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File a free tax extension online 3. File a free tax extension online   Savings Incentive Match Plans for Employees (SIMPLE) Table of Contents Introduction What Is a SIMPLE Plan?Eligible Employees How Are Contributions Made? How Much Can Be Contributed on Your Behalf?Matching contributions less than 3%. File a free tax extension online Traditional IRA mistakenly moved to SIMPLE IRA. File a free tax extension online When Can You Withdraw or Use Assets?Are Distributions Taxable? Introduction This chapter is for employees who need information about savings incentive match plans for employees (SIMPLE plans). File a free tax extension online It explains what a SIMPLE plan is, contributions to a SIMPLE plan, and distributions from a SIMPLE plan. File a free tax extension online Under a SIMPLE plan, SIMPLE retirement accounts for participating employees can be set up either as: Part of a 401(k) plan, or A plan using IRAs (SIMPLE IRA). File a free tax extension online This chapter only discusses the SIMPLE plan rules that relate to SIMPLE IRAs. File a free tax extension online See chapter 3 of Publication 560 for information on any special rules for SIMPLE plans that do not use IRAs. File a free tax extension online If your employer maintains a SIMPLE plan, you must be notified, in writing, that you can choose the financial institution that will serve as trustee for your SIMPLE IRA and that you can roll over or transfer your SIMPLE IRA to another financial institution. File a free tax extension online See Rollovers and Transfers Exception, later under When Can You Withdraw or Use Assets. File a free tax extension online What Is a SIMPLE Plan? A SIMPLE plan is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. File a free tax extension online See chapter 3 of Publication 560 for information on the requirements employers must satisfy to set up a SIMPLE plan. File a free tax extension online A SIMPLE plan is a written agreement (salary reduction agreement) between you and your employer that allows you, if you are an eligible employee (including a self-employed individual), to choose to: Reduce your compensation (salary) by a certain percentage each pay period, and Have your employer contribute the salary reductions to a SIMPLE IRA on your behalf. File a free tax extension online These contributions are called salary reduction contributions. File a free tax extension online All contributions under a SIMPLE IRA plan must be made to SIMPLE IRAs, not to any other type of IRA. File a free tax extension online The SIMPLE IRA can be an individual retirement account or an individual retirement annuity, described in chapter 1. File a free tax extension online Contributions are made on behalf of eligible employees. File a free tax extension online (See Eligible Employees below. File a free tax extension online ) Contributions are also subject to various limits. File a free tax extension online (See How Much Can Be Contributed on Your Behalf , later. File a free tax extension online ) In addition to salary reduction contributions, your employer must make either matching contributions or nonelective contributions. File a free tax extension online See How Are Contributions Made , later. File a free tax extension online You may be able to claim a credit for contributions to your SIMPLE plan. File a free tax extension online For more information, see chapter 4. File a free tax extension online Eligible Employees You must be allowed to participate in your employer's SIMPLE plan if you: Received at least $5,000 in compensation from your employer during any 2 years prior to the current year, and Are reasonably expected to receive at least $5,000 in compensation during the calendar year for which contributions are made. File a free tax extension online Self-employed individual. File a free tax extension online   For SIMPLE plan purposes, the term employee includes a self-employed individual who received earned income. File a free tax extension online Excludable employees. File a free tax extension online   Your employer can exclude the following employees from participating in the SIMPLE plan. File a free tax extension online Employees whose retirement benefits are covered by a collective bargaining agreement (union contract). File a free tax extension online Employees who are nonresident aliens and received no earned income from sources within the United States. File a free tax extension online Employees who would not have been eligible employees if an acquisition, disposition, or similar transaction had not occurred during the year. File a free tax extension online Compensation. File a free tax extension online   For purposes of the SIMPLE plan rules, your compensation for a year generally includes the following amounts. File a free tax extension online Wages, tips, and other pay from your employer that is subject to income tax withholding. File a free tax extension online Deferred amounts elected under any 401(k) plans, 403(b) plans, government (section 457) plans, SEP plans, and SIMPLE plans. File a free tax extension online Self-employed individual compensation. File a free tax extension online   For purposes of the SIMPLE plan rules, if you are self-employed, your compensation for a year is your net earnings from self-employment (Schedule SE (Form 1040), Section A, line 4, or Section B, line 6) before subtracting any contributions made to a SIMPLE IRA on your behalf. File a free tax extension online   For these purposes, net earnings from self-employment include services performed while claiming exemption from self-employment tax as a member of a group conscientiously opposed to social security benefits. File a free tax extension online How Are Contributions Made? Contributions under a salary reduction agreement are called salary reduction contributions. File a free tax extension online They are made on your behalf by your employer. File a free tax extension online Your employer must also make either matching contributions or nonelective contributions. File a free tax extension online Salary reduction contributions. File a free tax extension online   During the 60-day period before the beginning of any year, and during the 60-day period before you are eligible, you can choose salary reduction contributions expressed either as a percentage of compensation, or as a specific dollar amount (if your employer offers this choice). File a free tax extension online You can choose to cancel the election at any time during the year. File a free tax extension online   Salary reduction contributions are also referred to as “elective deferrals. File a free tax extension online ”   Your employer cannot place restrictions on the contributions amount (such as by limiting the contributions percentage), except to comply with the salary reduction contributions limit, discussed under How Much Can Be Contributed on Your Behalf, later. File a free tax extension online Matching contributions. File a free tax extension online   Unless your employer chooses to make nonelective contributions, your employer must make contributions equal to the salary reduction contributions you choose (elect), but only up to certain limits. File a free tax extension online See How Much Can Be Contributed on Your Behalf below. File a free tax extension online These contributions are in addition to the salary reduction contributions and must be made to the SIMPLE IRAs of all eligible employees (defined earlier) who chose salary reductions. File a free tax extension online These contributions are referred to as matching contributions. File a free tax extension online   Matching contributions on behalf of a self-employed individual are not treated as salary reduction contributions. File a free tax extension online Nonelective contributions. File a free tax extension online   Instead of making matching contributions, your employer may be able to choose to make nonelective contributions on behalf of all eligible employees. File a free tax extension online These nonelective contributions must be made on behalf of each eligible employee who has at least $5,000 of compensation from your employer, whether or not the employee chose salary reductions. File a free tax extension online   One of the requirements your employer must satisfy is notifying the employees that the election was made. File a free tax extension online For other requirements that your employer must satisfy, see chapter 3 of Publication 560. File a free tax extension online How Much Can Be Contributed on Your Behalf? The limits on contributions to a SIMPLE IRA vary with the type of contribution that is made. File a free tax extension online Salary reduction contributions limit. File a free tax extension online   Salary reduction contributions (employee-chosen contributions or elective deferrals) that your employer can make on your behalf under a SIMPLE plan are limited to $12,000 for 2013. File a free tax extension online The limitation remains at $12,000 for 2014. File a free tax extension online If you are a participant in any other employer plans during 2013 and you have elective salary reductions or deferred compensation under those plans, the salary reduction contributions under the SIMPLE plan also are included in the annual limit of $17,500 for 2013 on exclusions of salary reductions and other elective deferrals. File a free tax extension online You, not your employer, are responsible for monitoring compliance with these limits. File a free tax extension online Additional elective deferrals can be contributed to your SIMPLE plan if: You reached age 50 by the end of 2013, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions, such as the regular annual limit. File a free tax extension online The most that can be contributed in additional elective deferrals to your SIMPLE plan is the lesser of the following two amounts. File a free tax extension online $2,500 for 2013, or Your compensation for the year reduced by your other elective deferrals for the year. File a free tax extension online The additional deferrals are not subject to any other contribution limit and are not taken into account in applying other contribution limits. File a free tax extension online The additional deferrals are not subject to the nondiscrimination rules as long as all eligible participants are allowed to make them. File a free tax extension online Matching employer contributions limit. File a free tax extension online   Generally, your employer must make matching contributions to your SIMPLE IRA in an amount equal to your salary reduction contributions. File a free tax extension online These matching contributions cannot be more than 3% of your compensation for the calendar year. File a free tax extension online See Matching contributions less than 3% below. File a free tax extension online Example 1. File a free tax extension online In 2013, Joshua was a participant in his employer's SIMPLE plan. File a free tax extension online His compensation, before SIMPLE plan contributions, was $41,600 ($800 per week). File a free tax extension online Instead of taking it all in cash, Joshua elected to have 12. File a free tax extension online 5% of his weekly pay ($100) contributed to his SIMPLE IRA. File a free tax extension online For the full year, Joshua's salary reduction contributions were $5,200, which is less than the $12,000 limit on these contributions. File a free tax extension online Under the plan, Joshua's employer was required to make matching contributions to Joshua's SIMPLE IRA. File a free tax extension online Because his employer's matching contributions must equal Joshua's salary reductions, but cannot be more than 3% of his compensation (before salary reductions) for the year, his employer's matching contribution was limited to $1,248 (3% of $41,600). File a free tax extension online Example 2. File a free tax extension online Assume the same facts as in Example 1 , except that Joshua's compensation for the year was $408,163 and he chose to have 2. File a free tax extension online 94% of his weekly pay contributed to his SIMPLE IRA. File a free tax extension online In this example, Joshua's salary reduction contributions for the year (2. File a free tax extension online 94% × $408,163) were equal to the 2013 limit for salary reduction contributions ($12,000). File a free tax extension online Because 3% of Joshua's compensation ($12,245) is more than the amount his employer was required to match ($12,000), his employer's matching contributions were limited to $12,000. File a free tax extension online In this example, total contributions made on Joshua's behalf for the year were $24,000 ($12,000 (Joshua's contributions) + $12,000 (matching contributions)), the maximum contributions permitted under a SIMPLE IRA for 2013. File a free tax extension online Matching contributions less than 3%. File a free tax extension online   Your employer can reduce the 3% limit on matching contributions for a calendar year, but only if: The limit is not reduced below 1%, The limit is not reduced for more than 2 years out of the 5-year period that ends with (and includes) the year for which the election is effective, and Employees are notified of the reduced limit within a reasonable period of time before the 60-day election period during which they can enter into salary reduction agreements. File a free tax extension online   For purposes of applying the rule in item (2) in determining whether the limit was reduced below 3% for the year, any year before the first year in which your employer (or a former employer) maintains a SIMPLE IRA plan will be treated as a year for which the limit was 3%. File a free tax extension online If your employer chooses to make nonelective contributions for a year, that year also will be treated as a year for which the limit was 3%. File a free tax extension online Nonelective employer contributions limit. File a free tax extension online   If your employer chooses to make nonelective contributions, instead of matching contributions, to each eligible employee's SIMPLE IRA, contributions must be 2% of your compensation for the entire year. File a free tax extension online For 2013, only $255,000 of your compensation can be taken into account to figure the contribution limit. File a free tax extension online   Your employer can substitute the 2% nonelective contribution for the matching contribution for a year if both of the following requirements are met. File a free tax extension online Eligible employees are notified that a 2% nonelective contribution will be made instead of a matching contribution. File a free tax extension online This notice is provided within a reasonable period during which employees can enter into salary reduction agreements. File a free tax extension online Example 3. File a free tax extension online Assume the same facts as in Example 2 , except that Joshua's employer chose to make nonelective contributions instead of matching contributions. File a free tax extension online Because his employer's nonelective contributions are limited to 2% of up to $255,000 of Joshua's compensation, his employer's contribution to Joshua's SIMPLE IRA was limited to $5,100. File a free tax extension online In this example, total contributions made on Joshua's behalf for the year were $17,100 (Joshua's salary reductions of $12,000 plus his employer's contribution of $5,100). File a free tax extension online Traditional IRA mistakenly moved to SIMPLE IRA. File a free tax extension online   If you mistakenly roll over or transfer an amount from a traditional IRA to a SIMPLE IRA, you can later recharacterize the amount as a contribution to another traditional IRA. File a free tax extension online For more information, see Recharacterizations in chapter 1. File a free tax extension online Recharacterizing employer contributions. File a free tax extension online   You cannot recharacterize employer contributions (including elective deferrals) under a SEP or SIMPLE plan as contributions to another IRA. File a free tax extension online SEPs are discussed in chapter 2 of Publication 560. File a free tax extension online SIMPLE plans are discussed in this chapter. File a free tax extension online Converting from a SIMPLE IRA. File a free tax extension online   Generally, you can convert an amount in your SIMPLE IRA to a Roth IRA under the same rules explained in chapter 1 under Converting From Any Traditional IRA Into a Roth IRA . File a free tax extension online    However, you cannot convert any amount distributed from the SIMPLE IRA during the 2-year period beginning on the date you first participated in any SIMPLE IRA plan maintained by your employer. File a free tax extension online When Can You Withdraw or Use Assets? Generally, the same distribution (withdrawal) rules that apply to traditional IRAs apply to SIMPLE IRAs. File a free tax extension online These rules are discussed in chapter 1. File a free tax extension online Your employer cannot restrict you from taking distributions from a SIMPLE IRA. File a free tax extension online Are Distributions Taxable? Generally, distributions from a SIMPLE IRA are fully taxable as ordinary income. File a free tax extension online If the distribution is an early distribution (discussed in chapter 1), it may be subject to the additional tax on early distributions. File a free tax extension online See Additional Tax on Early Distributions, later. File a free tax extension online Rollovers and Transfers Exception Generally, rollovers and trustee-to-trustee transfers are not taxable distributions. File a free tax extension online Two-year rule. File a free tax extension online   To qualify as a tax-free rollover (or a tax-free trustee-to-trustee transfer), a rollover distribution (or a transfer) made from a SIMPLE IRA during the 2-year period beginning on the date on which you first participated in your employer's SIMPLE plan must be contributed (or transferred) to another SIMPLE IRA. File a free tax extension online The 2-year period begins on the first day on which contributions made by your employer are deposited in your SIMPLE IRA. File a free tax extension online   After the 2-year period, amounts in a SIMPLE IRA can be rolled over or transferred tax free to an IRA other than a SIMPLE IRA, or to a qualified plan, a tax-sheltered annuity plan (section 403(b) plan), or deferred compensation plan of a state or local government (section 457 plan). File a free tax extension online Additional Tax on Early Distributions The additional tax on early distributions (discussed in chapter 1) applies to SIMPLE IRAs. File a free tax extension online If a distribution is an early distribution and occurs during the 2-year period following the date on which you first participated in your employer's SIMPLE plan, the additional tax on early distributions is increased from 10% to 25%. File a free tax extension online If a rollover distribution (or transfer) from a SIMPLE IRA does not satisfy the 2-year rule, and is otherwise an early distribution, the additional tax imposed because of the early distribution is increased from 10% to 25% of the amount distributed. File a free tax extension online Prev  Up  Next   Home   More Online Publications
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File a free tax extension online 2. File a free tax extension online   Taxable and Nontaxable Income Table of Contents Compensation for Services Retirement Plan DistributionsIndividual Retirement Arrangements (IRAs) Pensions and Annuities Social Security and Equivalent Railroad Retirement BenefitsAre Any of Your Benefits Taxable? How Much Is Taxable? How To Report Your Benefits Lump-Sum Election Repayments More Than Gross Benefits Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Life Insurance ProceedsInstallments for life. File a free tax extension online Surviving spouse. File a free tax extension online Endowment Contract Proceeds Accelerated Death Benefits Sale of HomeMaximum Amount of Exclusion Ownership and Use Tests Married Persons Business Use or Rental of Home Reporting the Sale Reverse Mortgages Other ItemsWelfare benefits. File a free tax extension online Payments from a state fund for victims of crime. File a free tax extension online Home Affordable Modification Program (HAMP). File a free tax extension online Mortgage assistance payments. File a free tax extension online Payments to reduce cost of winter energy use. File a free tax extension online Nutrition Program for the Elderly. File a free tax extension online Reemployment Trade Adjustment Assistance (RTAA). File a free tax extension online Generally, income is taxable unless it is specifically exempt (not taxed) by law. File a free tax extension online Your taxable income may include compensation for services, interest, dividends, rents, royalties, income from partnerships, estate or trust income, gain from sales or exchanges of property, and business income of all kinds. File a free tax extension online Under special provisions of the law, certain items are partially or fully exempt from tax. File a free tax extension online Provisions that are of special interest to older taxpayers are discussed in this chapter. File a free tax extension online Compensation for Services Generally, you must include in gross income everything you receive in payment for personal services. File a free tax extension online In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. File a free tax extension online You need not receive the compensation in cash for it to be taxable. File a free tax extension online Payments you receive in the form of goods or services generally must be included in gross income at their fair market value. File a free tax extension online Volunteer work. File a free tax extension online   Do not include in your gross income amounts you receive for supportive services or reimbursements for out-of-pocket expenses under any of the following volunteer programs. File a free tax extension online Retired Senior Volunteer Program (RSVP). File a free tax extension online Foster Grandparent Program. File a free tax extension online Senior Companion Program. File a free tax extension online Service Corps of Retired Executives (SCORE). File a free tax extension online Unemployment compensation. File a free tax extension online   You must include in income all unemployment compensation you or your spouse (if married filing jointly) received. File a free tax extension online More information. File a free tax extension online   See Publication 525, Taxable and Nontaxable Income, for more detailed information on specific types of income. File a free tax extension online Retirement Plan Distributions This section summarizes the tax treatment of amounts you receive from traditional individual retirement arrangements (IRA), employee pensions or annuities, and disability pensions or annuities. File a free tax extension online A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. File a free tax extension online A Roth IRA is an individual retirement plan that can be either an account or an annuity and features nondeductible contributions and tax-free distributions. File a free tax extension online A SIMPLE IRA is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. File a free tax extension online More detailed information can be found in Publication 590, Individual Retirement Arrangements (IRAs), and Publication 575, Pension and Annuity Income. File a free tax extension online Individual Retirement Arrangements (IRAs) In general, distributions from a traditional IRA are taxable in the year you receive them. File a free tax extension online Exceptions to the general rule are rollovers, tax-free withdrawals of contributions, and the return of nondeductible contributions. File a free tax extension online These are discussed in Publication 590. File a free tax extension online If you made nondeductible contributions to a traditional IRA, you must file Form 8606, Nondeductible IRAs. File a free tax extension online If you do not file Form 8606 with your return, you may have to pay a $50 penalty. File a free tax extension online Also, when you receive distributions from your traditional IRA, the amounts will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. File a free tax extension online Early distributions. File a free tax extension online   Generally, early distributions are amounts distributed from your traditional IRA account or annuity before you are age 59½, or amounts you receive when you cash in retirement bonds before you are age  59½. File a free tax extension online You must include early distributions of taxable amounts in your gross income. File a free tax extension online These taxable amounts are also subject to an additional 10% tax unless the distribution qualifies for an exception. File a free tax extension online For purposes of the additional 10% tax, an IRA is a qualified retirement plan. File a free tax extension online For more information about this tax, see Tax on Early Distributions under Pensions and Annuities, later. File a free tax extension online After age 59½ and before age 70½. File a free tax extension online   After you reach age 59½, you can receive distributions from your traditional IRA without having to pay the 10% additional tax. File a free tax extension online Even though you can receive distributions after you reach age 59½, distributions are not required until you reach  age 70½. File a free tax extension online Required distributions. File a free tax extension online   If you are the owner of a traditional IRA, you generally must receive the entire balance in your IRA or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 70½. File a free tax extension online See When Must You Withdraw Assets? (Required Minimum Distributions) in Publication 590. File a free tax extension online If distributions from your traditional IRA(s) are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required. File a free tax extension online For purposes of the 50% excise tax, an IRA is a qualified retirement plan. File a free tax extension online For more information about this tax, see Tax on Excess Accumulation under Pensions and Annuities, later. File a free tax extension online See also Excess Accumulations (Insufficient Distributions) in Publication 590. File a free tax extension online Pensions and Annuities Generally, if you did not pay any part of the cost of your employee pension or annuity, and your employer did not withhold part of the cost of the contract from your pay while you worked, the amounts you receive each year are fully taxable. File a free tax extension online However, see Insurance Premiums for Retired Public Safety Officers , later. File a free tax extension online If you paid part of the cost of your pension or annuity plan (see Cost , later), you can exclude part of each annuity payment from income as a recovery of your cost (investment in the contract). File a free tax extension online This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. File a free tax extension online The rest of each payment is taxable. File a free tax extension online However, see Insurance Premiums for Retired Public Safety Officers , later. File a free tax extension online You figure the tax-free part of the payment using one of the following methods. File a free tax extension online Simplified Method. File a free tax extension online You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). File a free tax extension online You cannot use this method if your annuity is paid under a nonqualified plan. File a free tax extension online General Rule. File a free tax extension online You must use this method if your annuity is paid under a nonqualified plan. File a free tax extension online You generally cannot use this method if your annuity is paid under a qualified plan. File a free tax extension online Contact your employer or plan administrator to find out if your pension or annuity is paid under a qualified or nonqualified plan. File a free tax extension online You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. File a free tax extension online Exclusion limit. File a free tax extension online   If your annuity starting date is after 1986, the total amount of annuity income you can exclude over the years as a recovery of the cost cannot exceed your total cost. File a free tax extension online Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. File a free tax extension online This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. File a free tax extension online   If you contributed to your pension or annuity and your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. File a free tax extension online If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. File a free tax extension online The total exclusion may be more than your cost. File a free tax extension online Cost. File a free tax extension online   Before you can figure how much, if any, of your pension or annuity benefits are taxable, you must determine your cost in the plan (your investment in the contract). File a free tax extension online Your total cost in the plan includes everything that you paid. File a free tax extension online It also includes amounts your employer contributed that were taxable to you when paid. File a free tax extension online However, see Foreign employment contributions , later. File a free tax extension online   From this total cost, subtract any refunded premiums, rebates, dividends, unrepaid loans, or other tax-free amounts you received by the later of the annuity starting date or the date on which you received your first payment. File a free tax extension online   The annuity starting date is the later of the first day of the first period for which you received a payment from the plan or the date on which the plan's obligations became fixed. File a free tax extension online    The amount of your contributions to the plan may be shown in box 9b of any Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. File a free tax extension online , that you receive. File a free tax extension online Foreign employment contributions. File a free tax extension online   If you worked abroad, certain amounts your employer paid into your retirement plan that were not includible in your gross income may be considered part of your cost. File a free tax extension online For details, see Foreign employment contributions in Publication 575. File a free tax extension online Withholding. File a free tax extension online   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable part of amounts paid to you. File a free tax extension online However, you can choose not to have tax withheld on the payments you receive, unless they are eligible rollover distributions. File a free tax extension online (These are distributions that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. File a free tax extension online ) See Withholding Tax and Estimated Tax and Rollovers in Publication 575 for more information. File a free tax extension online   For payments other than eligible rollover distributions, you can tell the payer how much to withhold by filing a Form W-4P, Withholding Certificate for Pension or Annuity Payments. File a free tax extension online Simplified Method. File a free tax extension online   Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. File a free tax extension online For an annuity that is payable over the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. File a free tax extension online For any other annuity, this number is the number of monthly annuity payments under the contract. File a free tax extension online Who must use the Simplified Method. File a free tax extension online   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you receive your pension or annuity payments from a qualified plan or annuity, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments (defined next). File a free tax extension online   In addition, if your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use the Simplified Method for payments from a qualified plan, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments. File a free tax extension online If you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. File a free tax extension online Guaranteed payments. File a free tax extension online   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. File a free tax extension online If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. File a free tax extension online Who cannot use the Simplified Method. File a free tax extension online   You cannot use the Simplified Method and must use the General Rule if you receive pension or annuity payments from: A nonqualified plan, such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan, or A qualified plan if you are age 75 or older on your annuity starting date and you are entitled to at least 5 years of guaranteed payments (defined above). File a free tax extension online   In addition, you had to use the General Rule for either circumstance described above if your annuity starting date is after July 1, 1986, and before November 19, 1996. File a free tax extension online If you did not have to use the General Rule, you could have chosen to use it. File a free tax extension online You also had to use the General Rule for payments from a qualified plan if your annuity starting date is before July 2, 1986, and you did not qualify to use the Three-Year Rule. File a free tax extension online   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. File a free tax extension online   Unless your annuity starting date was before 1987, once you have recovered all of your non-taxable investment, all of each remaining payment you receive is fully taxable. File a free tax extension online Once your remaining payments are fully taxable, there is no longer a concern with the General Rule or Simplified Method. File a free tax extension online   Complete information on the General Rule, including the actuarial tables you need, is contained in Publication 939, General Rule for Pensions and Annuities. File a free tax extension online How to use the Simplified Method. File a free tax extension online   Complete the Simplified Method Worksheet in the Form 1040, Form 1040A, or Form 1040NR instructions or in Publication 575 to figure your taxable annuity for 2013. File a free tax extension online Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. File a free tax extension online   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. File a free tax extension online How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. File a free tax extension online For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. File a free tax extension online    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. File a free tax extension online Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. File a free tax extension online Single-life annuity. File a free tax extension online   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. File a free tax extension online Enter on line 3 the number shown for your age on your annuity starting date. File a free tax extension online This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. File a free tax extension online Multiple-lives annuity. File a free tax extension online   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. File a free tax extension online Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. File a free tax extension online For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. File a free tax extension online For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. File a free tax extension online Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. File a free tax extension online   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. File a free tax extension online Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. File a free tax extension online This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. File a free tax extension online Fixed-period annuities. File a free tax extension online   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. File a free tax extension online Line 6. File a free tax extension online   The amount on line 6 should include all amounts that could have been recovered in prior years. File a free tax extension online If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. File a free tax extension online    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity in later years. File a free tax extension online Example. File a free tax extension online Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. File a free tax extension online Bill's annuity starting date is January 1, 2013. File a free tax extension online The benefits are to be paid over the joint lives of Bill and his wife, Kathy, age 65. File a free tax extension online Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. File a free tax extension online Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. File a free tax extension online Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. File a free tax extension online See the illustrated Worksheet 2-A, Simplified Method Worksheet, later. File a free tax extension online You can find a blank version of this worksheet in Publication 575. File a free tax extension online (The references in the illustrated worksheet are to sections in Publication 575). File a free tax extension online His annuity is payable over the lives of more than one annuitant, so Bill uses his and Kathy's combined ages, 130 (65 + 65), and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet and finds the line 3 amount to be 310. File a free tax extension online Bill's tax-free monthly amount is $100 ($31,000 ÷ 310 as shown on line 4 of the worksheet). File a free tax extension online Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. File a free tax extension online The full amount of any annuity payments received after 310 payments are paid must generally be included in gross income. File a free tax extension online If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. File a free tax extension online This deduction is not subject to the 2%-of-adjusted-gross-income limit. File a free tax extension online Worksheet 2-A. File a free tax extension online Simplified Method Worksheet—Illustrated 1. File a free tax extension online Enter the total pension or annuity payments received this year. File a free tax extension online Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. File a free tax extension online $ 14,400 2. File a free tax extension online Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion* See Cost (Investment in the Contract), earlier 2. File a free tax extension online 31,000   Note. File a free tax extension online If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). File a free tax extension online Otherwise, go to line 3. File a free tax extension online     3. File a free tax extension online Enter the appropriate number from Table 1 below. File a free tax extension online But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. File a free tax extension online 310 4. File a free tax extension online Divide line 2 by the number on line 3 4. File a free tax extension online 100 5. File a free tax extension online Multiply line 4 by the number of months for which this year's payments were made. File a free tax extension online If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. File a free tax extension online Otherwise, go to line 6 5. File a free tax extension online 1,200 6. File a free tax extension online Enter any amount previously recovered tax free in years after 1986. File a free tax extension online This is the amount shown on line 10 of your worksheet for last year 6. File a free tax extension online 0 7. File a free tax extension online Subtract line 6 from line 2 7. File a free tax extension online 31,000 8. File a free tax extension online Enter the smaller of line 5 or line 7 8. File a free tax extension online 1,200 9. File a free tax extension online Taxable amount for year. File a free tax extension online Subtract line 8 from line 1. File a free tax extension online Enter the result, but not less than zero. File a free tax extension online Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. File a free tax extension online Note. File a free tax extension online If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. File a free tax extension online If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers, earlier, before entering an amount on your tax return. File a free tax extension online 9. File a free tax extension online $ 13,200 10. File a free tax extension online Was your annuity starting date before 1987? □ Yes. File a free tax extension online STOP. File a free tax extension online Do not complete the rest of this worksheet. File a free tax extension online  ☑ No. File a free tax extension online Add lines 6 and 8. File a free tax extension online This is the amount you have recovered tax free through 2013. File a free tax extension online You will need this number if you need to fill out this worksheet next year. File a free tax extension online 10. File a free tax extension online 1,200 11. File a free tax extension online Balance of cost to be recovered. File a free tax extension online Subtract line 10 from line 2. File a free tax extension online If zero, you will not have to complete this worksheet next year. File a free tax extension online The payments you receive next year will generally be fully taxable 11. File a free tax extension online $ 29,800 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. File a free tax extension online   Table 1 for Line 3 Above       AND your annuity starting date was—   IF your age on your annuity starting date was . File a free tax extension online . File a free tax extension online . File a free tax extension online   BEFORE November 19, 1996, enter on line 3 . File a free tax extension online . File a free tax extension online . File a free tax extension online AFTER November 18, 1996, enter on line 3 . File a free tax extension online . File a free tax extension online . File a free tax extension online   55 or under 300 360   56-60 260 310   61-65 240 260   66-70 170 210   71 or over 120 160 Table 2 for Line 3 Above   IF the annuitants' combined ages on your annuity starting date were . File a free tax extension online . File a free tax extension online . File a free tax extension online   THEN enter on line 3 . File a free tax extension online . File a free tax extension online . File a free tax extension online         110 or under   410         111-120   360         121-130   310         131-140   260         141 or over   210       Survivors of retirees. File a free tax extension online   Benefits paid to you as a survivor under a joint and survivor annuity must be included in your gross income in the same way the retiree would have included them in gross income. File a free tax extension online   If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule, include the total received in your income. File a free tax extension online The retiree's cost has already been recovered tax free. File a free tax extension online   If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage the retiree used to your initial payment called for in the contract. File a free tax extension online The resulting tax-free amount will then remain fixed. File a free tax extension online Any increases in the survivor annuity are fully taxable. File a free tax extension online   If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. File a free tax extension online See Simplified Method , earlier. File a free tax extension online How to report. File a free tax extension online   If you file Form 1040, report your total annuity on line 16a, and the taxable part on line 16b. File a free tax extension online If your pension or annuity is fully taxable, enter it on line 16b. File a free tax extension online Do not make an entry on line 16a. File a free tax extension online   If you file Form 1040A, report your total annuity on line 12a, and the taxable part on line 12b. File a free tax extension online If your pension or annuity is fully taxable, enter it on line 12b. File a free tax extension online Do not make an entry on line 12a. File a free tax extension online   If you file Form 1040NR, report your total annuity on line 17a, and the taxable part on line 17b. File a free tax extension online If your pension or annuity is fully taxable, enter it on line 17b. File a free tax extension online Do not make an entry on line 17a. File a free tax extension online Example. File a free tax extension online You are a Form 1040 filer and you received monthly payments totaling $1,200 (12 months x $100) during 2013 from a pension plan that was completely financed by your employer. File a free tax extension online You had paid no tax on the payments that your employer made to the plan, and the payments were not used to pay for accident, health, or long-term care insurance premiums (as discussed later under Insurance Premiums for Retired Public Safety Officers ). File a free tax extension online The entire $1,200 is taxable. File a free tax extension online You include $1,200 only on Form 1040, line 16b. File a free tax extension online Joint return. File a free tax extension online   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on line 16a of Form 1040, line 12a of Form 1040A, or line 17a of Form 1040NR. File a free tax extension online Report the total of the taxable parts on line 16b of Form 1040, line 12b of Form 1040A, or line 17b of Form 1040NR. File a free tax extension online Form 1099-R. File a free tax extension online   You should receive a Form 1099-R for your pension or annuity. File a free tax extension online Form 1099-R shows your pension or annuity for the year and any income tax withheld. File a free tax extension online You should receive a Form W-2 if you receive distributions from certain nonqualified plans. File a free tax extension online You must attach Forms 1099-R or Forms W-2 to your 2013 tax return if federal income tax was withheld. File a free tax extension online Generally, you should be sent these forms by January 31, 2014. File a free tax extension online Nonperiodic Distributions If you receive a nonperiodic distribution from your retirement plan, you may be able to exclude all or part of it from your income as a recovery of your cost. File a free tax extension online Nonperiodic distributions include cash withdrawals, distributions of current earnings (dividends) on your investment, and certain loans. File a free tax extension online For information on how to figure the taxable amount of a nonperiodic distribution, see Taxation of Nonperiodic Payments in Publication 575. File a free tax extension online The taxable part of a nonperiodic distribution may be subject to an additional 10% tax. File a free tax extension online See Tax on Early Distributions, later. File a free tax extension online Lump-sum distributions. File a free tax extension online   If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. File a free tax extension online The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. File a free tax extension online The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. File a free tax extension online You may be able to use the 10-year tax option to figure tax on the ordinary income part. File a free tax extension online Form 1099-R. File a free tax extension online   If you receive a total distribution from a plan, you should receive a Form 1099-R. File a free tax extension online If the distribution qualifies as a lump-sum distribution, box 3 shows the capital gain part of the distribution. File a free tax extension online The amount in box 2a, Taxable amount, minus the amount in box 3, Capital gain, is the ordinary income part. File a free tax extension online More information. File a free tax extension online   For more detailed information on lump-sum distributions, see Publication 575 or Form 4972, Tax on Lump-Sum Distributions. File a free tax extension online Tax on Early Distributions Most distributions you receive from your qualified retirement plan and nonqualified annuity contracts before you reach age 59½ are subject to an additional tax of 10%. File a free tax extension online The tax applies to the taxable part of the distribution. File a free tax extension online For this purpose, a qualified retirement plan is: A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)), A qualified employee annuity plan, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). File a free tax extension online  An IRA is also a qualified retirement plan for purposes of this tax. File a free tax extension online General exceptions to tax. File a free tax extension online   The early distribution tax does not apply to any distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. File a free tax extension online Additional exceptions. File a free tax extension online   There are additional exceptions to the early distribution tax for certain distributions from qualified retirement plans and nonqualified annuity contracts. File a free tax extension online See Publication 575 for details. File a free tax extension online Reporting tax. File a free tax extension online   If you owe only the tax on early distributions and distribution code 1 (early distribution, no known exception) is correctly shown in Form 1099-R, box 7, multiply the taxable part of the early distribution by 10% (. File a free tax extension online 10) and enter the result on Form 1040, line 58, or Form 1040NR, line 56. File a free tax extension online See the instructions for line 58 of Form 1040 or line 56 of Form 1040NR for more information about reporting the early distribution tax. File a free tax extension online Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date. File a free tax extension online Unless the rule for 5% owners applies, this is generally April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. File a free tax extension online However, your plan may require you to begin to receive payments by April 1 of the year that follows the year in which you reach 70½, even if you have not retired. File a free tax extension online For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan) (for benefits accruing after 1986). File a free tax extension online  An IRA is also a qualified retirement plan for purposes of this tax. File a free tax extension online An excess accumulation is the undistributed remainder of the required minimum distribution that was left in your qualified retirement plan. File a free tax extension online 5% owners. File a free tax extension online   If you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the company maintaining your qualified retirement plan, you must begin to receive distributions from the plan by April 1 of the year after the calendar year in which you reach age 70½. File a free tax extension online See Publication 575 for more information. File a free tax extension online Amount of tax. File a free tax extension online   If you do not receive the required minimum distribution, you are subject to an additional tax. File a free tax extension online The tax equals 50% of the difference between the amount that must be distributed and the amount that was distributed during the tax year. File a free tax extension online You can get this excise tax excused if you establish that the shortfall in distributions was due to reasonable error and that you are taking reasonable steps to remedy the shortfall. File a free tax extension online Form 5329. File a free tax extension online   You must file a Form 5329 if you owe a tax because you did not receive a minimum required distribution from your qualified retirement plan. File a free tax extension online Additional information. File a free tax extension online   For more detailed information on the tax on excess accumulation, see Publication 575. File a free tax extension online Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. File a free tax extension online The premiums can be for coverage for you, your spouse, or dependent(s). File a free tax extension online The distribution must be made directly from the plan to the insurance provider. File a free tax extension online You can exclude from income the smaller of the amount of the insurance premiums or $3,000. File a free tax extension online You can only make this election for amounts that would otherwise be included in your income. File a free tax extension online The amount excluded from your income cannot be used to claim a medical expense deduction. File a free tax extension online An eligible retirement plan is a governmental plan that is a: Qualified trust, Section 403(a) plan, Section 403(b) annuity, or Section 457(b) plan. File a free tax extension online If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. File a free tax extension online The taxable amount shown in box 2a of any Form 1099-R that you receive does not reflect the exclusion. File a free tax extension online Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. File a free tax extension online Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. File a free tax extension online Enter “PSO” next to the appropriate line on which you report the taxable amount. File a free tax extension online Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. File a free tax extension online These categories are treated differently for income tax purposes. File a free tax extension online Social security equivalent benefits. File a free tax extension online   The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. File a free tax extension online This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and is treated for tax purposes like social security benefits. File a free tax extension online (See Social Security and Equivalent Railroad Retirement Benefits , later. File a free tax extension online ) Non-social security equivalent benefits. File a free tax extension online   The second category contains the rest of the tier 1 benefits, called the non-social security equivalent benefit (NSSEB). File a free tax extension online It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. File a free tax extension online This category of benefits is treated as an amount received from a qualified employee plan. File a free tax extension online This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. File a free tax extension online Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. File a free tax extension online More information. File a free tax extension online   For more information about railroad retirement benefits, see Publication 575. File a free tax extension online Military Retirement Pay Military retirement pay based on age or length of service is taxable and must be included in income as a pension on Form 1040, lines 16a and 16b; on Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. File a free tax extension online But, certain military and government disability pensions that are based on a percentage of disability from active service in the Armed Forces of any country generally are not taxable. File a free tax extension online For more information, including information about veterans' benefits and insurance, see Publication 525. File a free tax extension online Social Security and Equivalent Railroad Retirement Benefits This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. File a free tax extension online Social security benefits include monthly retirement, survivor, and disability benefits. File a free tax extension online They do not include supplemental security income (SSI) payments, which are not taxable. File a free tax extension online Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. File a free tax extension online They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits. File a free tax extension online If you received these benefits during 2013, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits. File a free tax extension online Are Any of Your Benefits Taxable? Note. File a free tax extension online When the term “benefits” is used in this section, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. File a free tax extension online  To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. File a free tax extension online When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. File a free tax extension online S. File a free tax extension online savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned in American Samoa or Puerto Rico by bona fide residents. File a free tax extension online Figuring total income. File a free tax extension online   To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. File a free tax extension online If that total amount is more than your base amount, part of your benefits may be taxable. File a free tax extension online If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. File a free tax extension online Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. File a free tax extension online If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. File a free tax extension online If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. File a free tax extension online Worksheet 2-B. File a free tax extension online A Quick Way To Check if Your Benefits May Be Taxable A. File a free tax extension online Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. File a free tax extension online Include  the full amount of any lump-sum benefit payments received in 2013, for 2013 and  earlier years. File a free tax extension online (If you received more than one form, combine the amounts from box 5  and enter the total. File a free tax extension online ) A. File a free tax extension online     Note. File a free tax extension online If the amount on line A is zero or less, stop here; none of your benefits are  taxable this year. File a free tax extension online     B. File a free tax extension online Enter one-half of the amount on line A B. File a free tax extension online   C. File a free tax extension online Enter your taxable pensions, wages, interest, dividends, and other taxable income C. File a free tax extension online   D. File a free tax extension online Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for: •Interest from qualified U. File a free tax extension online S. File a free tax extension online savings bonds, •Employer-provided adoption benefits, •Foreign earned income or foreign housing, or •Income earned in American Samoa or Puerto Rico by bona fide residents D. File a free tax extension online   E. File a free tax extension online Add lines B, C, and D and enter the total E. File a free tax extension online   F. File a free tax extension online If you are: •Married filing jointly, enter $32,000 •Single, head of household, qualifying widow(er), or married filing separately and you  lived apart from your spouse for all of 2013, enter $25,000 •Married filing separately and you lived with your spouse at any time during 2013,  enter -0- F. File a free tax extension online   G. File a free tax extension online Is the amount on line F less than or equal to the amount on line E? □ No. File a free tax extension online None of your benefits are taxable this year. File a free tax extension online  □ Yes. File a free tax extension online Some of your benefits may be taxable. File a free tax extension online To figure how much of your benefits  are taxable, see Which worksheet to use under How Much Is Taxable. File a free tax extension online     Base Amount Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er) with dependent child, $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $0 if you are married filing separately and lived with your spouse at any time during 2013. File a free tax extension online Repayment of Benefits Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. File a free tax extension online It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. File a free tax extension online If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. File a free tax extension online Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. File a free tax extension online Your repayments are shown in box 4. File a free tax extension online The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). File a free tax extension online Use the amount in box 5 to figure whether any of your benefits are taxable. File a free tax extension online Tax Withholding and Estimated Tax You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. File a free tax extension online If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. File a free tax extension online If you do not choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. File a free tax extension online For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. File a free tax extension online How Much Is Taxable? If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. File a free tax extension online Generally, the higher that total amount, the greater the taxable part of your benefits. File a free tax extension online Maximum taxable part. File a free tax extension online   The taxable part of your benefits usually cannot be more than 50%. File a free tax extension online However, up to 85% of your benefits can be taxable if either of the following situations applies to you. File a free tax extension online The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). File a free tax extension online You are married filing separately and lived with your spouse at any time during 2013. File a free tax extension online   If you are a nonresident alien, 85% of your benefits are taxable. File a free tax extension online However, this income is exempt under some tax treaties. File a free tax extension online Which worksheet to use. File a free tax extension online   A worksheet to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. File a free tax extension online However, you will need to use a different worksheet(s) if any of the following situations applies to you. File a free tax extension online You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse were covered by a retirement plan at work. File a free tax extension online In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. File a free tax extension online Situation (1) does not apply and you take one or more of the following exclusions. File a free tax extension online Interest from qualified U. File a free tax extension online S. File a free tax extension online savings bonds (Form 8815). File a free tax extension online Employer-provided adoption benefits (Form 8839). File a free tax extension online Foreign earned income or housing (Form 2555 or Form 2555-EZ). File a free tax extension online Income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. File a free tax extension online In these situations, you must use Worksheet 1 in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure your taxable benefits. File a free tax extension online You received a lump-sum payment for an earlier year. File a free tax extension online In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. File a free tax extension online See Lump-Sum Election , later. File a free tax extension online How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040, Form 1040A, or Form 1040NR. File a free tax extension online You cannot use Form 1040EZ. File a free tax extension online Reporting on Form 1040. File a free tax extension online   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable part on line 20b. File a free tax extension online If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. File a free tax extension online Reporting on Form 1040A. File a free tax extension online   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable part on line 14b. File a free tax extension online If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. File a free tax extension online Reporting on Form 1040NR. File a free tax extension online   Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of Form 1040NR, Schedule NEC, line 8. File a free tax extension online Benefits not taxable. File a free tax extension online   If you are filing Form 1040EZ, do not report any benefits on your tax return. File a free tax extension online If you are filing Form 1040 or Form 1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. File a free tax extension online Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. File a free tax extension online If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. File a free tax extension online Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. File a free tax extension online This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. File a free tax extension online No part of the lump-sum death benefit is subject to tax. File a free tax extension online For more information about the lump-sum death benefit, visit the Social Security Administration website at www. File a free tax extension online SSA. File a free tax extension online gov, and use keyword: death benefit. File a free tax extension online Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. File a free tax extension online However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. File a free tax extension online You can elect this method if it lowers your taxable benefits. File a free tax extension online See Publication 915 for more information. File a free tax extension online Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. File a free tax extension online If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. File a free tax extension online If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. File a free tax extension online If you have any questions about this negative figure, contact your local Social Security Administration office or your local U. File a free tax extension online S. File a free tax extension online Railroad Retirement Board field office. File a free tax extension online Joint return. File a free tax extension online   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's does not, subtract the box 5 amount on your form from the box 5 amount on your spouse's form. File a free tax extension online You do this to get your net benefits when figuring if your combined benefits are taxable. File a free tax extension online Repayment of benefits received in an earlier year. File a free tax extension online   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. File a free tax extension online   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. File a free tax extension online Claim it on Schedule A (Form 1040), line 23. File a free tax extension online   If this deduction is more than $3,000, you have to follow some special instructions. File a free tax extension online See Publication 915 for those instructions. File a free tax extension online Sickness and Injury Benefits Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. File a free tax extension online If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. File a free tax extension online However, certain payments may not be taxable to you. File a free tax extension online Some of these payments are discussed later in this section. File a free tax extension online Also, see Military and Government Disability Pensions and Other Sickness and Injury Benefits in Publication 525. File a free tax extension online Cost paid by you. File a free tax extension online   If you pay the entire cost of an accident or health plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. File a free tax extension online If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. File a free tax extension online Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. File a free tax extension online You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. File a free tax extension online Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. File a free tax extension online If you were 65 or older by the end of 2013 or you were retired on permanent and total disability and received taxable disability income, you may be able to claim the credit for the elderly or the disabled. File a free tax extension online See Credit for the Elderly or the Disabled, later. File a free tax extension online For more information on this credit, see Publication 524, Credit for the Elderly or the Disabled. File a free tax extension online Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. File a free tax extension online Report the payments on lines 16a and 16b of Form 1040, on lines 12a and 12b of Form 1040A, or on lines 17a and 17b of Form 1040NR. File a free tax extension online For more information on pensions and annuities, see Publication 575. File a free tax extension online Retirement and profit-sharing plans. File a free tax extension online   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. File a free tax extension online The payments must be reported as a pension or annuity. File a free tax extension online Accrued leave payment. File a free tax extension online   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. File a free tax extension online The payment is not a disability payment. File a free tax extension online Include it in your income in the tax year you receive it. File a free tax extension online Long-Term Care Insurance Contracts In most cases, long-term care insurance contracts generally are treated as accident and health insurance contracts. File a free tax extension online Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. File a free tax extension online However, the amount you can exclude may be limited. File a free tax extension online Long-term care insurance contracts are discussed in more detail in Publication 525. File a free tax extension online Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. File a free tax extension online The exemption also applies to your survivors. File a free tax extension online The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. File a free tax extension online If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. File a free tax extension online For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. File a free tax extension online Return to work. File a free tax extension online   If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. File a free tax extension online Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. File a free tax extension online Federal Employees' Compensation Act (FECA). File a free tax extension online   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. File a free tax extension online However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. File a free tax extension online Report this income on Form 1040, line 7; Form 1040A, line 7; on Form 1040EZ, line 1; or Form 1040NR, line 8. File a free tax extension online Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. File a free tax extension online    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. File a free tax extension online For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. File a free tax extension online Other compensation. File a free tax extension online   Many other amounts you receive as compensation for sickness or injury are not taxable. File a free tax extension online These include the following amounts. File a free tax extension online Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. File a free tax extension online Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. File a free tax extension online Compensation you receive for permanent loss or loss of use of a part or function of your body, for your permanent disfigurement, or for such loss or disfigurement suffered by your spouse or dependent(s). File a free tax extension online This compensation must be based only on the injury and not on the period of your absence from work. File a free tax extension online These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. File a free tax extension online Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. File a free tax extension online This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. File a free tax extension online Proceeds not received in installments. File a free tax extension online   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. File a free tax extension online If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. File a free tax extension online Proceeds received in installments. File a free tax extension online   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. File a free tax extension online   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. File a free tax extension online Include anything over this excluded part in your income as interest. File a free tax extension online Installments for life. File a free tax extension online   If, as the beneficiary under an insurance contract, you are entitled to receive the proceeds in installments for the rest of your life without a refund or period-certain guarantee, you figure the excluded part of each installment by dividing the amount held by the insurance company by your life expectancy. File a free tax extension online If there is a refund or period-certain guarantee, the amount held by the insurance company for this purpose is reduced by the actuarial value of the guarantee. File a free tax extension online Surviving spouse. File a free tax extension online   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude, in any year, up to $1,000 of the interest included in the installments. File a free tax extension online If you remarry, you can continue to take the exclusion. File a free tax extension online Surrender of policy for cash. File a free tax extension online   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. File a free tax extension online In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. File a free tax extension online You should receive a Form 1099-R showing the total proceeds and the taxable part. File a free tax extension online Report these amounts on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or Form 1040NR, lines 17a and 17b. File a free tax extension online Endowment Contract Proceeds An endowment contract is a policy that pays over to you a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. File a free tax extension online Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. File a free tax extension online To determine your cost, subtract from the total premiums (or other consideration) paid for the contract any amount that you previously received under the contract and excluded from your income. File a free tax extension online Include in your income the part of the lump-sum payment that is more than your cost. File a free tax extension online Endowment proceeds that you choose to receive in installments instead of a lump-sum payment at the maturity of the policy are taxed as an annuity. File a free tax extension online The tax treatment of an annuity is explained in Publication 575. File a free tax extension online For this treatment to apply, you must choose to receive the proceeds in installments before receiving any part of the lump sum. File a free tax extension online This election must be made within 60 days after the lump-sum payment first becomes payable to you. File a free tax extension online Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are generally excluded from income if the insured is terminally or chronically ill. File a free tax extension online However, see Exception , later. File a free tax extension online For a chronically ill individual, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. File a free tax extension online Accelerated death benefits paid on a per diem or other periodic basis without regard to the costs are excludable up to a limit. File a free tax extension online In addition, if any portion of a death benefit under a life insurance contract on the life of a terminally or chronically ill individual is sold or assigned to a viatical settlement provider, the amount received also is excluded from income. File a free tax extension online Generally, a viatical settlement provider is one who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill. File a free tax extension online To report taxable accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. File a free tax extension online Terminally or chronically ill defined. File a free tax extension online   A terminally ill person is one who has been certified by a physician as having an illness or physical condition that reasonably can be expected to result in death within 24 months from the date of the certification. File a free tax extension online A chronically ill person is one who is not terminally ill but has been certified (within the previous 12 months) by a licensed health care practitioner as meeting either of the following conditions. File a free tax extension online The person is unable to perform (without substantial help) at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) for a period of 90 days or more because of a loss of functional capacity. File a free tax extension online The person requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment. File a free tax extension online Exception. File a free tax extension online   The exclusion does not apply to any amount paid to a person other than the insured if that other person has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the other person, or Has a financial interest in the business of the other person. File a free tax extension online Sale of Home You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return in most cases) on the sale of your main home. File a free tax extension online Generally, if you can exclude all of the gain, you do not need to report the sale on your tax return. File a free tax extension online You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. File a free tax extension online Main home. File a free tax extension online   Usually, your main home is the home you live in most of the time and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. File a free tax extension online Repaying the first-time homebuyer credit because you sold your home. File a free tax extension online   If you claimed a first-time homebuyer credit for your main home and you sell it, you may have to repay the credit. File a free tax extension online For a home purchased in 2008 and used as your main home until sold in 2013, you must file Form 5405 and repay the balance of the unpaid credit on your 2013 tax return. File a free tax extension online   For a home purchased after 2008, you generally must repay the entire credit if the home was sold (or otherwise ceased to be your main home) within 36 months of the purchase date. File a free tax extension online If you purchased your home in 2009 and used it as your main home until sold in 2013, you do not have to repay the credit or file Form 5405. File a free tax extension online If you purchased your home in 2010 and used it as your main home until sold in 2013, you may have to file Form 5405 and repay the entire credit on your 2013 tax return. File a free tax extension online   See the Instructions for Form 5405 for more information about repaying the credit and exceptions to repayment that may apply to you. File a free tax extension online Maximum Amount of Exclusion You can generally exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. File a free tax extension online You meet the ownership test. File a free tax extension online You meet the use test. File a free tax extension online During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. File a free tax extension online You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . File a free tax extension online Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. File a free tax extension online This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). File a free tax extension online Exception to ownership and use tests. File a free tax extension online   If you owned and lived in the property as your main home for less than 2 years, you still can claim an exclusion in some cases. File a free tax extension online Generally, you must have sold the home due to a change in place of employment, health, or unforeseen circumstances. File a free tax extension online The maximum amount you can exclude will be reduced. File a free tax extension online See Publication 523, Selling Your Home, for more information. File a free tax extension online Exception to use test for individuals with a disability. File a free tax extension online   There is an exception to the use test if, during the 5-year period before the sale of your home: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year. File a free tax extension online Under this exception, you are considered to live in your home during any time that you own the home and live in a facility (including a nursing home) that is licensed by a state or political subdivision to care for persons in your condition. File a free tax extension online   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. File a free tax extension online Exception to ownership test for property acquired in a like-kind exchange. File a free tax extension online   You must have owned your main home for at least 5 years to qualify for the exclusion if you acquired your main home in a like-kind exchange. File a free tax extension online This special 5-year ownership rule continues to apply to a home you acquired in a like-kind exchange and gave to another person. File a free tax extension online A like-kind exchange is an exchange of property held for productive use in a trade or business or for investment. File a free tax extension online See Publication 523 for more information. File a free tax extension online Period of nonqualified use. File a free tax extension online   Generally, the gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gain is allocated to periods of nonqualified use. File a free tax extension online Nonqualified use is any period after December 31, 2008, during which the property is not used as the main home. File a free tax extension online See Publication 523 for more information. File a free tax extension online Married Persons In the special situations discussed below, if you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use test, you can exclude up to $250,000 of gain. File a free tax extension online However, see Special rules for joint returns , next. File a free tax extension online Special rules for joint returns. File a free tax extension online   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. File a free tax extension online You are married and file a joint return for the year. File a free tax extension online Either you or your spouse meets the ownership test. File a free tax extension online Both you and your spouse meet the use test. File a free tax extension online During the 2-year period ending on the date of the sale, neither you nor your spouse exclude gain from the sale of another home. File a free tax extension online Sale of home by surviving spouse. File a free tax extension online   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. File a free tax extension online   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home in 2013. File a free tax extension online The sale or exchange took place no more than 2 years after the date of death of your spouse. File a free tax extension online You have not remarried. File a free tax extension online You and your spouse met the use test at the time of your spouse's death. File a free tax extension online You or your spouse met the ownership test at the time of your spouse's death. File a free tax extension online Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. File a free tax extension online Home transferred from spouse. File a free tax extension online   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. File a free tax extension online Use of home after divorce. File a free tax extension online   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. File a free tax extension online Business Use or Rental of Home You may be able to exclude gain from the sale of a home that you have used for business or to produce rental income. File a free tax extension online However, you must meet the ownership and use tests. File a free tax extension online See Publication 523 for more information. File a free tax extension online Depreciation after May 6, 1997. File a free tax extension online   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. File a free tax extension online See Publication 523 for more information. File a free tax extension online Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and you do not qualify to exclude all of it, You have a gain and you choose not to exclude it, or You received Form 1099-S. File a free tax extension online If you have a gain that you cannot or choose not to exclude, if you received a Form 1099-S, or if you have a deductible loss, report the sale on your tax return. File a free tax extension online Report the sale on Part I or Part II of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home. File a free tax extension online If you used your home for business or to produce rental income, you may have to use Form 4797, Sales of Business Property, to report the sale of the business or rental part. File a free tax extension online See Publication 523 for more information. File a free tax extension online Reverse Mortgages A revers