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File federal taxes online free 1. File federal taxes online free   Gain or Loss Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesGain or Loss From Sales and Exchanges Abandonments Foreclosures and RepossessionsAmount realized on a nonrecourse debt. File federal taxes online free Amount realized on a recourse debt. File federal taxes online free Involuntary ConversionsCondemnations Nontaxable ExchangesLike-Kind Exchanges Other Nontaxable Exchanges Transfers to Spouse Rollover of Gain From Publicly Traded Securities Gains on Sales of Qualified Small Business Stock Exclusion of Gain From Sale of DC Zone Assets Topics - This chapter discusses: Sales and exchanges Abandonments Foreclosures and repossessions Involuntary conversions Nontaxable exchanges Transfers to spouse Rollovers and exclusions for certain capital gains Useful Items - You may want to see: Publication 523 Selling Your Home 537 Installment Sales 547 Casualties, Disasters, and Thefts 550 Investment Income and Expenses 551 Basis of Assets 908 Bankruptcy Tax Guide 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 1040 U. File federal taxes online free S. File federal taxes online free Individual Income Tax Return 1040X Amended U. File federal taxes online free S. File federal taxes online free Individual Income Tax Return 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets Although the discussions in this chapter may at times refer mainly to individuals, many of the rules discussed also apply to taxpayers other than individuals. File federal taxes online free However, the rules for property held for personal use usually will not apply to taxpayers other than individuals. File federal taxes online free See chapter 5 for information about getting publications and forms. File federal taxes online free Sales and Exchanges A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. File federal taxes online free An exchange is a transfer of property for other property or services. File federal taxes online free The following discussions describe the kinds of transactions that are treated as sales or exchanges and explain how to figure gain or loss. File federal taxes online free Sale or lease. File federal taxes online free    Some agreements that seem to be leases may really be conditional sales contracts. File federal taxes online free The intention of the parties to the agreement can help you distinguish between a sale and a lease. File federal taxes online free   There is no test or group of tests to prove what the parties intended when they made the agreement. File federal taxes online free You should consider each agreement based on its own facts and circumstances. File federal taxes online free For more information, see chapter 3 in Publication 535, Business Expenses. File federal taxes online free Cancellation of a lease. File federal taxes online free    Payments received by a tenant for the cancellation of a lease are treated as an amount realized from the sale of property. File federal taxes online free Payments received by a landlord (lessor) for the cancellation of a lease are essentially a substitute for rental payments and are taxed as ordinary income in the year in which they are received. File federal taxes online free Copyright. File federal taxes online free    Payments you receive for granting the exclusive use of (or right to exploit) a copyright throughout its life in a particular medium are treated as received from the sale of property. File federal taxes online free It does not matter if the payments are a fixed amount or a percentage of receipts from the sale, performance, exhibition, or publication of the copyrighted work, or an amount based on the number of copies sold, performances given, or exhibitions made. File federal taxes online free Nor does it matter if the payments are made over the same period as that covering the grantee's use of the copyrighted work. File federal taxes online free   If the copyright was used in your trade or business and you held it longer than a year, the gain or loss may be a section 1231 gain or loss. File federal taxes online free For more information, see Section 1231 Gains and Losses in chapter 3. File federal taxes online free Easement. File federal taxes online free   The amount received for granting an easement is subtracted from the basis of the property. File federal taxes online free If only a specific part of the entire tract of property is affected by the easement, only the basis of that part is reduced by the amount received. File federal taxes online free If it is impossible or impractical to separate the basis of the part of the property on which the easement is granted, the basis of the whole property is reduced by the amount received. File federal taxes online free   Any amount received that is more than the basis to be reduced is a taxable gain. File federal taxes online free The transaction is reported as a sale of property. File federal taxes online free   If you transfer a perpetual easement for consideration and do not keep any beneficial interest in the part of the property affected by the easement, the transaction will be treated as a sale of property. File federal taxes online free However, if you make a qualified conservation contribution of a restriction or easement granted in perpetuity, it is treated as a charitable contribution and not a sale or exchange, even though you keep a beneficial interest in the property affected by the easement. File federal taxes online free   If you grant an easement on your property (for example, a right-of-way over it) under condemnation or threat of condemnation, you are considered to have made a forced sale, even though you keep the legal title. File federal taxes online free Although you figure gain or loss on the easement in the same way as a sale of property, the gain or loss is treated as a gain or loss from a condemnation. File federal taxes online free See Gain or Loss From Condemnations, later. File federal taxes online free Property transferred to satisfy debt. File federal taxes online free   A transfer of property to satisfy a debt is an exchange. File federal taxes online free Note's maturity date extended. File federal taxes online free   The extension of a note's maturity date is not treated as an exchange of an outstanding note for a new and different note. File federal taxes online free Also, it is not considered a closed and completed transaction that would result in a gain or loss. File federal taxes online free However, an extension will be treated as a taxable exchange of the outstanding note for a new and materially different note if the changes in the terms of the note are significant. File federal taxes online free Each case must be determined by its own facts. File federal taxes online free For more information, see Regulations section 1. File federal taxes online free 1001-3. File federal taxes online free Transfer on death. File federal taxes online free   The transfer of property of a decedent to an executor or administrator of the estate, or to the heirs or beneficiaries, is not a sale or exchange or other disposition. File federal taxes online free No taxable gain or deductible loss results from the transfer. File federal taxes online free Bankruptcy. File federal taxes online free   Generally, a transfer (other than by sale or exchange) of property from a debtor to a bankruptcy estate is not treated as a disposition. File federal taxes online free Consequently, the transfer generally does not result in gain or loss. File federal taxes online free For more information, see Publication 908, Bankruptcy Tax Guide. File federal taxes online free Gain or Loss From Sales and Exchanges You usually realize gain or loss when property is sold or exchanged. File federal taxes online free A gain is the amount you realize from a sale or exchange of property that is more than its adjusted basis. File federal taxes online free A loss is the adjusted basis of the property that is more than the amount you realize. File federal taxes online free   Table 1-1. File federal taxes online free How To Figure Whether You Have a Gain or Loss IF your. File federal taxes online free . File federal taxes online free . File federal taxes online free THEN you have a. File federal taxes online free . File federal taxes online free . File federal taxes online free Adjusted basis is more than the amount realized, Loss. File federal taxes online free Amount realized is more than the adjusted basis, Gain. File federal taxes online free Basis. File federal taxes online free   You must know the basis of your property to determine whether you have a gain or loss from its sale or other disposition. File federal taxes online free The basis of property you buy is usually its cost. File federal taxes online free However, if you acquired the property by gift, inheritance, or in some way other than buying it, you must use a basis other than its cost. File federal taxes online free See Basis Other Than Cost in Publication 551, Basis of Assets. File federal taxes online free Special rules apply to property acquired from a decedent who died in 2010 and the executor made the election to file Form 8939, Allocation of Increase in Basis for Property Received From a Decedent. File federal taxes online free See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for details. File federal taxes online free Adjusted basis. File federal taxes online free   The adjusted basis of property is your original cost or other basis plus (increased by) certain additions and minus (decreased by) certain deductions. File federal taxes online free Increases include costs of any improvements having a useful life of more than 1 year. File federal taxes online free Decreases include depreciation and casualty losses. File federal taxes online free For more details and additional examples, see Adjusted Basis in Publication 551. File federal taxes online free Amount realized. File federal taxes online free   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (defined below) of all property or services you receive. File federal taxes online free The amount you realize also includes any of your liabilities that were assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. File federal taxes online free Fair market value. File federal taxes online free   Fair market value (FMV) is the price at which the property would change hands between a buyer and a seller when both have reasonable knowledge of all the necessary facts and neither is being forced to buy or sell. File federal taxes online free If parties with adverse interests place a value on property in an arm's-length transaction, that is strong evidence of FMV. File federal taxes online free If there is a stated price for services, this price is treated as the FMV unless there is evidence to the contrary. File federal taxes online free Example. File federal taxes online free You used a building in your business that cost you $70,000. File federal taxes online free You made certain permanent improvements at a cost of $20,000 and deducted depreciation totaling $10,000. File federal taxes online free You sold the building for $100,000 plus property having an FMV of $20,000. File federal taxes online free The buyer assumed your real estate taxes of $3,000 and a mortgage of $17,000 on the building. File federal taxes online free The selling expenses were $4,000. File federal taxes online free Your gain on the sale is figured as follows. File federal taxes online free Amount realized:     Cash $100,000   FMV of property received 20,000   Real estate taxes assumed by buyer 3,000   Mortgage assumed by  buyer 17,000   Total 140,000   Minus: Selling expenses 4,000 $136,000 Adjusted basis:     Cost of building $70,000   Improvements 20,000   Total $90,000   Minus: Depreciation 10,000   Adjusted basis   $80,000 Gain on sale $56,000 Amount recognized. File federal taxes online free   Your gain or loss realized from a sale or exchange of property is usually a recognized gain or loss for tax purposes. File federal taxes online free Recognized gains must be included in gross income. File federal taxes online free Recognized losses are deductible from gross income. File federal taxes online free However, your gain or loss realized from certain exchanges of property is not recognized for tax purposes. File federal taxes online free See Nontaxable Exchanges, later. File federal taxes online free Also, a loss from the sale or other disposition of property held for personal use is not deductible, except in the case of a casualty or theft. File federal taxes online free Interest in property. File federal taxes online free   The amount you realize from the disposition of a life interest in property, an interest in property for a set number of years, or an income interest in a trust is a recognized gain under certain circumstances. File federal taxes online free If you received the interest as a gift, inheritance, or in a transfer from a spouse or former spouse incident to a divorce, the amount realized is a recognized gain. File federal taxes online free Your basis in the property is disregarded. File federal taxes online free This rule does not apply if all interests in the property are disposed of at the same time. File federal taxes online free Example 1. File federal taxes online free Your father dies and leaves his farm to you for life with a remainder interest to your younger brother. File federal taxes online free You decide to sell your life interest in the farm. File federal taxes online free The entire amount you receive is a recognized gain. File federal taxes online free Your basis in the farm is disregarded. File federal taxes online free Example 2. File federal taxes online free The facts are the same as in Example 1, except that your brother joins you in selling the farm. File federal taxes online free The entire interest in the property is sold, so your basis in the farm is not disregarded. File federal taxes online free Your gain or loss is the difference between your share of the sales price and your adjusted basis in the farm. File federal taxes online free Canceling a sale of real property. File federal taxes online free   If you sell real property under a sales contract that allows the buyer to return the property for a full refund and the buyer does so, you may not have to recognize gain or loss on the sale. File federal taxes online free If the buyer returns the property in the year of sale, no gain or loss is recognized. File federal taxes online free This cancellation of the sale in the same year it occurred places both you and the buyer in the same positions you were in before the sale. File federal taxes online free If the buyer returns the property in a later tax year, you must recognize gain (or loss, if allowed) in the year of the sale. File federal taxes online free When the property is returned in a later year, you acquire a new basis in the property. File federal taxes online free That basis is equal to the amount you pay to the buyer. File federal taxes online free Bargain Sale If you sell or exchange property for less than fair market value with the intent of making a gift, the transaction is partly a sale or exchange and partly a gift. File federal taxes online free You have a gain if the amount realized is more than your adjusted basis in the property. File federal taxes online free However, you do not have a loss if the amount realized is less than the adjusted basis of the property. File federal taxes online free Bargain sales to charity. File federal taxes online free   A bargain sale of property to a charitable organization is partly a sale or exchange and partly a charitable contribution. File federal taxes online free If a charitable deduction for the contribution is allowable, you must allocate your adjusted basis in the property between the part sold and the part contributed based on the fair market value of each. File federal taxes online free The adjusted basis of the part sold is figured as follows. File federal taxes online free Adjusted basis of entire property × Amount realized (fair market value of part sold)   Fair market value of entire property   Based on this allocation rule, you will have a gain even if the amount realized is not more than your adjusted basis in the property. File federal taxes online free This allocation rule does not apply if a charitable contribution deduction is not allowable. File federal taxes online free   See Publication 526, Charitable Contributions, for information on figuring your charitable contribution. File federal taxes online free Example. File federal taxes online free You sold property with a fair market value of $10,000 to a charitable organization for $2,000 and are allowed a deduction for your contribution. File federal taxes online free Your adjusted basis in the property is $4,000. File federal taxes online free Your gain on the sale is $1,200, figured as follows. File federal taxes online free Sales price $2,000 Minus: Adjusted basis of part sold ($4,000 × ($2,000 ÷ $10,000)) 800 Gain on the sale $1,200 Property Used Partly for Business or Rental Generally, if you sell or exchange property you used partly for business or rental purposes and partly for personal purposes, you must figure the gain or loss on the sale or exchange as though you had sold two separate pieces of property. File federal taxes online free You must subtract depreciation you took or could have taken from the basis of the business or rental part. File federal taxes online free However, see the special rule below for a home used partly for business or rental. File federal taxes online free You must allocate the selling price, selling expenses, and the basis of the property between the business or rental part and the personal part. File federal taxes online free Gain or loss on the business or rental part of the property may be a capital gain or loss or an ordinary gain or loss, as discussed in chapter 3 under Section 1231 Gains and Losses. File federal taxes online free Any gain on the personal part of the property is a capital gain. File federal taxes online free You cannot deduct a loss on the personal part. File federal taxes online free Home used partly for business or rental. File federal taxes online free    If you use property partly as a home and partly for business or to produce rental income, the computation and treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. File federal taxes online free See Property Used Partly for Business or Rental, in Publication 523. File federal taxes online free Property Changed to Business or Rental Use You cannot deduct a loss on the sale of property you purchased or constructed for use as your home and used as your home until the time of sale. File federal taxes online free You can deduct a loss on the sale of property you acquired for use as your home but changed to business or rental property and used as business or rental property at the time of sale. File federal taxes online free However, if the adjusted basis of the property at the time of the change was more than its fair market value, the loss you can deduct is limited. File federal taxes online free Figure the loss you can deduct as follows. File federal taxes online free Use the lesser of the property's adjusted basis or fair market value at the time of the change. File federal taxes online free Add to (1) the cost of any improvements and other increases to basis since the change. File federal taxes online free Subtract from (2) depreciation and any other decreases to basis since the change. File federal taxes online free Subtract the amount you realized on the sale from the result in (3). File federal taxes online free If the amount you realized is more than the result in (3), treat this result as zero. File federal taxes online free The result in (4) is the loss you can deduct. File federal taxes online free Example. File federal taxes online free You changed your main home to rental property 5 years ago. File federal taxes online free At the time of the change, the adjusted basis of your home was $75,000 and the fair market value was $70,000. File federal taxes online free This year, you sold the property for $55,000. File federal taxes online free You made no improvements to the property but you have depreciation expense of $12,620 over the 5 prior years. File federal taxes online free Although your loss on the sale is $7,380 [($75,000 − $12,620) − $55,000], the amount you can deduct as a loss is limited to $2,380, figured as follows. File federal taxes online free Lesser of adjusted basis or fair market value at time of the change $70,000 Plus: Cost of any improvements and any other additions to basis after the change -0-   70,000 Minus: Depreciation and any other decreases to basis after the change 12,620   57,380 Minus: Amount you realized from the sale 55,000 Deductible loss $2,380 Gain. File federal taxes online free   If you have a gain on the sale, you generally must recognize the full amount of the gain. File federal taxes online free You figure the gain by subtracting your adjusted basis from your amount realized, as described earlier. File federal taxes online free   You may be able to exclude all or part of the gain if you owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. File federal taxes online free However, you may not be able to exclude the part of the gain allocated to any period of nonqualified use. File federal taxes online free   For more information, see Business Use or Rental of Home in Publication 523. File federal taxes online free In addition, special rules apply if the home sold was acquired in a like-kind exchange. File federal taxes online free See Special Situations in Publication 523. File federal taxes online free Also see Like-Kind Exchanges, later. File federal taxes online free Abandonments The abandonment of property is a disposition of property. File federal taxes online free You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership but without passing it on to anyone else. File federal taxes online free Generally, abandonment is not treated as a sale or exchange of the property. File federal taxes online free If the amount you realize (if any) is more than your adjusted basis, then you have a gain. File federal taxes online free If your adjusted basis is more than the amount you realize (if any), then you have a loss. File federal taxes online free Loss from abandonment of business or investment property is deductible as a loss. File federal taxes online free A loss from an abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. File federal taxes online free This rule also applies to leasehold improvements the lessor made for the lessee that were abandoned. File federal taxes online free If the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed later under Foreclosure and Repossessions. File federal taxes online free The abandonment loss is deducted in the tax year in which the loss is sustained. File federal taxes online free If the abandoned property is secured by debt, special rules apply. File federal taxes online free The tax consequences of abandonment of property that is secured by debt depend on whether you are personally liable for the debt (recourse debt) or you are not personally liable for the debt (nonrecourse debt). File federal taxes online free For more information, including examples, see chapter 3 of Publication 4681. File federal taxes online free You cannot deduct any loss from abandonment of your home or other property held for personal use only. File federal taxes online free Cancellation of debt. File federal taxes online free   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you may realize ordinary income equal to the canceled debt. File federal taxes online free This income is separate from any loss realized from abandonment of the property. File federal taxes online free   You must report this income on your tax return unless one of the following applies. File federal taxes online free The cancellation is intended as a gift. File federal taxes online free The debt is qualified farm debt. File federal taxes online free The debt is qualified real property business debt. File federal taxes online free You are insolvent or bankrupt. File federal taxes online free The debt is qualified principal residence indebtedness. File federal taxes online free File Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), to report the income exclusion. File federal taxes online free For more information, including other exceptions and exclusion, see Publication 4681. File federal taxes online free Forms 1099-A and 1099-C. File federal taxes online free   If you abandon property that secures a loan and the lender knows the property has been abandoned, the lender should send you Form 1099-A showing information you need to figure your loss from the abandonment. File federal taxes online free However, if your debt is canceled and the lender must file Form 1099-C, the lender may include the information about the abandonment on that form instead of on Form 1099-A, and send you Form 1099-C only. File federal taxes online free The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. File federal taxes online free For abandonments of property and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. File federal taxes online free Foreclosures and Repossessions If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. File federal taxes online free The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. File federal taxes online free This is true even if you voluntarily return the property to the lender. File federal taxes online free You also may realize ordinary income from cancellation of debt if the loan balance is more than the fair market value of the property. File federal taxes online free Buyer's (borrower's) gain or loss. File federal taxes online free   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. File federal taxes online free The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. File federal taxes online free See Gain or Loss From Sales and Exchanges, earlier. File federal taxes online free You can use Table 1-2 to figure your gain or loss from a foreclosure or repossession. File federal taxes online free Amount realized on a nonrecourse debt. File federal taxes online free   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full debt canceled by the transfer. File federal taxes online free The full canceled debt is included even if the fair market value of the property is less than the canceled debt. File federal taxes online free Example 1. File federal taxes online free Chris bought a new car for $15,000. File federal taxes online free He paid $2,000 down and borrowed the remaining $13,000 from the dealer's credit company. File federal taxes online free Chris is not personally liable for the loan (nonrecourse debt), but pledges the new car as security. File federal taxes online free The credit company repossessed the car because he stopped making loan payments. File federal taxes online free The balance due after taking into account the payments Chris made was $10,000. File federal taxes online free The fair market value of the car when repossessed was $9,000. File federal taxes online free The amount Chris realized on the repossession is $10,000. File federal taxes online free That is the outstanding amount of the debt canceled by the repossession, even though the car's fair market value is less than $10,000. File federal taxes online free Chris figures his gain or loss on the repossession by comparing the amount realized ($10,000) with his adjusted basis ($15,000). File federal taxes online free He has a $5,000 nondeductible loss. File federal taxes online free Example 2. File federal taxes online free Abena paid $200,000 for her home. File federal taxes online free She paid $15,000 down and borrowed the remaining $185,000 from a bank. File federal taxes online free Abena is not personally liable for the loan (nonrecourse debt), but pledges the house as security. File federal taxes online free The bank foreclosed on the loan because Abena stopped making payments. File federal taxes online free When the bank foreclosed on the loan, the balance due was $180,000, the fair market value of the house was $170,000, and Abena's adjusted basis was $175,000 due to a casualty loss she had deducted. File federal taxes online free The amount Abena realized on the foreclosure is $180,000, the balance due and debt canceled by the foreclosure. File federal taxes online free She figures her gain or loss by comparing the amount realized ($180,000) with her adjusted basis ($175,000). File federal taxes online free She has a $5,000 realized gain. File federal taxes online free Amount realized on a recourse debt. File federal taxes online free   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. File federal taxes online free You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. File federal taxes online free The amount realized does not include the canceled debt that is your income from cancellation of debt. File federal taxes online free See Cancellation of debt, below. File federal taxes online free Seller's (lender's) gain or loss on repossession. File federal taxes online free   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. File federal taxes online free For more information, see Repossession in Publication 537. File federal taxes online free    Table 1-2. File federal taxes online free Worksheet for Foreclosures and Repossessions Part 1. File federal taxes online free Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. File federal taxes online free Complete this part only  if you were personally liable for the debt. File federal taxes online free Otherwise,  go to Part 2. File federal taxes online free   1. File federal taxes online free Enter the amount of outstanding debt immediately before the transfer of   property reduced by any amount for which you remain personally liable after   the transfer of property   2. File federal taxes online free Enter the fair market value of the transferred property   3. File federal taxes online free Ordinary income from cancellation of debt upon foreclosure or    repossession. File federal taxes online free * Subtract line 2 from line 1. File federal taxes online free   If less than zero, enter zero   Part 2. File federal taxes online free Figure your gain or loss from foreclosure or repossession. File federal taxes online free   4. File federal taxes online free If you completed Part 1, enter the smaller of line 1 or line 2. File federal taxes online free   If you did not complete Part 1, enter the outstanding debt immediately before   the transfer of property   5. File federal taxes online free Enter any proceeds you received from the foreclosure sale   6. File federal taxes online free Add lines 4 and 5   7. File federal taxes online free Enter the adjusted basis of the transferred property   8. File federal taxes online free Gain or loss from foreclosure or repossession. File federal taxes online free Subtract line 7  from line 6   * The income may not be taxable. File federal taxes online free See Cancellation of debt. File federal taxes online free Cancellation of debt. File federal taxes online free   If property that is repossessed or foreclosed on secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the fair market value of the property. File federal taxes online free This income is separate from any gain or loss realized from the foreclosure or repossession. File federal taxes online free Report the income from cancellation of a debt related to a business or rental activity as business or rental income. File federal taxes online free    You can use Table 1-2 to figure your income from cancellation of debt. File federal taxes online free   You must report this income on your tax return unless one of the following applies. File federal taxes online free The cancellation is intended as a gift. File federal taxes online free The debt is qualified farm debt. File federal taxes online free The debt is qualified real property business debt. File federal taxes online free You are insolvent or bankrupt. File federal taxes online free The debt is qualified principal residence indebtedness. File federal taxes online free File Form 982 to report the income exclusion. File federal taxes online free Example 1. File federal taxes online free Assume the same facts as in Example 1 under Amount realized on a nonrecourse debt, earlier, except Chris is personally liable for the car loan (recourse debt). File federal taxes online free In this case, the amount he realizes is $9,000. File federal taxes online free This is the lesser of the canceled debt ($10,000) or the car's fair market value ($9,000). File federal taxes online free Chris figures his gain or loss on the repossession by comparing the amount realized ($9,000) with his adjusted basis ($15,000). File federal taxes online free He has a $6,000 nondeductible loss. File federal taxes online free He also is treated as receiving ordinary income from cancellation of debt. File federal taxes online free That income is $1,000 ($10,000 − $9,000). File federal taxes online free This is the part of the canceled debt not included in the amount realized. File federal taxes online free Example 2. File federal taxes online free Assume the same facts as in Example 2 under Amount realized on a nonrecourse debt, earlier, except Abena is personally liable for the loan (recourse debt). File federal taxes online free In this case, the amount she realizes is $170,000. File federal taxes online free This is the lesser of the canceled debt ($180,000) or the fair market value of the house ($170,000). File federal taxes online free Abena figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($175,000). File federal taxes online free She has a $5,000 nondeductible loss. File federal taxes online free She also is treated as receiving ordinary income from cancellation of debt. File federal taxes online free (The debt is not exempt from tax as discussed under Cancellation of debt, above. File federal taxes online free ) That income is $10,000 ($180,000 − $170,000). File federal taxes online free This is the part of the canceled debt not included in the amount realized. File federal taxes online free Forms 1099-A and 1099-C. File federal taxes online free   A lender who acquires an interest in your property in a foreclosure or repossession should send you Form 1099-A showing the information you need to figure your gain or loss. File federal taxes online free However, if the lender also cancels part of your debt and must file Form 1099-C, the lender may include the information about the foreclosure or repossession on that form instead of on Form 1099-A and send you Form 1099-C only. File federal taxes online free The lender must file Form 1099-C and send you a copy if the amount of debt canceled is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. File federal taxes online free For foreclosures or repossessions occurring in 2013, these forms should be sent to you by January 31, 2014. File federal taxes online free Involuntary Conversions An involuntary conversion occurs when your property is destroyed, stolen, condemned, or disposed of under the threat of condemnation and you receive other property or money in payment, such as insurance or a condemnation award. File federal taxes online free Involuntary conversions are also called involuntary exchanges. File federal taxes online free Gain or loss from an involuntary conversion of your property is usually recognized for tax purposes unless the property is your main home. File federal taxes online free You report the gain or deduct the loss on your tax return for the year you realize it. File federal taxes online free You cannot deduct a loss from an involuntary conversion of property you held for personal use unless the loss resulted from a casualty or theft. File federal taxes online free However, depending on the type of property you receive, you may not have to report a gain on an involuntary conversion. File federal taxes online free Generally, you do not report the gain if you receive property that is similar or related in service or use to the converted property. File federal taxes online free Your basis for the new property is the same as your basis for the converted property. File federal taxes online free This means that the gain is deferred until a taxable sale or exchange occurs. File federal taxes online free If you receive money or property that is not similar or related in service or use to the involuntarily converted property and you buy qualifying replacement property within a certain period of time, you can elect to postpone reporting the gain on the property purchased. File federal taxes online free This publication explains the treatment of a gain or loss from a condemnation or disposition under the threat of condemnation. File federal taxes online free If you have a gain or loss from the destruction or theft of property, see Publication 547. File federal taxes online free Condemnations A condemnation is the process by which private property is legally taken for public use without the owner's consent. File federal taxes online free The property may be taken by the federal government, a state government, a political subdivision, or a private organization that has the power to legally take it. File federal taxes online free The owner receives a condemnation award (money or property) in exchange for the property taken. File federal taxes online free A condemnation is like a forced sale, the owner being the seller and the condemning authority being the buyer. File federal taxes online free Example. File federal taxes online free A local government authorized to acquire land for public parks informed you that it wished to acquire your property. File federal taxes online free After the local government took action to condemn your property, you went to court to keep it. File federal taxes online free But, the court decided in favor of the local government, which took your property and paid you an amount fixed by the court. File federal taxes online free This is a condemnation of private property for public use. File federal taxes online free Threat of condemnation. File federal taxes online free   A threat of condemnation exists if a representative of a government body or a public official authorized to acquire property for public use informs you that the government body or official has decided to acquire your property. File federal taxes online free You must have reasonable grounds to believe that, if you do not sell voluntarily, your property will be condemned. File federal taxes online free   The sale of your property to someone other than the condemning authority will also qualify as an involuntary conversion, provided you have reasonable grounds to believe that your property will be condemned. File federal taxes online free If the buyer of this property knows at the time of purchase that it will be condemned and sells it to the condemning authority, this sale also qualifies as an involuntary conversion. File federal taxes online free Reports of condemnation. File federal taxes online free   A threat of condemnation exists if you learn of a decision to acquire your property for public use through a report in a newspaper or other news medium, and this report is confirmed by a representative of the government body or public official involved. File federal taxes online free You must have reasonable grounds to believe that they will take necessary steps to condemn your property if you do not sell voluntarily. File federal taxes online free If you relied on oral statements made by a government representative or public official, the Internal Revenue Service (IRS) may ask you to get written confirmation of the statements. File federal taxes online free Example. File federal taxes online free Your property lies along public utility lines. File federal taxes online free The utility company has the authority to condemn your property. File federal taxes online free The company informs you that it intends to acquire your property by negotiation or condemnation. File federal taxes online free A threat of condemnation exists when you receive the notice. File federal taxes online free Related property voluntarily sold. File federal taxes online free   A voluntary sale of your property may be treated as a forced sale that qualifies as an involuntary conversion if the property had a substantial economic relationship to property of yours that was condemned. File federal taxes online free A substantial economic relationship exists if together the properties were one economic unit. File federal taxes online free You also must show that the condemned property could not reasonably or adequately be replaced. File federal taxes online free You can elect to postpone reporting the gain by buying replacement property. File federal taxes online free See Postponement of Gain, later. File federal taxes online free Gain or Loss From Condemnations If your property was condemned or disposed of under the threat of condemnation, figure your gain or loss by comparing the adjusted basis of your condemned property with your net condemnation award. File federal taxes online free If your net condemnation award is more than the adjusted basis of the condemned property, you have a gain. File federal taxes online free You can postpone reporting gain from a condemnation if you buy replacement property. File federal taxes online free If only part of your property is condemned, you can treat the cost of restoring the remaining part to its former usefulness as the cost of replacement property. File federal taxes online free See Postponement of Gain, later. File federal taxes online free If your net condemnation award is less than your adjusted basis, you have a loss. File federal taxes online free If your loss is from property you held for personal use, you cannot deduct it. File federal taxes online free You must report any deductible loss in the tax year it happened. File federal taxes online free You can use Part 2 of Table 1-3 to figure your gain or loss from a condemnation award. File federal taxes online free Main home condemned. File federal taxes online free   If you have a gain because your main home is condemned, you generally can exclude the gain from your income as if you had sold or exchanged your home. File federal taxes online free You may be able to exclude up to $250,000 of the gain (up to $500,000 if married filing jointly). File federal taxes online free For information on this exclusion, see Publication 523. File federal taxes online free If your gain is more than you can exclude but you buy replacement property, you may be able to postpone reporting the rest of the gain. File federal taxes online free See Postponement of Gain, later. File federal taxes online free Table 1-3. File federal taxes online free Worksheet for Condemnations Part 1. File federal taxes online free Gain from severance damages. File federal taxes online free  If you did not receive severance damages, skip Part 1 and go to Part 2. File federal taxes online free   1. File federal taxes online free Enter gross severance damages received   2. File federal taxes online free Enter your expenses in getting severance damages   3. File federal taxes online free Subtract line 2 from line 1. File federal taxes online free If less than zero, enter -0-   4. File federal taxes online free Enter any special assessment on remaining property taken out of your award   5. File federal taxes online free Net severance damages. File federal taxes online free Subtract line 4 from line 3. File federal taxes online free If less than zero, enter -0-   6. File federal taxes online free Enter the adjusted basis of the remaining property   7. File federal taxes online free Gain from severance damages. File federal taxes online free Subtract line 6 from line 5. File federal taxes online free If less than zero, enter -0-   8. File federal taxes online free Refigured adjusted basis of the remaining property. File federal taxes online free Subtract line 5 from line 6. File federal taxes online free If less than zero, enter -0-   Part 2. File federal taxes online free Gain or loss from condemnation award. File federal taxes online free   9. File federal taxes online free Enter the gross condemnation award received   10. File federal taxes online free Enter your expenses in getting the condemnation award   11. File federal taxes online free If you completed Part 1, and line 4 is more than line 3, subtract line 3 from line 4. File federal taxes online free If you did not complete Part 1, but a special assessment was taken out of your award, enter that amount. File federal taxes online free Otherwise, enter -0-   12. File federal taxes online free Add lines 10 and 11   13. File federal taxes online free Net condemnation award. File federal taxes online free Subtract line 12 from line 9   14. File federal taxes online free Enter the adjusted basis of the condemned property   15. File federal taxes online free Gain from condemnation award. File federal taxes online free If line 14 is more than line 13, enter -0-. File federal taxes online free Otherwise, subtract line 14 from  line 13 and skip line 16   16. File federal taxes online free Loss from condemnation award. File federal taxes online free Subtract line 13 from line 14     (Note: You cannot deduct the amount on line 16 if the condemned property was held for personal use. File federal taxes online free )   Part 3. File federal taxes online free Postponed gain from condemnation. File federal taxes online free  (Complete only if line 7 or line 15 is more than zero and you bought qualifying replacement property or made expenditures to restore the usefulness of your remaining property. File federal taxes online free )   17. File federal taxes online free If you completed Part 1, and line 7 is more than zero, enter the amount from line 5. File federal taxes online free Otherwise, enter -0-   18. File federal taxes online free If line 15 is more than zero, enter the amount from line 13. File federal taxes online free Otherwise, enter -0-   19. File federal taxes online free Add lines 17 and 18. File federal taxes online free If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   20. File federal taxes online free Enter the total cost of replacement property and any expenses to restore the usefulness of your remaining property   21. File federal taxes online free Subtract line 20 from line 19. File federal taxes online free If less than zero, enter -0-   22. File federal taxes online free If you completed Part 1, add lines 7 and 15. File federal taxes online free Otherwise, enter the amount from line 15. File federal taxes online free If the condemned property was your main home, subtract from this total the gain you excluded from your income and enter the result   23. File federal taxes online free Recognized gain. File federal taxes online free Enter the smaller of line 21 or line 22. File federal taxes online free   24. File federal taxes online free Postponed gain. File federal taxes online free Subtract line 23 from line 22. File federal taxes online free If less than zero, enter -0-   Condemnation award. File federal taxes online free   A condemnation award is the money you are paid or the value of other property you receive for your condemned property. File federal taxes online free The award is also the amount you are paid for the sale of your property under threat of condemnation. File federal taxes online free Payment of your debts. File federal taxes online free   Amounts taken out of the award to pay your debts are considered paid to you. File federal taxes online free Amounts the government pays directly to the holder of a mortgage or lien against your property are part of your award, even if the debt attaches to the property and is not your personal liability. File federal taxes online free Example. File federal taxes online free The state condemned your property for public use. File federal taxes online free The award was set at $200,000. File federal taxes online free The state paid you only $148,000 because it paid $50,000 to your mortgage holder and $2,000 accrued real estate taxes. File federal taxes online free You are considered to have received the entire $200,000 as a condemnation award. File federal taxes online free Interest on award. File federal taxes online free   If the condemning authority pays you interest for its delay in paying your award, it is not part of the condemnation award. File federal taxes online free You must report the interest separately as ordinary income. File federal taxes online free Payments to relocate. File federal taxes online free   Payments you receive to relocate and replace housing because you have been displaced from your home, business, or farm as a result of federal or federally assisted programs are not part of the condemnation award. File federal taxes online free Do not include them in your income. File federal taxes online free Replacement housing payments used to buy new property are included in the property's basis as part of your cost. File federal taxes online free Net condemnation award. File federal taxes online free   A net condemnation award is the total award you received, or are considered to have received, for the condemned property minus your expenses of obtaining the award. File federal taxes online free If only a part of your property was condemned, you also must reduce the award by any special assessment levied against the part of the property you retain. File federal taxes online free This is discussed later under Special assessment taken out of award. File federal taxes online free Severance damages. File federal taxes online free    Severance damages are not part of the award paid for the property condemned. File federal taxes online free They are paid to you if part of your property is condemned and the value of the part you keep is decreased because of the condemnation. File federal taxes online free   For example, you may receive severance damages if your property is subject to flooding because you sell flowage easement rights (the condemned property) under threat of condemnation. File federal taxes online free Severance damages also may be given to you if, because part of your property is condemned for a highway, you must replace fences, dig new wells or ditches, or plant trees to restore your remaining property to the same usefulness it had before the condemnation. File federal taxes online free   The contracting parties should agree on the specific amount of severance damages in writing. File federal taxes online free If this is not done, all proceeds from the condemning authority are considered awarded for your condemned property. File federal taxes online free   You cannot make a completely new allocation of the total award after the transaction is completed. File federal taxes online free However, you can show how much of the award both parties intended for severance damages. File federal taxes online free The severance damages part of the award is determined from all the facts and circumstances. File federal taxes online free Example. File federal taxes online free You sold part of your property to the state under threat of condemnation. File federal taxes online free The contract you and the condemning authority signed showed only the total purchase price. File federal taxes online free It did not specify a fixed sum for severance damages. File federal taxes online free However, at settlement, the condemning authority gave you closing papers showing clearly the part of the purchase price that was for severance damages. File federal taxes online free You may treat this part as severance damages. File federal taxes online free Treatment of severance damages. File federal taxes online free   Your net severance damages are treated as the amount realized from an involuntary conversion of the remaining part of your property. File federal taxes online free Use them to reduce the basis of the remaining property. File federal taxes online free If the amount of severance damages is based on damage to a specific part of the property you kept, reduce the basis of only that part by the net severance damages. File federal taxes online free   If your net severance damages are more than the basis of your retained property, you have a gain. File federal taxes online free You may be able to postpone reporting the gain. File federal taxes online free See Postponement of Gain, later. File federal taxes online free    You can use Part 1 of Table 1-3 to figure any gain from severance damages and to refigure the adjusted basis of the remaining part of your property. File federal taxes online free Net severance damages. File federal taxes online free   To figure your net severance damages, you first must reduce your severance damages by your expenses in obtaining the damages. File federal taxes online free You then reduce them by any special assessment (described later) levied against the remaining part of the property and retained out of the award by the condemning authority. File federal taxes online free The balance is your net severance damages. File federal taxes online free Expenses of obtaining a condemnation award and severance damages. File federal taxes online free   Subtract the expenses of obtaining a condemnation award, such as legal, engineering, and appraisal fees, from the total award. File federal taxes online free Also, subtract the expenses of obtaining severance damages, which may include similar expenses, from the severance damages paid to you. File federal taxes online free If you cannot determine which part of your expenses is for each part of the condemnation proceeds, you must make a proportionate allocation. File federal taxes online free Example. File federal taxes online free You receive a condemnation award and severance damages. File federal taxes online free One-fourth of the total was designated as severance damages in your agreement with the condemning authority. File federal taxes online free You had legal expenses for the entire condemnation proceeding. File federal taxes online free You cannot determine how much of your legal expenses is for each part of the condemnation proceeds. File federal taxes online free You must allocate one-fourth of your legal expenses to the severance damages and the other three-fourths to the condemnation award. File federal taxes online free Special assessment retained out of award. File federal taxes online free   When only part of your property is condemned, a special assessment levied against the remaining property may be retained by the governing body out of your condemnation award. File federal taxes online free An assessment may be levied if the remaining part of your property benefited by the improvement resulting from the condemnation. File federal taxes online free Examples of improvements that may cause a special assessment are widening a street and installing a sewer. File federal taxes online free   To figure your net condemnation award, you must reduce the amount of the award by the assessment retained out of the award. File federal taxes online free Example. File federal taxes online free To widen the street in front of your home, the city condemned a 25-foot deep strip of your land. File federal taxes online free You were awarded $5,000 for this and spent $300 to get the award. File federal taxes online free Before paying the award, the city levied a special assessment of $700 for the street improvement against your remaining property. File federal taxes online free The city then paid you only $4,300. File federal taxes online free Your net award is $4,000 ($5,000 total award minus $300 expenses in obtaining the award and $700 for the special assessment retained). File federal taxes online free If the $700 special assessment was not retained out of the award and you were paid $5,000, your net award would be $4,700 ($5,000 − $300). File federal taxes online free The net award would not change, even if you later paid the assessment from the amount you received. File federal taxes online free Severance damages received. File federal taxes online free   If severance damages are included in the condemnation proceeds, the special assessment retained out of the severance damages is first used to reduce the severance damages. File federal taxes online free Any balance of the special assessment is used to reduce the condemnation award. File federal taxes online free Example. File federal taxes online free You were awarded $4,000 for the condemnation of your property and $1,000 for severance damages. File federal taxes online free You spent $300 to obtain the severance damages. File federal taxes online free A special assessment of $800 was retained out of the award. File federal taxes online free The $1,000 severance damages are reduced to zero by first subtracting the $300 expenses and then $700 of the special assessment. File federal taxes online free Your $4,000 condemnation award is reduced by the $100 balance of the special assessment, leaving a $3,900 net condemnation award. File federal taxes online free Part business or rental. File federal taxes online free   If you used part of your condemned property as your home and part as business or rental property, treat each part as a separate property. File federal taxes online free Figure your gain or loss separately because gain or loss on each part may be treated differently. File federal taxes online free   Some examples of this type of property are a building in which you live and operate a grocery, and a building in which you live on the first floor and rent out the second floor. File federal taxes online free Example. File federal taxes online free You sold your building for $24,000 under threat of condemnation to a public utility company that had the authority to condemn. File federal taxes online free You rented half the building and lived in the other half. File federal taxes online free You paid $25,000 for the building and spent an additional $1,000 for a new roof. File federal taxes online free You claimed allowable depreciation of $4,600 on the rental half. File federal taxes online free You spent $200 in legal expenses to obtain the condemnation award. File federal taxes online free Figure your gain or loss as follows. File federal taxes online free     Resi- dential Part Busi- ness Part 1) Condemnation award received $12,000 $12,000 2) Minus: Legal expenses, $200 100 100 3) Net condemnation award $11,900 $11,900 4) Adjusted basis:       ½ of original cost, $25,000 $12,500 $12,500   Plus: ½ of cost of roof, $1,000 500 500   Total $13,000 $13,000 5) Minus: Depreciation   4,600 6) Adjusted basis, business part   $8,400 7) (Loss) on residential property ($1,100)   8) Gain on business property $3,500 The loss on the residential part of the property is not deductible. File federal taxes online free Postponement of Gain Do not report the gain on condemned property if you receive only property that is similar or related in service or use to the condemned property. File federal taxes online free Your basis for the new property is the same as your basis for the old. File federal taxes online free Money or unlike property received. File federal taxes online free   You ordinarily must report the gain if you receive money or unlike property. File federal taxes online free You can elect to postpone reporting the gain if you buy property that is similar or related in service or use to the condemned property within the replacement period, discussed later. File federal taxes online free You also can elect to postpone reporting the gain if you buy a controlling interest (at least 80%) in a corporation owning property that is similar or related in service or use to the condemned property. File federal taxes online free See Controlling interest in a corporation, later. File federal taxes online free   To postpone reporting all the gain, you must buy replacement property costing at least as much as the amount realized for the condemned property. File federal taxes online free If the cost of the replacement property is less than the amount realized, you must report the gain up to the unspent part of the amount realized. File federal taxes online free   The basis of the replacement property is its cost, reduced by the postponed gain. File federal taxes online free Also, if your replacement property is stock in a corporation that owns property similar or related in service or use, the corporation generally will reduce its basis in its assets by the amount by which you reduce your basis in the stock. File federal taxes online free See Controlling interest in a corporation, later. File federal taxes online free You can use Part 3 of Table 1-3 to figure the gain you must report and your postponed gain. File federal taxes online free Postponing gain on severance damages. File federal taxes online free   If you received severance damages for part of your property because another part was condemned and you buy replacement property, you can elect to postpone reporting gain. File federal taxes online free See Treatment of severance damages, earlier. File federal taxes online free You can postpone reporting all your gain if the replacement property costs at least as much as your net severance damages plus your net condemnation award (if resulting in gain). File federal taxes online free   You also can make this election if you spend the severance damages, together with other money you received for the condemned property (if resulting in gain), to acquire nearby property that will allow you to continue your business. File federal taxes online free If suitable nearby property is not available and you are forced to sell the remaining property and relocate in order to continue your business, see Postponing gain on the sale of related property, next. File federal taxes online free   If you restore the remaining property to its former usefulness, you can treat the cost of restoring it as the cost of replacement property. File federal taxes online free Postponing gain on the sale of related property. File federal taxes online free   If you sell property that is related to the condemned property and then buy replacement property, you can elect to postpone reporting gain on the sale. File federal taxes online free You must meet the requirements explained earlier under Related property voluntarily sold. File federal taxes online free You can postpone reporting all your gain if the replacement property costs at least as much as the amount realized from the sale plus your net condemnation award (if resulting in gain) plus your net severance damages, if any (if resulting in gain). File federal taxes online free Buying replacement property from a related person. File federal taxes online free   Certain taxpayers cannot postpone reporting gain from a condemnation if they buy the replacement property from a related person. File federal taxes online free For information on related persons, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2. File federal taxes online free   This rule applies to the following taxpayers. File federal taxes online free C corporations. File federal taxes online free Partnerships in which more than 50% of the capital or profits interest is owned by  C corporations. File federal taxes online free All others (including individuals, partnerships (other than those in (2)), and S corporations) if the total realized gain for the tax year on all involuntarily converted properties on which there is realized gain of more than $100,000. File federal taxes online free   For taxpayers described in (3) above, gains cannot be offset with any losses when determining whether the total gain is more than $100,000. File federal taxes online free If the property is owned by a partnership, the $100,000 limit applies to the partnership and each partner. File federal taxes online free If the property is owned by an S corporation, the $100,000 limit applies to the S corporation and each shareholder. File federal taxes online free Exception. File federal taxes online free   This rule does not apply if the related person acquired the property from an unrelated person within the replacement period. File federal taxes online free Advance payment. File federal taxes online free   If you pay a contractor in advance to build your replacement property, you have not bought replacement property unless it is finished before the end of the replacement period (discussed later). File federal taxes online free Replacement property. File federal taxes online free   To postpone reporting gain, you must buy replacement property for the specific purpose of replacing your condemned property. File federal taxes online free You do not have to use the actual funds from the condemnation award to acquire the replacement property. File federal taxes online free Property you acquire by gift or inheritance does not qualify as replacement property. File federal taxes online free Similar or related in service or use. File federal taxes online free   Your replacement property must be similar or related in service or use to the property it replaces. File federal taxes online free   If the condemned property is real property you held for productive use in your trade or business or for investment (other than property held mainly for sale), like-kind property to be held either for productive use in trade or business or for investment will be treated as property similar or related in service or use. File federal taxes online free For a discussion of like-kind property, see Like-Kind Property under Like-Kind Exchanges, later. File federal taxes online free Owner-user. File federal taxes online free   If you are an owner-user, similar or related in service or use means that replacement property must function in the same way as the property it replaces. File federal taxes online free Example. File federal taxes online free Your home was condemned and you invested the proceeds from the condemnation in a grocery store. File federal taxes online free Your replacement property is not similar or related in service or use to the condemned property. File federal taxes online free To be similar or related in service or use, your replacement property must also be used by you as your home. File federal taxes online free Owner-investor. File federal taxes online free   If you are an owner-investor, similar or related in service or use means that any replacement property must have the same relationship of services or uses to you as the property it replaces. File federal taxes online free You decide this by determining all the following information. File federal taxes online free Whether the properties are of similar service to you. File federal taxes online free The nature of the business risks connected with the properties. File federal taxes online free What the properties demand of you in the way of management, service, and relations to your tenants. File federal taxes online free Example. File federal taxes online free You owned land and a building you rented to a manufacturing company. File federal taxes online free The building was condemned. File federal taxes online free During the replacement period, you had a new building built on other land you already owned. File federal taxes online free You rented out the new building for use as a wholesale grocery warehouse. File federal taxes online free The replacement property is also rental property, so the two properties are considered similar or related in service or use if there is a similarity in all the following areas. File federal taxes online free Your management activities. File federal taxes online free The amount and kind of services you provide to your tenants. File federal taxes online free The nature of your business risks connected with the properties. File federal taxes online free Leasehold replaced with fee simple property. File federal taxes online free   Fee simple property you will use in your trade or business or for investment can qualify as replacement property that is similar or related in service or use to a condemned leasehold if you use it in the same business and for the identical purpose as the condemned leasehold. File federal taxes online free   A fee simple property interest generally is a property interest that entitles the owner to the entire property with unconditional power to dispose of it during his or her lifetime. File federal taxes online free A leasehold is property held under a lease, usually for a term of years. File federal taxes online free Outdoor advertising display replaced with real property. File federal taxes online free   You can elect to treat an outdoor advertising display as real property. File federal taxes online free If you make this election and you replace the display with real property in which you hold a different kind of interest, your replacement property can qualify as like-kind property. File federal taxes online free For example, real property bought to replace a destroyed billboard and leased property on which the billboard was located qualify as property of a like-kind. File federal taxes online free   You can make this election only if you did not claim a section 179 deduction for the display. File federal taxes online free You cannot cancel this election unless you get the consent of the IRS. File federal taxes online free   An outdoor advertising display is a sign or device rigidly assembled and permanently attached to the ground, a building, or any other permanent structure used to display a commercial or other advertisement to the public. File federal taxes online free Substituting replacement property. File federal taxes online free   Once you designate certain property as replacement property on your tax return, you cannot substitute other qualified property. File federal taxes online free But, if your previously designated replacement property does not qualify, you can substitute qualified property if you acquire it within the replacement period. File federal taxes online free Controlling interest in a corporation. File federal taxes online free   You can replace property by acquiring a controlling interest in a corporation that owns property similar or related in service or use to your condemned property. File federal taxes online free You have controlling interest if you own stock having at least 80% of the combined voting power of all classes of stock entitled to vote and at least 80% of the total number of shares of all other classes of stock of the corporation. File federal taxes online free Basis adjustment to corporation's property. File federal taxes online free   The basis of property held by the corporation at the time you acquired control must be reduced by your postponed gain, if any. File federal taxes online free You are not required to reduce the adjusted basis of the corporation's properties below your adjusted basis in the corporation's stock (determined after reduction by your postponed gain). File federal taxes online free   Allocate this reduction to the following classes of property in the order shown below. File federal taxes online free Property that is similar or related in service or use to the condemned property. File federal taxes online free Depreciable property not reduced in (1). File federal taxes online free All other property. File federal taxes online free If two or more properties fall in the same class, allocate the reduction to each property in proportion to the adjusted basis of all the properties in that class. File federal taxes online free The reduced basis of any single property cannot be less than zero. File federal taxes online free Main home replaced. File federal taxes online free   If your gain from a condemnation of your main home is more than you can exclude from your income (see Main home condemned under Gain or Loss From Condemnations, earlier), you can postpone reporting the rest of the gain by buying replacement property that is similar or related in service or use. File federal taxes online free The replacement property must cost at least as much as the amount realized from the condemnation minus the excluded gain. File federal taxes online free   You must reduce the basis of your replacement property by the postponed gain. File federal taxes online free Also, if you postpone reporting any part of your gain under these rules, you are treated as having owned and used the replacement property as your main home for the period you owned and used the condemned property as your main home. File federal taxes online free Example. File federal taxes online free City authorities condemned your home that you had used as a personal residence for 5 years prior to the condemnation. File federal taxes online free The city paid you a condemnation award of $400,000. File federal taxes online free Your adjusted basis in the property was $80,000. File federal taxes online free You realize a gain of $320,000 ($400,000 − $80,000). File federal taxes online free You purchased a new home for $100,000. File federal taxes online free You can exclude $250,000 of the realized gain from your gross income. File federal taxes online free The amount realized is then treated as being $150,000 ($400,000 − $250,000) and the gain realized is $70,000 ($150,000 amount realized − $80,000 adjusted basis). File federal taxes online free You must recognize $50,000 of the gain ($150,000 amount realized − $100,000 cost of new home). File federal taxes online free The remaining $20,000 of realized gain is postponed. File federal taxes online free Your basis in the new home is $80,000 ($100,000 cost − $20,000 gain postponed). File federal taxes online free Replacement period. File federal taxes online free   To postpone reporting your gain from a condemnation, you must buy replacement property within a certain period of time. File federal taxes online free This is the replacement period. File federal taxes online free   The replacement period for a condemnation begins on the earlier of the following dates. File federal taxes online free The date on which you disposed of the condemned property. File federal taxes online free The date on which the threat of condemnation began. File federal taxes online free   The replacement period generally ends 2 years after the end of the first tax year in which any part of the gain on the condemnation is realized. File federal taxes online free However, see the exceptions below. File federal taxes online free Three-year replacement period for certain property. File federal taxes online free   If real property held for use in a trade or business or for investment (not including property held primarily for sale) is condemned, the replacement period ends 3 years after the end of the first tax year in which any part of the gain on the condemnation is realized. File federal taxes online free However, this 3-year replacement period cannot be used if you replace the condemned property by acquiring control of a corporation owning property that is similar or related in service or use. File federal taxes online free Five-year replacement period for certain property. File federal taxes online free   The replacement period ends 5 years after the end of the first tax year in which any part of the gain is realized on the compulsory or involuntary conversion of the following qualified property. File federal taxes online free Property in any Midwestern disaster area compulsorily or involuntarily converted on or after the applicable disaster date as a result of severe storms, tornadoes, or flooding, but only if substantially all of the use of the replacement property is in a Midwestern disaster area. File federal taxes online free Property in the Kansas disaster area compulsorily or involuntarily converted after May 3, 2007, but only if substantially all of the use of the replacement property is in the Kansas disaster area. File federal taxes online free Property in the Hurricane Katrina disaster area compulsorily or involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, but only if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. File federal taxes online free Extended replacement period for taxpayers affected by other federally declared disasters. File federal taxes online free    If you are affected by a federally declared disaster, the IRS may grant disaster relief by extending the periods to perform certain tax-related acts for 2013, including the replacement period, by up to one year. File federal taxes online free For more information visit www. File federal taxes online free irs. File federal taxes online free gov/uac/Tax-Relief-in-Disaster-Situations. File federal taxes online free Weather-related sales of livestock in an area eligible for federal assistance. File federal taxes online free   Generally, if the sale or exchange of livestock is due to drought, flood, or other weather-related conditions in an area eligible for federal assistance, the replacement period ends 4 years after the close of the first tax year in which you realize any part of your gain from the sale or exchange. File federal taxes online free    If the weather-related conditions continue for longer than 3 years, the replacement period may be extended on a regional basis until the end of your first drought-free year for the applicable region. File federal taxes online free See Notice 2006-82. File federal taxes online free You can find Notice 2006-82 on page 529 of Internal Revenue Bulletin 2006-39 at www. File federal taxes online free irs. File federal taxes online free gov/irb/2006-39_IRB/ar13. File federal taxes online free html. File federal taxes online free    Each year, the IRS publishes a list of counties, districts, cities, or parishes for which exceptional, extreme, or severe drought was reported during the preceding 12 months. File federal taxes online free If you qualified for a 4-year replacement period for livestock sold or exchanged on account of drought and your replacement period is scheduled to expire at the end of 2013 (or at the end of the tax year that includes August 31, 2013), see Notice 2013-62. File federal taxes online free You can find Notice 2013-62 on page 466 of Internal Revenue Bulletin 2013-45 at www. File federal taxes online free irs. File federal taxes online free gov/irb/2013-45_IRB/ar04. File federal taxes online free html. File federal taxes online free The replacement period will be extended under Notice 2006-82 if the applicable region is on the list included in Notice 2013-62. File federal taxes online free Determining when gain is realized. File federal taxes online free   If you are a cash basis taxpayer, you realize gain when you receive payments that are more than your basis in the property. File federal taxes online free If the condemning authority makes deposits with the court, you realize gain when you withdraw (or have the right to withdraw) amounts that are more than your basis. File federal taxes online free   This applies even if the amounts received are only partial or advance payments and the full award has not yet been determined. File federal taxes online free A replacement will be too late if you wait for a final determination that does not take place in the applicable replacement period after you first realize gain. File federal taxes online free   For accrual basis taxpayers, gain (if any) accrues in the earlier year when either of the following occurs. File federal taxes online free All events have occurred that fix the right to the condemnation award and the amount can be determined with reasonable accuracy. File federal taxes online free All or part of the award is actually or constructively received. File federal taxes online free For example, if you have an absolute right to a part of a condemnation award when it is deposited with the court, the amount deposited accrues in the year the deposit is made even though the full amount of the award is still contested. File federal taxes online free Replacement property bought before the condemnation. File federal taxes online free   If you buy your replacement property after there is a threat of condemnation but before the actual condemnation and you still hold the replacement property at the time of the condemnation, you have bought your replacement property within the replacement period. File federal taxes online free Property you acquire before there is a threat of condemnation does not qualify as replacement property acquired within the replacement period. File federal taxes online free Example. File federal taxes online free On April 3, 2012, city authorities notified you that your property would be condemned. File federal taxes online free On June 5, 2012, you acquired property to replace the property to be condemned. File federal taxes online free You still had the new property when the city took possession of your old property on September 4, 2013. File federal taxes online free You have made a replacement within the replacement period. File federal taxes online free Extension. File federal taxes online free   You can request an extension of the replacement period from the IRS director for your area. File federal taxes online free You should apply before the end of the replacement period. File federal taxes online free Your request should explain in detail why you need an extension. File federal taxes online free The IRS will consider a request filed within a reasonable time after the replacement period if you can show reasonable cause for the delay. File federal taxes online free An extension of the replacement period will be granted if you can show reasonable cause for not making the replacement within the regular period. File federal taxes online free   Ordinarily, requests for extensions are granted near the end of the replacement period or the extended replacement period. File federal taxes online free Extensions are usually limited to a period of 1 year or less. File federal taxes online free The high market value or scarcity of replacement property is not a sufficient reason for granting an extension. File federal taxes online free If your replacement property is being built and you clearly show that the replacement or restoration cannot be made within the replacement peri
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Help for Victims of Ponzi Investment Schemes

 

The IRS provides two items of guidance to help taxpayers who are victims of losses from Ponzi-type investment schemes.

  • Revenue Ruling 2009-9 provides guidance on determining the amount and timing of losses from these schemes, which is difficult and dependent on the prospect of recovering the lost money (which may not become known for several years).

  • Revenue Procedure 2009-20 simplifies compliance for taxpayers by providing a safe-harbor means of determining the year in which the loss is deemed to occur and a simplified means of computing the amount of the loss.  

For an overview of this guidance, see IRS Commissioner Doug Shulman's March 17, 2009, testimony before the Senate Finance Committee on tax issues related to Ponzi schemes.

Questions and Answers

  • FAQs Related to Ponzi Scenarios for Clawback Treatment

  • Do you have questions on what to do if you've invested in a Ponzi scheme? If so, these questions and answers may help.

  • Do you have questions on what to do if you took a tax loss due to a Ponzi scheme investment but later recovered some of your investment? If so, these questions and answers on the tax treatment of distributions received from a trustee/receiver may help. A trustee or receiver may use this information to respond to questions from investors and may include a copy of these questions and answers with any distributions sent to investors.
Page Last Reviewed or Updated: 14-Mar-2014

The File Federal Taxes Online Free

File federal taxes online free 5. File federal taxes online free   Figuring Your Tax Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tax Year Identification NumberF-1 and M-1 visa holders. File federal taxes online free J-1 visa holders. File federal taxes online free Filing StatusResident Aliens Nonresident Aliens Reporting Your Income DeductionsResident Aliens Nonresident Aliens ExemptionsResident Aliens Nonresident Aliens Itemized DeductionsResident Aliens Nonresident Aliens Tax Credits and PaymentsResident Aliens Nonresident Aliens Bona Fide Residents of American Samoa or Puerto Rico Introduction After you have determined your alien status, the source of your income, and if and how that income is taxed in the United States, your next step is to figure your tax. File federal taxes online free The information in this chapter is not as comprehensive for resident aliens as it is for nonresident aliens. File federal taxes online free Resident aliens should get publications, forms, and instructions for U. File federal taxes online free S. File federal taxes online free citizens, because the information for filing returns for resident aliens is generally the same as for U. File federal taxes online free S. File federal taxes online free citizens. File federal taxes online free If you are both a nonresident alien and a resident alien in the same tax year, see chapter 6 for a discussion of dual-status aliens. File federal taxes online free Topics - This chapter discusses: Identification numbers, Filing status, Deductions, Exemptions, Tax credits and payments, and Special rules for bona fide residents of American Samoa and Puerto Rico. File federal taxes online free Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 501 Exemptions, Standard Deduction, and Filing Information 521 Moving Expenses 526 Charitable Contributions 535 Business Expenses 597 Information on the United States–Canada Income Tax Treaty Form (and Instructions) W-7 Application for IRS Individual Taxpayer Identification Number 1040 U. File federal taxes online free S. File federal taxes online free Individual Income Tax Return 1040NR U. File federal taxes online free S. File federal taxes online free Nonresident Alien Income Tax Return 1040NR-EZ U. File federal taxes online free S. File federal taxes online free Income Tax Return for Certain Nonresident Aliens With No Dependents 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3903 Moving Expenses 4563 Exclusion of Income for Bona Fide Residents of American Samoa 8959 Additional Medicare Tax See chapter 12 for information about getting these publications and forms. File federal taxes online free Tax Year You must figure your income and file a tax return on the basis of an annual accounting period called a tax year. File federal taxes online free If you have not previously established a fiscal tax year, your tax year is the calendar year. File federal taxes online free A calendar year is 12 consecutive months ending on December 31. File federal taxes online free If you have previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December or a 52–53 week year) and are considered to be a U. File federal taxes online free S. File federal taxes online free resident for any calendar year, you will be treated as a U. File federal taxes online free S. File federal taxes online free resident for any part of your fiscal year that falls within that calendar year. File federal taxes online free Identification Number A taxpayer identification number must be furnished on returns, statements, and other tax-related documents. File federal taxes online free For an individual, this is a social security number (SSN). File federal taxes online free If you do not have and are not eligible to get an SSN, you must apply for an individual taxpayer identification number (ITIN). File federal taxes online free An employer identification number (EIN) is required if you are engaged in a trade or business as a sole proprietor and have employees or a qualified retirement plan. File federal taxes online free You must furnish a taxpayer identification number if you are: An alien who has income effectively connected with the conduct of a U. File federal taxes online free S. File federal taxes online free trade or business at any time during the year, An alien who has a U. File federal taxes online free S. File federal taxes online free office or place of business at any time during the year, A nonresident alien spouse treated as a resident, as discussed in chapter 1, or Any other alien who files a tax return, an amended return, or a refund claim (but not information returns). File federal taxes online free Social security number (SSN). File federal taxes online free   Generally, you can get an SSN if you have been lawfully admitted to the United States for permanent residence or under other immigration categories that authorize U. File federal taxes online free S. File federal taxes online free employment. File federal taxes online free   To apply for this number, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration (SSA) office or call the SSA at 1-800-772-1213. File federal taxes online free You can also download Form SS-5 from the SSA's website at www. File federal taxes online free socialsecurity. File federal taxes online free gov/ssnumber/ss5. File federal taxes online free htm. File federal taxes online free You must visit an SSA office in person and submit your Form SS-5 along with original documentation showing your age, identity, immigration status, and authority to work in the United States. File federal taxes online free Generally, you will receive your card about 2 weeks after the SSA has all of the necessary information. File federal taxes online free F-1 and M-1 visa holders. File federal taxes online free    If you are an F-1 or M-1 student, you must also show your Form I-20. File federal taxes online free For more information, see SSA Publication 05-10181, International Students and Social Security Numbers, available online at www. File federal taxes online free socialsecurity. File federal taxes online free gov/pubs/10181. File federal taxes online free html. File federal taxes online free J-1 visa holders. File federal taxes online free   If you are a J-1 exchange visitor, you will also need to show your Form DS-2019. File federal taxes online free For more information, see SSA Publication 05-10107, Foreign Workers and Social Security Numbers, available online at www. File federal taxes online free socialsecurity. File federal taxes online free gov/pubs/10107. File federal taxes online free html. File federal taxes online free Individual taxpayer identification number (ITIN). File federal taxes online free   If you do not have and are not eligible to get an SSN, you must apply for an ITIN. File federal taxes online free For details on how to do so, see Form W-7 and its instructions. File federal taxes online free Allow 6 to 10 weeks for the IRS to notify you of your ITIN. File federal taxes online free If you already have an ITIN, enter it wherever an SSN is required on your tax return. File federal taxes online free   An ITIN is for tax use only. File federal taxes online free It does not entitle you to social security benefits or change your employment or immigration status under U. File federal taxes online free S. File federal taxes online free law. File federal taxes online free   In addition to those aliens who are required to furnish a taxpayer identification number and are not eligible for an SSN, a Form W-7 must be filed for: Alien individuals who are claimed as dependents and are not eligible for an SSN, and Alien spouses who are claimed as exemptions and are not eligible for an SSN. File federal taxes online free Employer identification number (EIN). File federal taxes online free   An individual may use an SSN (or ITIN) for individual taxes and an EIN for business taxes. File federal taxes online free To apply for an EIN, file Form SS-4, Application for Employer Identification Number, with the IRS. File federal taxes online free Filing Status The amount of your tax depends on your filing status. File federal taxes online free Your filing status is important in determining whether you can take certain deductions and credits. File federal taxes online free The rules for determining your filing status are different for resident aliens and nonresident aliens. File federal taxes online free Resident Aliens Resident aliens can use the same filing statuses available to U. File federal taxes online free S. File federal taxes online free citizens. File federal taxes online free See your form instructions or Publication 501 for more information on filing status. File federal taxes online free Married filing jointly. File federal taxes online free   Generally, you can file as married filing jointly only if both you and your spouse were resident aliens for the entire tax year, or if you make one of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year. File federal taxes online free Qualifying widow(er). File federal taxes online free   If your spouse died in 2011 or 2012, you did not remarry before the end of 2013, and you have a dependent child living with you, you may qualify to file as a qualifying widow(er) and use the joint return tax rates. File federal taxes online free This applies only if you could have filed a joint return with your spouse for the year your spouse died. File federal taxes online free Head of household. File federal taxes online free   You can qualify as head of household if you are unmarried or considered unmarried on the last day of the year and you pay more than half the cost of keeping up a home for you and a qualifying person. File federal taxes online free You must be a resident alien for the entire tax year. File federal taxes online free   You are considered unmarried for this purpose if your spouse was a nonresident alien at any time during the year and you do not make one of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year. File federal taxes online free Note. File federal taxes online free   Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you may still be considered married for purposes of the earned income credit. File federal taxes online free In that case, you will not be entitled to the credit. File federal taxes online free See Publication 596 for more information. File federal taxes online free Nonresident Aliens If you are a nonresident alien filing Form 1040NR, you may be able to use one of the filing statuses discussed later. File federal taxes online free If you are filing Form 1040NR-EZ, you can only claim “Single nonresident alien” or “Married nonresident alien” as your filing status. File federal taxes online free Married nonresident alien. File federal taxes online free   Married nonresident aliens who are not married to U. File federal taxes online free S. File federal taxes online free citizens or residents generally must use the Tax Table column or the Tax Computation Worksheet for married filing separate returns when determining the tax on income effectively connected with a U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free Exceptions. File federal taxes online free   Married nonresident aliens normally cannot use the Tax Table column or the Tax Computation Worksheet for single individuals. File federal taxes online free However, you may be able to file as single if you lived apart from your spouse during the last 6 months of the year and you are a married resident of Canada, Mexico, South Korea, or are a married U. File federal taxes online free S. File federal taxes online free national. File federal taxes online free See the instructions for Form 1040NR or Form 1040NR-EZ to see if you qualify. File federal taxes online free U. File federal taxes online free S. File federal taxes online free national is defined later in this section under Qualifying widow(er) . File federal taxes online free   A nonresident alien generally cannot file as married filing jointly. File federal taxes online free However, a nonresident alien who is married to a U. File federal taxes online free S. File federal taxes online free citizen or resident can choose to be treated as a resident and file a joint return on Form 1040, Form 1040A, or Form 1040EZ. File federal taxes online free For information on these choices, see chapter 1. File federal taxes online free If you do not make the choice to file jointly, file Form 1040NR or Form 1040NR-EZ and use the Tax Table column or the Tax Computation Worksheet for married individuals filing separately. File federal taxes online free Qualifying widow(er). File federal taxes online free   You may be eligible to file as a qualifying widow(er) and use the joint return tax rates if all of the following conditions apply. File federal taxes online free You were a resident of Canada, Mexico, or South Korea, or a U. File federal taxes online free S. File federal taxes online free national (defined later). File federal taxes online free Your spouse died in 2011 or 2012 and you did not remarry before the end of 2013. File federal taxes online free You have a dependent child living with you. File federal taxes online free See the instructions for Form 1040NR for the rules for filing as a qualifying widow(er) with a dependent child. File federal taxes online free   A U. File federal taxes online free S. File federal taxes online free national is an individual who, although not a U. File federal taxes online free S. File federal taxes online free citizen, owes his or her allegiance to the United States. File federal taxes online free U. File federal taxes online free S. File federal taxes online free nationals include American Samoans and Northern Mariana Islanders who chose to become U. File federal taxes online free S. File federal taxes online free nationals instead of U. File federal taxes online free S. File federal taxes online free citizens. File federal taxes online free Head of household. File federal taxes online free   You cannot file as head of household if you are a nonresident alien at any time during the tax year. File federal taxes online free However, if you are married, your spouse can qualify as a head of household if: Your spouse is a resident alien or U. File federal taxes online free S. File federal taxes online free citizen for the entire tax year, You do not choose to be treated as a resident alien, and Your spouse meets the other requirements for this filing status, as discussed earlier under Resident Aliens . File federal taxes online free Note. File federal taxes online free   Even if your spouse is considered unmarried for head of household purposes because you are a nonresident alien, your spouse may still be considered married for purposes of the earned income credit. File federal taxes online free In that case, your spouse will not be entitled to the credit. File federal taxes online free See Publication 596 for more information. File federal taxes online free Estates and trusts. File federal taxes online free   A nonresident alien estate or trust using Form 1040NR must use Tax Rate Schedule W in the Form 1040NR instructions when determining the tax on income effectively connected with a U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free Special rules for aliens from certain U. File federal taxes online free S. File federal taxes online free possessions. File federal taxes online free   A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year and who is temporarily working in the United States should read Bona Fide Residents of American Samoa or Puerto Rico, at the end of this chapter, for information about special rules. File federal taxes online free Reporting Your Income You must report each item of income that is taxable according to the rules in chapters 2, 3, and 4. File federal taxes online free For resident aliens, this includes income from sources both within and outside the United States. File federal taxes online free For nonresident aliens, this includes both income that is effectively connected with a trade or business in the United States (subject to graduated tax rates) and income from U. File federal taxes online free S. File federal taxes online free sources that is not effectively connected (subject to a flat 30% tax rate or lower tax treaty rate). File federal taxes online free Deductions Resident and nonresident aliens can claim similar deductions on their U. File federal taxes online free S. File federal taxes online free tax returns. File federal taxes online free However, nonresident aliens generally can claim only deductions related to income that is effectively connected with their U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free Resident Aliens You can claim the same deductions allowed to U. File federal taxes online free S. File federal taxes online free citizens if you are a resident alien for the entire tax year. File federal taxes online free While the discussion that follows contains some of the same general rules and guidelines that apply to you, it is specifically directed toward nonresident aliens. File federal taxes online free You should get Form 1040 and instructions for more information on how to claim your allowable deductions. File federal taxes online free Nonresident Aliens You can claim deductions to figure your effectively connected taxable income. File federal taxes online free You generally cannot claim deductions related to income that is not connected with your U. File federal taxes online free S. File federal taxes online free business activities. File federal taxes online free Except for personal exemptions, and certain itemized deductions, discussed later, you can claim deductions only to the extent they are connected with your effectively connected income. File federal taxes online free Ordinary and necessary business expenses. File federal taxes online free   You can deduct all ordinary and necessary expenses in the operation of your U. File federal taxes online free S. File federal taxes online free trade or business to the extent they relate to income effectively connected with that trade or business. File federal taxes online free The deduction for travel expenses while in the United States is discussed under Itemized Deductions, later. File federal taxes online free For information about other business expenses, see Publication 535. File federal taxes online free Losses. File federal taxes online free   You can deduct losses resulting from transactions that you entered into for profit and that you were not reimbursed for by insurance, etc. File federal taxes online free to the extent that they relate to income that is effectively connected with a trade or business in the United States. File federal taxes online free Educator expenses. File federal taxes online free   If you were an eligible educator in 2013, you can deduct as an adjustment to income up to $250 in unreimbursed qualified expenses you paid or incurred during 2013 for books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment, and other equipment and materials used in the classroom. File federal taxes online free For more information, see your tax form instructions. File federal taxes online free Individual retirement arrangement (IRA). File federal taxes online free   If you made contributions to a traditional IRA for 2013, you may be able to take an IRA deduction. File federal taxes online free But you must have taxable compensation effectively connected with a U. File federal taxes online free S. File federal taxes online free trade or business to do so. File federal taxes online free A Form 5498 should be sent to you by May 31, 2014, that shows all contributions to your traditional IRA for 2013. File federal taxes online free If you were covered by a retirement plan (qualified pension, profit-sharing (including 401(k)), annuity, SEP, SIMPLE, etc. File federal taxes online free ) at work or through self-employment, your IRA deduction may be reduced or eliminated. File federal taxes online free But you can still make contributions to a traditional IRA even if you cannot deduct them. File federal taxes online free If you made nondeductible contributions to a traditional IRA for 2013, you must report them on Form 8606, Nondeductible IRAs. File federal taxes online free   For more information, see Publication 590, Individual Retirement Arrangements (IRAs). File federal taxes online free Moving expenses. File federal taxes online free   If you are a nonresident alien temporarily in the United States earning taxable income for performing personal services, you can deduct moving expenses to the United States if you meet both of the following tests. File federal taxes online free You are a full-time employee for at least 39 weeks during the 12 months right after you move, or if you are self-employed, you work full time for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months right after you move. File federal taxes online free Your new job location is at least 50 miles farther (by the shortest commonly traveled route) from your former home than your former job location was. File federal taxes online free If you had no former job location, the new job location must be at least 50 miles from your former home. File federal taxes online free   You cannot deduct the moving expense you have when returning to your home abroad or moving to a foreign job site. File federal taxes online free   Figure your deductible moving expenses to the United States on Form 3903, and deduct them on line 26 of Form 1040NR. File federal taxes online free   For more information on the moving expense deduction, see Publication 521. File federal taxes online free Reimbursements. File federal taxes online free   If your employer reimbursed you for allowable moving expenses under an accountable plan, your employer should have excluded these reimbursements from your income. File federal taxes online free You can only deduct allowable moving expenses that were not reimbursed by your employer or that were reimbursed but the reimbursement was included in your income. File federal taxes online free For more information, see Publication 521. File federal taxes online free Moving expense or travel expense. File federal taxes online free   If you deduct moving expenses to the United States, you cannot also deduct travel expenses (discussed later under Itemized Deductions) while temporarily away from your tax home in a foreign country. File federal taxes online free Moving expenses are based on a change in your principal place of business while travel expenses are based on your temporary absence from your principal place of business. File federal taxes online free Self-employed SEP, SIMPLE, and qualified retirement plans. File federal taxes online free   If you are self-employed, you may be able to deduct contributions to a SEP, SIMPLE, or qualified retirement plan that provides retirement benefits for yourself and your common-law employees, if any. File federal taxes online free To make deductible contributions for yourself, you must have net earnings from self-employment that are effectively connected with your U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free   Get Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), for further information. File federal taxes online free Penalty on early withdrawal of savings. File federal taxes online free   You must include in income all effectively connected interest income you receive or that is credited to your account during the year. File federal taxes online free Do not reduce it by any penalty you must pay on an early withdrawal from a time savings account. File federal taxes online free However, if the interest income is effectively connected with your U. File federal taxes online free S. File federal taxes online free trade or business during the year, you can deduct on line 30 of Form 1040NR the amount of the early withdrawal penalty that the banking institution charged. File federal taxes online free Student loan interest expense. File federal taxes online free   If you paid interest on a student loan in 2013, you may be able to deduct up to $2,500 of the interest you paid. File federal taxes online free Generally, you can claim the deduction if all the following requirements are met. File federal taxes online free Your filing status is any filing status except married filing separately. File federal taxes online free Your modified adjusted gross income is less than $75,000. File federal taxes online free No one else is claiming an exemption for you on his or her 2013 tax return. File federal taxes online free You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, someone who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan was taken out except that: The person filed a joint return, The person had gross income that was equal to or more than the exemption amount for that year ($3,900 for 2013), or You could be claimed as a dependent on someone else's return. File federal taxes online free The loan is not from a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan. File federal taxes online free The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out. File federal taxes online free The person for whom the expenses were paid or incurred was an eligible student. File federal taxes online free Use the worksheet in the Form 1040NR or Form 1040NR-EZ instructions to figure the deduction. File federal taxes online free For more information, see Publication 970, Tax Benefits for Education. File federal taxes online free Exemptions Resident aliens can claim personal exemptions and exemptions for dependents in the same way as U. File federal taxes online free S. File federal taxes online free citizens. File federal taxes online free However, nonresident aliens generally can claim only a personal exemption for themselves on their U. File federal taxes online free S. File federal taxes online free tax return. File federal taxes online free Resident Aliens You can claim personal exemptions and exemptions for dependents according to the dependency rules for U. File federal taxes online free S. File federal taxes online free citizens. File federal taxes online free You can claim an exemption for your spouse on a separate return if your spouse had no gross income for U. File federal taxes online free S. File federal taxes online free tax purposes and was not the dependent of another taxpayer. File federal taxes online free You can claim this exemption even if your spouse has not been a resident alien for a full tax year or is an alien who has not come to the United States. File federal taxes online free You can claim an exemption for each person who qualifies as a dependent according to the rules for U. File federal taxes online free S. File federal taxes online free citizens. File federal taxes online free The dependent must be a citizen or national (defined earlier) of the United States or be a resident of the United States, Canada, or Mexico for some part of the calendar year in which your tax year begins. File federal taxes online free Get Publication 501 for more information. File federal taxes online free Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. File federal taxes online free See Identification Number, earlier. File federal taxes online free Nonresident Aliens Generally, if you are a nonresident alien engaged in a trade or business in the United States, you can claim only one personal exemption ($3,900 for 2013). File federal taxes online free You may be able to claim an exemption for a spouse and a dependent if you are described in any of the following discussions. File federal taxes online free Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. File federal taxes online free See Identification Number, earlier. File federal taxes online free Residents of Mexico or Canada or U. File federal taxes online free S. File federal taxes online free nationals. File federal taxes online free   If you are a resident of Mexico or Canada or a national of the United States (defined earlier), you can also claim a personal exemption for your spouse if your spouse had no gross income for U. File federal taxes online free S. File federal taxes online free tax purposes and cannot be claimed as the dependent on another U. File federal taxes online free S. File federal taxes online free taxpayer's return. File federal taxes online free In addition, you can claim exemptions for your dependents who meet certain tests. File federal taxes online free Residents of Mexico, Canada, or nationals of the United States must use the same rules as U. File federal taxes online free S. File federal taxes online free citizens to determine who is a dependent and for which dependents exemptions can be claimed. File federal taxes online free See Publication 501 for these rules. File federal taxes online free For purposes of these rules, dependents who are U. File federal taxes online free S. File federal taxes online free nationals meet the citizenship test discussed in Publication 501. File federal taxes online free Residents of South Korea. File federal taxes online free   Nonresident aliens who are residents of South Korea may be able to claim exemptions for a spouse and children. File federal taxes online free The income tax treaty with South Korea imposes two additional requirements on South Korean residents: The spouse and all children claimed must live with the alien in the United States at some time during the tax year, and The additional deduction for the exemptions must be prorated based on the ratio of the alien's U. File federal taxes online free S. File federal taxes online free source gross income effectively connected with a U. File federal taxes online free S. File federal taxes online free trade or business for the tax year to the alien's entire income from all sources during the tax year. File federal taxes online free Example. File federal taxes online free Mr. File federal taxes online free Park, a nonresident alien who is a resident of South Korea, lives temporarily in the United States with his wife and two children. File federal taxes online free During the tax year he receives U. File federal taxes online free S. File federal taxes online free compensation of $18,000. File federal taxes online free He also receives $6,000 of income from sources outside the United States that is not effectively connected with his U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free Thus, his total income for the year is $24,000. File federal taxes online free Mr. File federal taxes online free Park meets all requirements for claiming exemptions for his spouse and two children. File federal taxes online free The additional deduction for 2013 is $8,775 figured as follows: $18,000 $24,000 × $11,700* = $8,775               *3 × $3,900 = $11,700   Students and business apprentices from India. File federal taxes online free   Students and business apprentices who are eligible for the benefits of Article 21(2) of the United States–India Income Tax Treaty may be able to claim exemptions for their spouse and dependents. File federal taxes online free   You can claim an exemption for your spouse if he or she had no gross income during the year and cannot be claimed as a dependent on another U. File federal taxes online free S. File federal taxes online free taxpayer's return. File federal taxes online free   You can claim exemptions for each of your dependents not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. File federal taxes online free S. File federal taxes online free citizens. File federal taxes online free See Publication 501 for these rules. File federal taxes online free   List your spouse and dependents on line 7c of Form 1040NR. File federal taxes online free Enter the total on the appropriate line to the right of line 7c. File federal taxes online free Itemized Deductions Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim. File federal taxes online free However, nonresident aliens can claim itemized deductions only if they have income effectively connected with their U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free Resident Aliens You can claim the same itemized deductions as U. File federal taxes online free S. File federal taxes online free citizens, using Schedule A of Form 1040. File federal taxes online free These deductions include certain medical and dental expenses, state and local income taxes, real estate taxes, interest you paid on a home mortgage, charitable contributions, casualty and theft losses, and miscellaneous deductions. File federal taxes online free If you do not itemize your deductions, you can claim the standard deduction for your particular filing status. File federal taxes online free For further information, see Form 1040 and instructions. File federal taxes online free Nonresident Aliens You can deduct certain itemized deductions if you receive income effectively connected with your U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free These deductions include state and local income taxes, charitable contributions to U. File federal taxes online free S. File federal taxes online free organizations, casualty and theft losses, and miscellaneous deductions. File federal taxes online free Use Schedule A of Form 1040NR to claim itemized deductions. File federal taxes online free If you are filing Form 1040NR-EZ, you can only claim a deduction for state or local income taxes. File federal taxes online free If you are claiming any other itemized deduction, you must file Form 1040NR. File federal taxes online free Standard deduction. File federal taxes online free   Nonresident aliens cannot claim the standard deduction. File federal taxes online free However, see Students and business apprentices from India , next. File federal taxes online free Students and business apprentices from India. File federal taxes online free   A special rule applies to students and business apprentices who are eligible for the benefits of Article 21(2) of the United States–India Income Tax Treaty. File federal taxes online free You can claim the standard deduction provided you do not claim itemized deductions. File federal taxes online free   Use Worksheet 5-1 to figure your standard deduction. File federal taxes online free If you are married and your spouse files a return and itemizes deductions, you cannot take the standard deduction. File federal taxes online free State and local income taxes. File federal taxes online free   You can deduct state and local income taxes you paid on income that is effectively connected with a trade or business in the United States. File federal taxes online free If you received a refund or rebate in 2013 of taxes you paid in an earlier year, do not reduce your deduction by that amount. File federal taxes online free Instead, you must include the refund or rebate in income if you deducted the taxes in the earlier year and the deduction reduced your tax. File federal taxes online free See Recoveries in Publication 525 for details on how to figure the amount to include in income. File federal taxes online free Charitable contributions. File federal taxes online free   You can deduct your charitable contributions or gifts to qualified organizations subject to certain limits. File federal taxes online free Qualified organizations include organizations that are religious, charitable, educational, scientific, or literary in nature, or that work to prevent cruelty to children or animals. File federal taxes online free Certain organizations that promote national or international amateur sports competition are also qualified organizations. File federal taxes online free Foreign organizations. File federal taxes online free   Contributions made directly to a foreign organization are not deductible. File federal taxes online free However, you can deduct contributions to a U. File federal taxes online free S. File federal taxes online free organization that transfers funds to a charitable foreign organization if the U. File federal taxes online free S. File federal taxes online free organization controls the use of the funds or if the foreign organization is only an administrative arm of the U. File federal taxes online free S. File federal taxes online free organization. File federal taxes online free   For more information about organizations that qualify to receive charitable contributions, see Publication 526, Charitable Contributions. File federal taxes online free Worksheet 5-1. File federal taxes online free 2013 Standard Deduction Worksheet for Students and Business Apprentices From India Caution. File federal taxes online free If you are married filing a separate return and your spouse itemizes deductions, do not complete this worksheet. File federal taxes online free You cannot take the standard deduction even if you were born before January 2, 1949, or are blind. File federal taxes online free 1 Enter the amount shown below for your filing status. File federal taxes online free           Single or married filing separately—$6,100 Qualifying widow(er)—$12,200 1. File federal taxes online free           2 Can you be claimed as a dependent on someone else's U. File federal taxes online free S. File federal taxes online free income tax return?  No. File federal taxes online free Enter the amount from line 1 on line 4. File federal taxes online free Skip line 3 and go to line 5. File federal taxes online free   Yes. File federal taxes online free Go to line 3. File federal taxes online free         3 Is your earned income* more than $650?           Yes. File federal taxes online free Add $350 to your earned income. File federal taxes online free Enter the total. File federal taxes online free           No. File federal taxes online free Enter $1,000 3. File federal taxes online free       4 Enter the smaller of line 1 or line 3 4. File federal taxes online free   5 If born before January 2, 1949, OR blind, enter $1,200 ($1,500 if single). File federal taxes online free If born before January 2, 1949, AND blind, enter $2,400 ($3,000 if single). File federal taxes online free Otherwise, enter -0- 5. File federal taxes online free   6 Add lines 4 and 5. File federal taxes online free Enter the total here and on Form 1040NR, line 38 (or Form 1040NR-EZ, line 11). File federal taxes online free Print “Standard Deduction Allowed Under U. File federal taxes online free S. File federal taxes online free –India Income Tax Treaty” in the space to the left of these lines. File federal taxes online free This is your standard deduction for 2013. File federal taxes online free 6. File federal taxes online free   *Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. File federal taxes online free It also includes any amount received as a scholarship that you must include in your income. File federal taxes online free Generally, your earned income is the total of the amount(s) you reported on Form 1040NR, lines 8,12,13, and 19, minus amounts on lines 27 and 31 (or Form 1040NR-EZ, lines 3 and 5, minus any amount on line 8). File federal taxes online free Contributions from which you benefit. File federal taxes online free   If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. File federal taxes online free   If you pay more than the fair market value to a qualified organization for merchandise, goods, or services, the amount you pay that is more than the value of the item can be a charitable contribution. File federal taxes online free For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. File federal taxes online free Cash contributions. File federal taxes online free   You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount) or a written record from the charity. File federal taxes online free The written record must include the name of the charity, date of the contribution, and the amount of the contribution. File federal taxes online free   You may deduct a cash contribution of $250 or more only if you have a written statement from the charitable organization showing: The amount of any money contributed, Whether the organization gave you any goods or services in return for your contribution, and A description and estimate of the value of any goods or services described in (2). File federal taxes online free If you received only intangible religious benefits, the organization must state this, but it does not have to describe or value the benefit. File federal taxes online free Noncash contributions. File federal taxes online free   For contributions not made in cash, the records you must keep depend on the amount of your deduction. File federal taxes online free See Publication 526 for details. File federal taxes online free For example, if you make a noncash contribution and the amount of your deduction is more than $500, you must complete and attach to your tax return Form 8283, Noncash Charitable Contributions. File federal taxes online free If you deduct more than $500 for a contribution of a motor vehicle, boat, or airplane, you must also attach a statement from the charitable organization to your return. File federal taxes online free If your total deduction is over $5,000, you also may have to get appraisals of the values of the property. File federal taxes online free If the donated property is valued at more than $5,000, you must obtain a qualified appraisal. File federal taxes online free You generally must attach to your tax return an appraisal of any property if your deduction for the property is more than $500,000. File federal taxes online free See Form 8283 and its instructions for details. File federal taxes online free Contributions of appreciated property. File federal taxes online free   If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. File federal taxes online free However, if you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. File federal taxes online free Your basis in the property is generally what you paid for it. File federal taxes online free If you need more information about basis, get Publication 551, Basis of Assets. File federal taxes online free   Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. File federal taxes online free For information about these rules, see Publication 526. File federal taxes online free Limit. File federal taxes online free   The amount you can deduct in a tax year is limited in the same way it is for a citizen or resident of the United States. File federal taxes online free For a discussion of limits on charitable contributions and other information, get Publication 526. File federal taxes online free Casualty and theft losses. File federal taxes online free   You can deduct your loss from fire, storm, shipwreck, or other casualty, or theft of property even though your property is not connected with a U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free The property can be personal use property or income-producing property not connected with a U. File federal taxes online free S. File federal taxes online free trade or business. File federal taxes online free The property must be located in the United States at the time of the casualty or theft. File federal taxes online free You can deduct theft losses only in the year in which you discover the loss. File federal taxes online free   The amount of the loss is the fair market value of the property immediately before the casualty or theft less its fair market value immediately after the casualty or theft (but not more than its cost or adjusted basis) less any insurance or other reimbursement. File federal taxes online free The fair market value of property immediately after a theft is considered zero, because you no longer have the property. File federal taxes online free   If your property is covered by insurance, you should file a timely insurance claim for reimbursement. File federal taxes online free If you do not, you cannot deduct this loss as a casualty or theft loss. File federal taxes online free   Figure your deductible casualty and theft losses on Form 4684, Casualties and Thefts. File federal taxes online free Losses from personal use property. File federal taxes online free    You cannot deduct the first $100 of each casualty or theft loss to property held for personal use. File federal taxes online free You can deduct only the total of these losses for the year (reduced by the $100 limit) that is more than 10% of your adjusted gross income (line 37, Form 1040NR) for the year. File federal taxes online free Losses from income-producing property. File federal taxes online free   These losses are not subject to the limitations that apply to personal use property. File federal taxes online free Use Section B of Form 4684 to figure your deduction for these losses. File federal taxes online free Job expenses and other miscellaneous deductions. File federal taxes online free   You can deduct job expenses, such as allowable unreimbursed travel expenses (discussed next), and other miscellaneous deductions. File federal taxes online free Generally, the allowable deductions must be related to effectively connected income. File federal taxes online free Deductible expenses include: Union dues, Safety equipment and small tools needed for your job, Dues to professional organizations, Subscriptions to professional journals, Tax return preparation fees, and Casualty and theft losses of property used in performing services as an employee (employee property). File federal taxes online free   Most miscellaneous itemized deductions are deductible only if they are more than 2% of your adjusted gross income (line 37, Form 1040NR). File federal taxes online free For more information on miscellaneous deductions, see the instructions for Form 1040NR. File federal taxes online free Travel expenses. File federal taxes online free   You may be able to deduct your ordinary and necessary travel expenses while you are temporarily performing personal services in the United States. File federal taxes online free Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less. File federal taxes online free You must be able to show you were present in the United States on an activity that required your temporary absence from your regular place of work. File federal taxes online free   For example, if you have established a “tax home” through regular employment in a foreign country, and intend to return to similar employment in the same country at the end of your temporary stay in the United States, you can deduct reasonable travel expenses you paid. File federal taxes online free You cannot deduct travel expenses for other members of your family or party. File federal taxes online free Deductible travel expenses. File federal taxes online free   If you qualify, you can deduct your expenses for: Transportation—airfare, local transportation, including train, bus, etc. File federal taxes online free , Lodging—rent paid, utilities (do not include telephone), hotel or motel room expenses, and Meal expenses—actual expenses allowed if you keep records of the amounts, or, if you do not wish to keep detailed records, you are generally allowed a standard meal allowance amount depending on the date and area of your travel. File federal taxes online free You generally can deduct only 50% of unreimbursed meal expenses. File federal taxes online free The standard meal allowance rates for high-cost areas are available at www. File federal taxes online free gsa. File federal taxes online free gov/perdiem. File federal taxes online free The rates for other areas are in Publication 463. File federal taxes online free   Use Form 2106 or 2106-EZ to figure your allowable expenses that you claim on line 7 of Schedule A (Form 1040NR). File federal taxes online free Expenses allocable to U. File federal taxes online free S. File federal taxes online free tax-exempt income. File federal taxes online free   You cannot deduct an expense, or part of an expense, that is allocable to U. File federal taxes online free S. File federal taxes online free tax-exempt income, including income exempt by tax treaty. File federal taxes online free Example. File federal taxes online free Irina Oak, a citizen of Poland, resided in the United States for part of the year to acquire business experience from a U. File federal taxes online free S. File federal taxes online free company. File federal taxes online free During her stay in the United States, she received a salary of $8,000 from her Polish employer. File federal taxes online free She received no other U. File federal taxes online free S. File federal taxes online free source income. File federal taxes online free She spent $3,000 on travel expenses, of which $1,000 were for meals. File federal taxes online free None of these expenses were reimbursed. File federal taxes online free Under the tax treaty with Poland, $5,000 of her salary is exempt from U. File federal taxes online free S. File federal taxes online free income tax. File federal taxes online free In filling out Form 2106-EZ, she must reduce her deductible meal expenses by half ($500). File federal taxes online free She must reduce the remaining $2,500 of travel expenses by 62. File federal taxes online free 5% ($1,563) because 62. File federal taxes online free 5% ($5,000 ÷ $8,000) of her salary is exempt from tax. File federal taxes online free She enters the remaining total of $937 on line 7 of Schedule A (Form 1040NR). File federal taxes online free She completes the remaining lines according to the instructions for Schedule A. File federal taxes online free More information. File federal taxes online free   For more information about deductible expenses, reimbursements, and recordkeeping, get Publication 463. File federal taxes online free Tax Credits and Payments This discussion covers tax credits and payments for resident aliens, followed by a discussion of the credits and payments for nonresident aliens. File federal taxes online free Resident Aliens Resident aliens generally claim tax credits and report tax payments, including withholding, using the same rules that apply to U. File federal taxes online free S. File federal taxes online free citizens. File federal taxes online free The following items are some of the credits you may be able to claim. File federal taxes online free Foreign tax credit. File federal taxes online free   You can claim a credit, subject to certain limits, for income tax you paid or accrued to a foreign country on foreign source income. File federal taxes online free You cannot claim a credit for taxes paid or accrued on excluded foreign earned income. File federal taxes online free To claim a credit for income taxes paid or accrued to a foreign country, you generally will file Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), with your Form 1040. File federal taxes online free   For more information, get Publication 514, Foreign Tax Credit for Individuals. File federal taxes online free Child and dependent care credit. File federal taxes online free   You may be able to take this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. File federal taxes online free Generally, you must be able to claim an exemption for your dependent. File federal taxes online free   For more information, get Publication 503, Child and Dependent Care Expenses, and Form 2441, Child and Dependent Care Expenses. File federal taxes online free Credit for the elderly or the disabled. File federal taxes online free   You may qualify for this credit if you are 65 or older or if you retired on permanent and total disability. File federal taxes online free For more information on this credit, get Publication 524, Credit for the Elderly or the Disabled, and Schedule R (Form 1040A or 1040). File federal taxes online free Education credits. File federal taxes online free   You may qualify for these credits if you paid qualified education expenses for yourself, your spouse, or your dependent. File federal taxes online free There are two education credits: the American Opportunity Credit and the lifetime learning credit. File federal taxes online free You cannot claim these credits if you are married filing separately. File federal taxes online free Use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), to figure the credit. File federal taxes online free For more information, see Publication 970. File federal taxes online free Retirement savings contributions credit. File federal taxes online free   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. File federal taxes online free You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than: $59,000, if your filing status is married filing jointly, $44,250, if your filing status is head of household, or $29,500, if your filing status is single, married filing separately, or qualifying widow(er). File federal taxes online free Use Form 8880, Credit for Qualified Retirement Savings Contributions, to figure the credit. File federal taxes online free For more information, see Publication 590. File federal taxes online free Child tax credit. File federal taxes online free   You may be able to take this credit if you have a qualifying child. File federal taxes online free   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. File federal taxes online free Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew). File federal taxes online free Is a U. File federal taxes online free S. File federal taxes online free citizen, a U. File federal taxes online free S. File federal taxes online free national, or a resident alien. File federal taxes online free Did not provide over half of his or her own support for 2013. File federal taxes online free Lived with you more than half of 2013. File federal taxes online free Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. File federal taxes online free Is claimed as a dependent on your return. File federal taxes online free An adopted child is always treated as your own child. File federal taxes online free An adopted child includes a child lawfully placed with you for legal adoption. File federal taxes online free   See your form instructions for additional details. File federal taxes online free Adoption credit. File federal taxes online free   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. File federal taxes online free This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. File federal taxes online free To claim the adoption credit, file Form 8839, Qualified Adoption Expenses, with your Form 1040. File federal taxes online free Earned income credit. File federal taxes online free   You may qualify for an earned income credit of up to $3,250 if a child lived with you in the United States and your earned income and adjusted gross income were each less than $37,870 ($43,210 if married filing jointly). File federal taxes online free If two children lived with you in the United States and your earned income and adjusted gross income were each less than $43,038 ($48,378 if married filing jointly), your credit could be as much as $5,372. File federal taxes online free If three or more children lived with you in the United States and your earned income and adjusted gross income were each less than $46,227 ($51,567 if married filing jointly), your credit could be as much as $6,044. File federal taxes online free If you do not have a qualifying child and your earned income and adjusted gross income were each less than $14,340 ($19,680 if married filing jointly), your credit could be as much as $487. File federal taxes online free You cannot claim the earned income credit if your filing status is married filing separately. File federal taxes online free    You and your spouse (if filing a joint return) and any qualifying child must have valid SSNs to claim this credit. File federal taxes online free You cannot claim the credit using an ITIN. File federal taxes online free If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. File federal taxes online free An example of a federally funded benefit is Medicaid. File federal taxes online free If a card has this legend and the individual's immigration status has changed so that the individual is now a U. File federal taxes online free S. File federal taxes online free citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend. File federal taxes online free Other information. File federal taxes online free   There are other eligibility rules that are not discussed here. File federal taxes online free For more information, get Publication 596, Earned Income Credit. File federal taxes online free Nonresident Aliens You can claim some of the same credits that resident aliens can claim. File federal taxes online free You can also report certain taxes you paid, are considered to have paid, or that were withheld from your income. File federal taxes online free Credits Credits are allowed only if you receive effectively connected income. File federal taxes online free You may be able to claim some of the following credits. File federal taxes online free Foreign tax credit. File federal taxes online free   If you receive foreign source income that is effectively connected with a trade or business in the United States, you can claim a credit for any income taxes paid or accrued to any foreign country or U. File federal taxes online free S. File federal taxes online free possession on that income. File federal taxes online free   If you do not have foreign source income effectively connected with a U. File federal taxes online free S. File federal taxes online free trade or business, you cannot claim credits against your U. File federal taxes online free S. File federal taxes online free tax for taxes paid or accrued to a foreign country or U. File federal taxes online free S. File federal taxes online free possession. File federal taxes online free   You cannot take any credit for taxes imposed by a foreign country or U. File federal taxes online free S. File federal taxes online free possession on your U. File federal taxes online free S. File federal taxes online free source income if those taxes were imposed only because you are a citizen or resident of the foreign country or possession. File federal taxes online free   If you claim a foreign tax credit, you generally will have to attach to your return a Form 1116. File federal taxes online free See Publication 514 for more information. File federal taxes online free Child and dependent care credit. File federal taxes online free   You may qualify for this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. File federal taxes online free Generally, you must be able to claim an exemption for your dependent. File federal taxes online free   Married nonresident aliens can claim the credit only if they choose to file a joint return with a U. File federal taxes online free S. File federal taxes online free citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Joint Return Test in Publication 503). File federal taxes online free   The amount of your child and dependent care expense that qualifies for the credit in any tax year cannot be more than your earned income from the United States for that tax year. File federal taxes online free Earned income generally means wages, salaries, and professional fees for personal services performed. File federal taxes online free   For more information, get Publication 503. File federal taxes online free Education credits. File federal taxes online free   If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. File federal taxes online free However, if you are married and choose to file a joint return with a U. File federal taxes online free S. File federal taxes online free citizen or resident spouse as discussed in chapter 1, you may be eligible for these credits. File federal taxes online free Retirement savings contributions credit. File federal taxes online free   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. File federal taxes online free You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than $29,500. File federal taxes online free Use Form 8880 to figure the credit. File federal taxes online free For more information, see Publication 590. File federal taxes online free Child tax credit. File federal taxes online free   You may be able to take this credit if you have a qualifying child. File federal taxes online free   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. File federal taxes online free Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew). File federal taxes online free Is a U. File federal taxes online free S. File federal taxes online free citizen, a U. File federal taxes online free S. File federal taxes online free national, or a resident alien. File federal taxes online free Did not provide over half of his or her own support for 2013. File federal taxes online free Lived with you more than half of 2013. File federal taxes online free Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. File federal taxes online free Is claimed as a dependent on your return. File federal taxes online free An adopted child is always treated as your own child. File federal taxes online free An adopted child includes a child lawfully placed with you for legal adoption. File federal taxes online free   See your form instructions for additional details. File federal taxes online free Adoption credit. File federal taxes online free   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. File federal taxes online free This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. File federal taxes online free To claim the adoption credit, file Form 8839 with your Form 1040NR. File federal taxes online free   Married nonresident aliens can claim the credit only if they choose to file a joint return with a U. File federal taxes online free S. File federal taxes online free citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Married Persons Not Filing Jointly in the Form 8839 instructions). File federal taxes online free Credit for prior year minimum tax. File federal taxes online free   If you paid alternative minimum tax in a prior year, get Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts, to see if you qualify for this credit. File federal taxes online free Earned income credit. File federal taxes online free   If you are a nonresident alien for any part of the tax year, you generally cannot get the earned income credit. File federal taxes online free However, if you are married and choose to file a joint return with a U. File federal taxes online free S. File federal taxes online free citizen or resident spouse as discussed in chapter 1, you may be eligible for the credit. File federal taxes online free    You, your spouse, and any qualifying child must have valid SSNs to claim this credit. File federal taxes online free You cannot claim the credit using an ITIN. File federal taxes online free If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. File federal taxes online free An example of a federally funded benefit is Medicaid. File federal taxes online free If a card has this legend and the individual's immigration status has changed so that the individual is now a U. File federal taxes online free S. File federal taxes online free citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend. File federal taxes online free   See Publication 596 for more information on the credit. File federal taxes online free Tax Withheld You can claim the tax withheld during the year as a payment against your U. File federal taxes online free S. File federal taxes online free tax. File federal taxes online free You claim it on line 61 of Form 1040NR or on line 18 of Form 1040NR-EZ. File federal taxes online free The tax withheld reduces any tax you owe with Form 1040NR or Form 1040NR-EZ. File federal taxes online free Withholding from wages. File federal taxes online free   Any federal income tax withheld from your wages during the tax year while you were a nonresident alien is allowed as a payment against your U. File federal taxes online free S. File federal taxes online free income tax liability for the same year. File federal taxes online free You can claim the income tax withheld whether or not you were engaged in a trade or business in the United States during the year, and whether or not the wages (or any other income) were connected with a trade or business in the United States. File federal taxes online free Excess social security tax withheld. File federal taxes online free   If you have two or more employers, you may be able to claim a credit against your U. File federal taxes online free S. File federal taxes online free income tax liability for social security tax withheld in excess of the maximum required. File federal taxes online free See Social Security and Medicare Taxes in chapter 8 for more information. File federal taxes online free Additional Medicare Tax. File federal taxes online free   Your employer is responsible for withholding the 0. File federal taxes online free 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in 2013. File federal taxes online free If you do not owe Additional Medicare Tax, you can claim a credit for any withheld Additional Medicare Tax against the total tax liability shown on your tax return by filing Form 8959. File federal taxes online free Tax paid on undistributed long-term capital gains. File federal taxes online free   If you are a shareholder in a mutual fund (or other regulated investment company) or real estate investment trust, you can claim a credit for your share of any taxes paid by the company on its undistributed long-term capital gains. File federal taxes online free You will receive information on Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, which you must attach to your return. File federal taxes online free Tax withheld at the source. File federal taxes online free   You can claim as a payment any tax withheld at the source on investment and other fixed or determinable annual or periodic income paid to you. File federal taxes online free Fixed or determinable income includes interest, dividend, rental, and royalty income that you do not claim to be effectively connected income. File federal taxes online free Wage or salary payments can be fixed or determinable income to you, but usually are subject to withholding as discussed above. File federal taxes online free Taxes on fixed or determinable income are withheld at a 30% rate or at a lower treaty rate. File federal taxes online free Tax withheld on partnership income. File federal taxes online free   If you are a foreign partner in a partnership, the partnership will withhold tax on your share of effectively connected taxable income from the partnership. File federal taxes online free The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, showing the tax withheld. File federal taxes online free A partnership that is publicly traded may withhold on your actual distributions of effectively connected income. File federal taxes online free In this case, the partnership will give you a statement on Form 1042-S. File federal taxes online free Claim the tax withheld as a payment on line 61b or 61d of Form 1040NR, as appropriate. File federal taxes online free Claiming tax withheld on your return. File federal taxes online free   When you fill out your tax return, take extra care to enter the correct amount of any tax withheld shown on your information documents. File federal taxes online free The following table lists some of the more common information documents and shows where to find the amount of tax withheld. File federal taxes online free Form number Location  of tax  withheld RRB-1042S Box 12 SSA-1042S Box 9 W-2 Box 2 W-2c Box 2 1042-S Box 9 8805 Line 10 8288-A Box 2 Bona Fide Residents of American Samoa or Puerto Rico If you are a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you generally are taxed the same as resident aliens. File federal taxes online free You should file Form 1040 and report all income from sources both in and outside the United States. File federal taxes online free However, you can exclude the income discussed in the following paragraphs. File federal taxes online free For tax purposes other than reporting income, however, you will be treated as a nonresident alien. File federal taxes online free For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. File federal taxes online free There are also limits on what deductions and credits are allowed. File federal taxes online free See Nonresident Aliens under Deductions , Itemized Deductions , and Tax Credits and Payments in this chapter. File federal taxes online free Residents of Puerto Rico. File federal taxes online free   If you are a bona fide resident of Puerto Rico for the entire year, you can exclude from gross income all income from sources in Puerto Rico (other than amounts for services performed as an employee of the United States or any of its agencies). File federal taxes online free   If you report income on a calendar year basis and you do not have wages subject to withholding, file your return and pay your tax by June 15. File federal taxes online free You must also make your first payment of estimated tax by June 15. File federal taxes online free You cannot file a joint income tax return or make joint payments of estimated tax. File federal taxes online free However, if you are married to a U. File federal taxes online free S. File federal taxes online free citizen or resident, see Nonresident Spouse Treated as a Resident in chapter 1. File federal taxes online free   If you earn wages subject to withholding, your U. File federal taxes online free S. File federal taxes online free income tax return is due by April 15. File federal taxes online free Your first payment of estimated tax is also due by April 15. File federal taxes online free For information on withholding and estimated tax, see chapter 8 . File federal taxes online free Residents of American Samoa. File federal taxes online free   If you are a bona fide resident of American Samoa for the entire year, you can exclude from gross income all income from sources in American Samoa (other than amounts for services performed as an employee of the U. File federal taxes online free S. File federal taxes online free government or any of its agencies). File federal taxes online free An employee of the American Samoan government is not considered an employee of the U. File federal taxes online free S. File federal taxes online free government or any of its agencies for purposes of the exclusion. File federal taxes online free For more information about this exclusion, get Form 4563 and Publication 570, Tax Guide for Individuals With Income From U. File federal taxes online free S. File federal taxes online free Possessions. File federal taxes online free Prev  Up  Next   Home   More Online Publications