his qualified retirement plan, $20,000, into a Roth IRA when he changed jobs. E file taxes free He used a 2011 Form 1040 to file his taxes. E file taxes free He entered $20,000 on line 16a of Form 1040 because that was the amount reported in box 1 of his 2011 Form 1099-R. E file taxes free Box 5 of his 2011 Form 1099-R reported $0 since he did not make any after-tax contributions to the qualified retirement plan. E file taxes free He entered $20,000 on line 16b of Form 1040 since that is the taxable amount that was rolled over in 2011. E file taxes free The total balance in his Roth IRA as of January 1, 2013 was $105,000 ($50,000 in contributions from 2000 through 2012 + $10,000 from the 2005 conversion + $20,000 from the 2011 rollover + $25,000 from earnings). E file taxes free He has not taken any early distribution from his Roth IRA before 2013. E file taxes free In 2013, he made the maximum contribution of $5,500 to his Roth IRA. E file taxes free In August of 2013, he took a $85,500 early distribution from his Roth IRA to use as a down payment on the purchase of his first home. E file taxes free See his filled out Illustrated Recapture Amount—Allocation Chart, later, to see how he allocated the amounts from the above transactions. E file taxes free Based on his allocation, he would enter $20,000 on his 2013 Form 5329, line 1 (see Amount to include on Form 5329, line 1 , above). E file taxes free He should also report $10,000 on his 2013 Form 5329, line 2, and enter exception 09 since that amount is not subject to the 10% additional tax on early distributions. E file taxes free Illustrated Recapture Amount—Allocation Chart Enter the amount from your 2013 Form 8606, line 19 $85,500 Before you begin: You will need your prior year Form(s) 8606 and income tax return(s) if you entered an amount on any line(s) as indicated below. E file taxes free   You will now allocate the amount you entered above (2013 Form 8606, line 19) in the order shown, to the amounts on the lines listed below (to the extent a prior year distribution was not allocable to the amount). E file taxes free The maximum amount you can enter on each line below is the amount entered on the referenced lines of the form for that year. E file taxes free Note. E file taxes free Once you have allocated the full amount from your 2013 Form 8606, line 19, STOP. E file taxes free See the Example , earlier. E file taxes free Tax Year Your Form 2013 Form 8606, line 20 $10,000 Form 8606, line 22 $55,500 1998 Form 8606, line 16   Form 8606, line 15   1999 Form 8606, line 16   Form 8606, line 15   2000 Form 8606, line 16   Form 8606, line 15   2001 Form 8606, line 18   Form 8606, line 17   2002 Form 8606, line 18   Form 8606, line 17   2003 Form 8606, line 18   Form 8606, line 17   2004 Form 8606, line 18   Form 8606, line 17   2005 Form 8606, line 18 $10,000 Form 8606, line 17 $-0- 2006 Form 8606, line 18   Form 8606, line 17   2007 Form 8606, line 18   Form 8606, line 17   2008 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2009 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2010 Form 8606, lines 18 and 23   Form 8606, lines 17 and 22   2011 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b* $10,000 Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2012 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 18  and  Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b*   Form 8606, line 17  and  Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a**   2013 Form 8606, line 25       *Only include those amounts rolled over to a Roth IRA. E file taxes free  **Only include any contributions (usually Form 1099-R, box 5) that were taxable to you when made and rolled over to a Roth IRA. E file taxes free How Do You Figure the Taxable Part? To figure the taxable part of a distribution that is not a qualified distribution, complete Form 8606, Part III. E file taxes free Must You Withdraw or Use Assets? You are not required to take distributions from your Roth IRA at any age. E file taxes free The minimum distribution rules that apply to traditional IRAs do not apply to Roth IRAs while the owner is alive. E file taxes free However, after the death of a Roth IRA owner, certain of the minimum distribution rules that apply to traditional IRAs also apply to Roth IRAs as explained later under Distributions After Owner's Death . E file taxes free Minimum distributions. E file taxes free   You cannot use your Roth IRA to satisfy minimum distribution requirements for your traditional IRA. E file taxes free Nor can you use distributions from traditional IRAs for required distributions from Roth IRAs. E file taxes free See Distributions to beneficiaries , later. E file taxes free Recognizing Losses on Investments If you have a loss on your Roth IRA investment, you can recognize the loss on your income tax return, but only when all the amounts in all of your Roth IRA accounts have been distributed to you and the total distributions are less than your unrecovered basis. E file taxes free Your basis is the total amount of contributions in your Roth IRAs. E file taxes free You claim the loss as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions on Schedule A (Form 1040). E file taxes free Any such losses are added back to taxable income for purposes of calculating the alternative minimum tax. E file taxes free Distributions After Owner's Death If a Roth IRA owner dies, the minimum distribution rules that apply to traditional IRAs apply to Roth IRAs as though the Roth IRA owner died before his or her required beginning date. E file taxes free See When Can You Withdraw or Use Assets? in chapter 1. E file taxes free Distributions to beneficiaries. E file taxes free   Generally, the entire interest in the Roth IRA must be distributed by the end of the fifth calendar year after the year of the owner's death unless the interest is payable to a designated beneficiary over the life or life expectancy of the designated beneficiary. E file taxes free (See When Must You Withdraw Assets? (Required Minimum Distributions) in chapter 1. E file taxes free )   If paid as an annuity, the entire interest must be payable over a period not greater than the designated beneficiary's life expectancy and distributions must begin before the end of the calendar year following the year of death. E file taxes free Distributions from another Roth IRA cannot be substituted for these distributions unless the other Roth IRA was inherited from the same decedent. E file taxes free   If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have reached age 70½ or treat the Roth IRA as his or her own. E file taxes free Combining with other Roth IRAs. E file taxes free   A beneficiary can combine an inherited Roth IRA with another Roth IRA maintained by the beneficiary only if the beneficiary either: Inherited the other Roth IRA from the same decedent, or Was the spouse of the decedent and the sole beneficiary of the Roth IRA and elects to treat it as his or her own IRA. E file taxes free Distributions that are not qualified distributions. E file taxes free   If a distribution to a beneficiary is not a qualified distribution, it is generally includible in the beneficiary's gross income in the same manner as it would have been included in the owner's income had it been distributed to the IRA owner when he or she was alive. E file taxes free   If the owner of a Roth IRA dies before the end of: The 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for the owner's benefit, or The 5-year period starting with the year of a conversion contribution from a traditional IRA or a rollover from a qualified retirement plan to a Roth IRA, each type of contribution is divided among multiple beneficiaries according to the pro-rata share of each. E file taxes free See Ordering Rules for Distributions , earlier in this chapter under Are Distributions Taxable. E file taxes free Example. E file taxes free When Ms. E file taxes free Hibbard died in 2013, her Roth IRA contained regular contributions of $4,000, a conversion contribution of $10,000 that was made in 2009, and earnings of $2,000. E file taxes free No distributions had been made from her IRA. E file taxes free She had no basis in the conversion contribution in 2009. E file taxes free When she established this Roth IRA (her first) in 2009, she named each of her four children as equal beneficiaries. E file taxes free Each child will receive one-fourth of each type of contribution and one-fourth of the earnings. E file taxes free An immediate distribution of $4,000 to each child will be treated as $1,000 from regular contributions, $2,500 from conversion contributions, and $500 from earnings. E file taxes free In this case, because the distributions are made before the end of the applicable 5-year period for a qualified distribution, each beneficiary includes $500 in income for 2013. E file taxes free The 10% additional tax on early distributions does not apply because the distribution was made to the beneficiaries as a result of the death of the IRA owner. E file taxes free If distributions from an inherited Roth IRA are less than the required minimum distribution for the year, discussed in chapter 1 under When Must You Withdraw Assets? (Required Minimum Distributions), you may have to pay a 50% excise tax for that year on the amount not distributed as required. E file taxes free For the tax on excess accumulations (insufficient distributions), see Excess Accumulations (Insufficient Distributions) under What Acts Result in Penalties or Additional Taxes? in chapter 1. E file taxes free If this applies to you, substitute “Roth IRA” for “traditional IRA” in that discussion. E file taxes free Prev  Up  Next   Home   More Online Publications
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E file taxes free 28. E file taxes free   Miscellaneous Deductions Table of Contents What's New Introduction Useful Items - You may want to see: Deductions Subject to the 2% LimitUnreimbursed Employee Expenses (Line 21) Tax Preparation Fees (Line 22) Other Expenses (Line 23) Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses What's New Standard mileage rate. E file taxes free  The 2013 rate for business use of a vehicle is 56½ cents per mile. E file taxes free Introduction This chapter explains which expenses you can claim as miscellaneous itemized deductions on Schedule A (Form 1040). E file taxes free You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. E file taxes free This chapter covers the following topics. E file taxes free Deductions subject to the 2% limit. E file taxes free Deductions not subject to the 2% limit. E file taxes free Expenses you cannot deduct. E file taxes free You must keep records to verify your deductions. E file taxes free You should keep receipts, canceled checks, substitute checks, financial account statements, and other documentary evidence. E file taxes free For more information on recordkeeping, get Publication 552, Record- keeping for Individuals. E file taxes free Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income 529 Miscellaneous Deductions 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) 946 How To Depreciate Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040). E file taxes free You can claim the amount of expenses that is more than 2% of your adjusted gross income. E file taxes free You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. E file taxes free Your adjusted gross income is the amount on Form 1040, line 38. E file taxes free Generally, you apply the 2% limit after you apply any other deduction limit. E file taxes free For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed in chapter 26) before you apply the 2% limit. E file taxes free Deductions subject to the 2% limit are discussed in the three categories in which you report them on Schedule A (Form 1040). E file taxes free Unreimbursed employee expenses (line 21). E file taxes free Tax preparation fees (line 22). E file taxes free Other expenses (line 23). E file taxes free Unreimbursed Employee Expenses (Line 21) Generally, you can deduct on Schedule A (Form 1040), line 21, unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. E file taxes free An expense is ordinary if it is common and accepted in your trade, business, or profession. E file taxes free An expense is necessary if it is appropriate and helpful to your business. E file taxes free An expense does not have to be required to be considered necessary. E file taxes free Examples of unreimbursed employee expenses are listed next. E file taxes free The list is followed by discussions of additional unreimbursed employee expenses. E file taxes free Business bad debt of an employee. E file taxes free Education that is work related. E file taxes free (See chapter 27. E file taxes free ) Legal fees related to your job. E file taxes free Licenses and regulatory fees. E file taxes free Malpractice insurance premiums. E file taxes free Medical examinations required by an employer. E file taxes free Occupational taxes. E file taxes free Passport for a business trip. E file taxes free Subscriptions to professional journals and trade magazines related to your work. E file taxes free Travel, transportation, entertainment, and gifts related to your work. E file taxes free (See chapter 26. E file taxes free ) Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. E file taxes free Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer that are attributable to the pay you received from that employer. E file taxes free Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. E file taxes free For more information about the rules and exceptions to the rules affecting the allowable deductions for a home computer, see Publication 529. E file taxes free Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. E file taxes free Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. E file taxes free Lobbying and political activities. E file taxes free   You may not be able to deduct that part of your dues that is for certain lobbying and political activities. E file taxes free See Dues used for lobbying under Nondeductible Expenses, later. E file taxes free Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. E file taxes free If you file Form 1040A, you can deduct these expenses on line 16. E file taxes free If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. E file taxes free However, neither spouse can deduct more than $250 of his or her qualified expenses. E file taxes free Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. E file taxes free You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. E file taxes free The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. E file taxes free See Publication 587 for more detailed information and a worksheet. E file taxes free Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. E file taxes free You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. E file taxes free Employment and outplacement agency fees. E file taxes free   You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. E file taxes free Employer pays you back. E file taxes free   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. E file taxes free (See Recoveries in chapter 12. E file taxes free ) Employer pays the employment agency. E file taxes free   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. E file taxes free Résumé. E file taxes free   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. E file taxes free Travel and transportation expenses. E file taxes free   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. E file taxes free You can deduct the travel expenses if the trip is primarily to look for a new job. E file taxes free The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. E file taxes free   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. E file taxes free   You can choose to use the standard mileage rate to figure your car expenses. E file taxes free The 2013 rate for business use of a vehicle is 56½ cents per mile. E file taxes free See chapter 26 for more information. E file taxes free Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. E file taxes free Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. E file taxes free If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. E file taxes free Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. E file taxes free If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. E file taxes free Research Expenses of a College Professor If you are a college professor, you can deduct research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. E file taxes free You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. E file taxes free However, you cannot deduct the cost of travel as a form of education. E file taxes free Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. E file taxes free You can depreciate the cost of tools that have a useful life substantially beyond the tax year. E file taxes free For more information about depreciation, see Publication 946. E file taxes free Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. E file taxes free You can also deduct assessments for benefit payments to unemployed union members. E file taxes free However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. E file taxes free Also, you cannot deduct contributions to a pension fund, even if the union requires you to make the contributions. E file taxes free You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. E file taxes free See Lobbying Expenses under Nondeductible Expenses, later. E file taxes free Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. E file taxes free You must wear them as a condition of your employment. E file taxes free The clothes are not suitable for everyday wear. E file taxes free It is not enough that you wear distinctive clothing. E file taxes free The clothing must be specifically required by your employer. E file taxes free Nor is it enough that you do not, in fact, wear your work clothes away from work. E file taxes free The clothing must not be suitable for taking the place of your regular clothing. E file taxes free Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. E file taxes free ). E file taxes free Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. E file taxes free However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. E file taxes free Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. E file taxes free Protective clothing. E file taxes free   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. E file taxes free   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. E file taxes free Military uniforms. E file taxes free   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. E file taxes free However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. E file taxes free In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. E file taxes free   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. E file taxes free   You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. E file taxes free Tax Preparation Fees (Line 22) You can usually deduct tax preparation fees in the year you pay them. E file taxes free Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. E file taxes free These fees include the cost of tax preparation software programs and tax publications. E file taxes free They also include any fee you paid for electronic filing of your return. E file taxes free Other Expenses (Line 23) You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2% limit. E file taxes free On Schedule A (Form 1040), line 23, you can deduct expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. E file taxes free You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonably and closely related to these purposes. E file taxes free Some of these other expenses are explained in the following discussions. E file taxes free If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses , later, under Nondeductible Expenses. E file taxes free Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. E file taxes free Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. E file taxes free First report the loss in Section B of Form 4684, Casualties and Thefts. E file taxes free You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. E file taxes free To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. E file taxes free For other casualty and theft losses, see chapter 25. E file taxes free Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. E file taxes free Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. E file taxes free The fees are deductible in the year paid. E file taxes free Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). E file taxes free You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. E file taxes free But if you work as an employee and also use the computer in that work, see Publication 946. E file taxes free Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. E file taxes free Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. E file taxes free The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. E file taxes free For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. E file taxes free Fees to Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. E file taxes free But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. E file taxes free You must add the fee to the cost of the property. E file taxes free You cannot deduct the fee you pay to a broker to sell securities. E file taxes free You can use the fee only to figure gain or loss from the sale. E file taxes free See the Instructions for Form 8949 for information on how to report the fee. E file taxes free Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. E file taxes free A hobby is not a business because it is not carried on to make a profit. E file taxes free See Activity not for profit in chapter 12 under Other Income. E file taxes free Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. E file taxes free Deductions of pass-through entities are passed through to the partners or shareholders. E file taxes free The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. E file taxes free Example. E file taxes free You are a member of an investment club that is formed solely to invest in securities. E file taxes free The club is treated as a partnership. E file taxes free The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. E file taxes free In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. E file taxes free However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. E file taxes free Publicly offered mutual funds. E file taxes free   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. E file taxes free A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. E file taxes free   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). E file taxes free This net figure is the amount you report on your return as income. E file taxes free You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. E file taxes free Information returns. E file taxes free   You should receive information returns from pass-through entities. E file taxes free Partnerships and S corporations. E file taxes free   These entities issue Schedule K-1, which lists the items and amounts you must report and identifies the tax return schedules and lines to use. E file taxes free Nonpublicly offered mutual funds. E file taxes free   These funds will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing your share of gross income and investment expenses. E file taxes free You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. E file taxes free Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. E file taxes free Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. E file taxes free You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce, if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. E file taxes free You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F), on the appropriate schedule. E file taxes free You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040). E file taxes free See Tax Preparation Fees , earlier. E file taxes free Loss on Deposits For information on whether, and if so, how, you may deduct a loss on your deposit in a qualified financial institution, see Loss on Deposits in chapter 25. E file taxes free Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. E file taxes free If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. E file taxes free If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. E file taxes free Repayments of Social Security Benefits For information on how to deduct your repayments of certain social security benefits, see Repayments More Than Gross Benefits in chapter 11. E file taxes free Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. E file taxes free You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. E file taxes free Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. E file taxes free These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. E file taxes free Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your individual retirement arrangement (IRA) are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. E file taxes free For more information about IRAs, see chapter 17. E file taxes free Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. E file taxes free They are not subject to the 2% limit. E file taxes free Report these items on Schedule A (Form 1040), line 28. E file taxes free List of Deductions Each of the following items is discussed in detail after the list (except where indicated). E file taxes free Amortizable premium on taxable bonds. E file taxes free Casualty and theft losses from income- producing property. E file taxes free Federal estate tax on income in respect of a decedent. E file taxes free Gambling losses up to the amount of gambling winnings. E file taxes free Impairment-related work expenses of persons with disabilities. E file taxes free Loss from other activities from Schedule K-1 (Form 1065-B), box 2. E file taxes free Losses from Ponzi-type investment schemes. E file taxes free See Losses from Ponzi-type investment schemes under Theft in chapter 25. E file taxes free Repayments of more than $3,000 under a claim of right. E file taxes free Unrecovered investment in an annuity. E file taxes free Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. E file taxes free You can elect to amortize the premium on taxable bonds. E file taxes free The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. E file taxes free Part of the premium on some bonds may be a miscellaneous deduction not subject to the 2% limit. E file taxes free For more information, see Amortizable Premium on Taxable Bonds in Publication 529, and Bond Premium Amortization in chapter 3 of Publication 550, Investment Income and Expenses. E file taxes free Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). E file taxes free First, report the loss in Form 4684, Section B. E file taxes free You may also have to include the loss on Form 4797, Sales of Business Property if you are otherwise required to file that form. E file taxes free To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. E file taxes free For more information on casualty and theft losses, see chapter 25. E file taxes free Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. E file taxes free Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. E file taxes free See Publication 559 for more information. E file taxes free Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. E file taxes free You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. E file taxes free You cannot deduct gambling losses that are more than your winnings. E file taxes free You cannot reduce your gambling winnings by your gambling losses and report the difference. E file taxes free You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. E file taxes free Therefore, your records should show your winnings separately from your losses. E file taxes free Diary of winnings and losses. E file taxes free You must keep an accurate diary or similar record of your losses and winnings. E file taxes free Your diary should contain at least the following information. E file taxes free The date and type of your specific wager or wagering activity. E file taxes free The name and address or location of the gambling establishment. E file taxes free The names of other persons present with you at the gambling establishment. E file taxes free The amount(s) you won or lost. E file taxes free See Publication 529 for more information. E file taxes free Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. E file taxes free Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and for other expenses in connection with your place of work that are necessary for you to be able to work. E file taxes free Self-employed. E file taxes free   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. E file taxes free Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28. E file taxes free It is not subject to the passive activity limitations. E file taxes free Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid or take a credit against your tax. E file taxes free See Repayments in chapter 12 for more information. E file taxes free Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. E file taxes free If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. E file taxes free See chapter 10 for more information about the tax treatment of pensions and annuities. E file taxes free Nondeductible Expenses Examples of nondeductible expenses are listed next. E file taxes free The list is followed by discussions of additional nondeductible expenses. E file taxes free List of Nondeductible Expenses Broker's commissions that you paid in connection with your IRA or other investment property. E file taxes free Burial or funeral expenses, including the cost of a cemetery lot. E file taxes free Capital expenses. E file taxes free Fees and licenses, such as car licenses, marriage licenses, and dog tags. E file taxes free Hobby losses, but see Hobby Expenses , earlier. E file taxes free Home repairs, insurance, and rent. E file taxes free Illegal bribes and kickbacks. E file taxes free See Bribes and kickbacks in chapter 11 of Publication 535. E file taxes free Losses from the sale of your home, furniture, personal car, etc. E file taxes free Personal disability insurance premiums. E file taxes free Personal, living, or family expenses. E file taxes free The value of wages never received or lost vacation time. E file taxes free Adoption Expenses You cannot deduct the expenses of adopting a child, but you may be able to take a credit for those expenses. E file taxes free See chapter 37. E file taxes free Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. E file taxes free These include qualification and registration fees for primary elections. E file taxes free Legal fees. E file taxes free   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. E file taxes free Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. E file taxes free Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. E file taxes free This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. E file taxes free You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. E file taxes free Dues paid to airline, hotel, and luncheon clubs are not deductible. E file taxes free Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). E file taxes free If you haul tools, instruments, or other items, in your car to and from work, you can deduct only the additional cost of hauling the items such as the rent on a trailer to carry the items. E file taxes free Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. E file taxes free This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). E file taxes free Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. E file taxes free Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. E file taxes free Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. E file taxes free However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. E file taxes free See Home Office under Unreimbursed Employee Expenses, earlier, and Security System under Deducting Expenses in Publication 587. E file taxes free Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. E file taxes free Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. E file taxes free You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. E file taxes free See chapter 18 for information on alimony. E file taxes free Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. E file taxes free These include expenses to: Influence legislation, Participate or intervene in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. E file taxes free Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. E file taxes free Dues used for lobbying. E file taxes free   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. E file taxes free See Lobbying Expenses in Publication 529 for information on exceptions. E file taxes free Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. E file taxes free However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. E file taxes free See chapter 25. E file taxes free Example. E file taxes free A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. E file taxes free The diamond falls from the ring and is never found. E file taxes free The loss of the diamond is a casualty. E file taxes free Lunches with Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. E file taxes free See chapter 26 for information on deductible expenses while traveling away from home. E file taxes free Meals While Working Late You cannot deduct the cost of meals while working late. E file taxes free However, you may be able to claim a deduction if the cost of meals is a deductible entertainment expense, or if you are traveling away from home. E file taxes free See chapter 26 for information on deductible entertainment expenses and expenses while traveling away from home. E file taxes free Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. E file taxes free Custody of children. E file taxes free Breach of promise to marry suit. E file taxes free Civil or criminal charges resulting from a personal relationship. E file taxes free Damages for personal injury, except for certain unlawful discrimination and whistleblower claims. E file taxes free Preparation of a title (or defense or perfection of a title). E file taxes free Preparation of a will. E file taxes free Property claims or property settlement in a divorce. E file taxes free You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. E file taxes free Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. E file taxes free Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. E file taxes free Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. E file taxes free Accounting certificate fees paid for the initial right to practice accounting. E file taxes free Bar exam fees and incidental expenses in securing initial admission to the bar. E file taxes free Medical and dental license fees paid to get initial licensing. E file taxes free Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. E file taxes free Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. E file taxes free Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. E file taxes free Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. E file taxes free You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. E file taxes free Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. E file taxes free You cannot deduct interest on a debt incurred or continued to buy or carry  tax-exempt securities. E file taxes free If you have expenses to produce both taxable and tax-exempt income, but you cannot identify the expenses that produce each type of income, you must divide the expenses based on the amount of each type of income to determine the amount that you can deduct. E file taxes free Example. E file taxes free During the year, you received taxable interest of $4,800 and tax-exempt interest of $1,200. E file taxes free In earning this income, you had total expenses of $500 during the year. E file taxes free You cannot identify the amount of each expense item that is for each income item. E file taxes free Therefore, 80% ($4,800/$6,000) of the expense is for the taxable interest and 20% ($1,200/$6,000) is for the tax-exempt interest. E file taxes free You can deduct, subject to the 2% limit, expenses of $400 (80% of $500). E file taxes free Travel Expenses for Another Individual You generally cannot deduct travel expenses you pay or incur for a spouse, dependent, or other individual who accompanies you (or your employee) on business or personal travel unless the spouse, dependent, or other individual is an employee of the taxpayer, the travel is for a bona fide business purpose, and such expenses would otherwise be deductible by the spouse, dependent, or other individual. E file taxes free See chapter 26 for more information on deductible travel expenses. E file taxes free Voluntary Unemployment Benefit Fund Contributions You cannot deduct voluntary unemployment benefit fund contributions you make to a union fund or a private fund. E file taxes free However, you can deduct contributions as taxes if state law requires you to make them to a state unemployment fund that covers you for the loss of wages from unemployment caused by business conditions. E file taxes free Wristwatches You cannot deduct the cost of a wristwatch, even if there is a job requirement that you know the correct time to properly perform your duties. E file taxes free Prev  Up  Next   Home   More Online Publications