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File your taxes free online 23. File your taxes free online   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. File your taxes free online Mortgage proceeds used for business or investment. File your taxes free online Introduction This chapter discusses what interest expenses you can deduct. File your taxes free online Interest is the amount you pay for the use of borrowed money. File your taxes free online The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). File your taxes free online Home mortgage interest, including certain points and mortgage insurance premiums. File your taxes free online Investment interest. File your taxes free online This chapter explains these deductions. File your taxes free online It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. File your taxes free online Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. File your taxes free online Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). File your taxes free online The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. File your taxes free online You can deduct home mortgage interest if all the following conditions are met. File your taxes free online You file Form 1040 and itemize deductions on Schedule A (Form 1040). File your taxes free online The mortgage is a secured debt on a qualified home in which you have an ownership interest. File your taxes free online (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. File your taxes free online The term “qualified home” means your main home or second home. File your taxes free online For details, see Publication 936. File your taxes free online )  Both you and the lender must intend that the loan be repaid. File your taxes free online Amount Deductible In most cases, you can deduct all of your home mortgage interest. File your taxes free online How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. File your taxes free online Fully deductible interest. File your taxes free online   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. File your taxes free online (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. File your taxes free online )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). File your taxes free online Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). File your taxes free online Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). File your taxes free online The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. File your taxes free online   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. File your taxes free online    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. File your taxes free online Figure 23-A. File your taxes free online Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. File your taxes free online Figure 23-A. File your taxes free online Is My Interest Fully Deductible? Limits on deduction. File your taxes free online   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. File your taxes free online If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. File your taxes free online Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. File your taxes free online It also describes certain special situations that may affect your deduction. File your taxes free online Late payment charge on mortgage payment. File your taxes free online   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. File your taxes free online Mortgage prepayment penalty. File your taxes free online   If you pay off your home mortgage early, you may have to pay a penalty. File your taxes free online You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. File your taxes free online Sale of home. File your taxes free online   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. File your taxes free online Example. File your taxes free online John and Peggy Harris sold their home on May 7. File your taxes free online Through April 30, they made home mortgage interest payments of $1,220. File your taxes free online The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. File your taxes free online Their mortgage interest deduction is $1,270 ($1,220 + $50). File your taxes free online Prepaid interest. File your taxes free online   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. File your taxes free online You can deduct in each year only the interest that qualifies as home mortgage interest for that year. File your taxes free online However, there is an exception that applies to points, discussed later. File your taxes free online Mortgage interest credit. File your taxes free online   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. File your taxes free online Figure the credit on Form 8396, Mortgage Interest Credit. File your taxes free online If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. File your taxes free online   For more information on the credit, see chapter 37. File your taxes free online Ministers' and military housing allowance. File your taxes free online   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. File your taxes free online Hardest Hit Fund and Emergency Homeowners' Loan Programs. File your taxes free online   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. File your taxes free online You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. File your taxes free online You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. File your taxes free online If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). File your taxes free online However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. File your taxes free online Mortgage assistance payments under section 235 of the National Housing Act. File your taxes free online   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. File your taxes free online You cannot deduct the interest that is paid for you. File your taxes free online No other effect on taxes. File your taxes free online   Do not include these mortgage assistance payments in your income. File your taxes free online Also, do not use these payments to reduce other deductions, such as real estate taxes. File your taxes free online Divorced or separated individuals. File your taxes free online   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. File your taxes free online See the discussion of Payments for jointly-owned home in chapter 18. File your taxes free online Redeemable ground rents. File your taxes free online   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. File your taxes free online   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. File your taxes free online For more information, see Publication 936. File your taxes free online Nonredeemable ground rents. File your taxes free online   Payments on a nonredeemable ground rent are not mortgage interest. File your taxes free online You can deduct them as rent if they are a business expense or if they are for rental property. File your taxes free online Reverse mortgages. File your taxes free online   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. File your taxes free online With a reverse mortgage, you retain title to your home. File your taxes free online Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. File your taxes free online Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. File your taxes free online Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. File your taxes free online Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. File your taxes free online Rental payments. File your taxes free online   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. File your taxes free online This is true even if the settlement papers call them interest. File your taxes free online You cannot deduct these payments as home mortgage interest. File your taxes free online Mortgage proceeds invested in tax-exempt securities. File your taxes free online   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. File your taxes free online “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. File your taxes free online Refunds of interest. File your taxes free online   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. File your taxes free online If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. File your taxes free online However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. File your taxes free online This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. File your taxes free online    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. File your taxes free online For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. File your taxes free online   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. File your taxes free online Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. File your taxes free online Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. File your taxes free online A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. File your taxes free online See Points paid by the seller , later. File your taxes free online General Rule You generally cannot deduct the full amount of points in the year paid. File your taxes free online Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. File your taxes free online See Deduction Allowed Ratably , next. File your taxes free online For exceptions to the general rule, see Deduction Allowed in Year Paid , later. File your taxes free online Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. File your taxes free online You use the cash method of accounting. File your taxes free online This means you report income in the year you receive it and deduct expenses in the year you pay them. File your taxes free online Most individuals use this method. File your taxes free online Your loan is secured by a home. File your taxes free online (The home does not need to be your main home. File your taxes free online ) Your loan period is not more than 30 years. File your taxes free online If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. File your taxes free online Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. File your taxes free online Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. File your taxes free online (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. File your taxes free online ) Your loan is secured by your main home. File your taxes free online (Your main home is the one you ordinarily live in most of the time. File your taxes free online ) Paying points is an established business practice in the area where the loan was made. File your taxes free online The points paid were not more than the points generally charged in that area. File your taxes free online You use the cash method of accounting. File your taxes free online This means you report income in the year you receive it and deduct expenses in the year you pay them. File your taxes free online (If you want more information about this method, see Accounting Methods in chapter 1. File your taxes free online ) The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. File your taxes free online The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. File your taxes free online The funds you provided are not required to have been applied to the points. File your taxes free online They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. File your taxes free online You cannot have borrowed these funds from your lender or mortgage broker. File your taxes free online You use your loan to buy or build your main home. File your taxes free online The points were computed as a percentage of the principal amount of the mortgage. File your taxes free online The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. File your taxes free online The points may be shown as paid from either your funds or the seller's. File your taxes free online Figure 23-B. File your taxes free online Are My Points Fully Deductible This Year? Please click here for the text description of the image. File your taxes free online Figure 23-B. File your taxes free online Are My Points Fully Deductible This Year? Note. File your taxes free online If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. File your taxes free online Home improvement loan. File your taxes free online   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. File your taxes free online Second home. File your taxes free online You cannot fully deduct in the year paid points you pay on loans secured by your second home. File your taxes free online You can deduct these points only over the life of the loan. File your taxes free online Refinancing. File your taxes free online   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. File your taxes free online This is true even if the new mortgage is secured by your main home. File your taxes free online   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. File your taxes free online You can deduct the rest of the points over the life of the loan. File your taxes free online Example 1. File your taxes free online In 1998, Bill Fields got a mortgage to buy a home. File your taxes free online In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. File your taxes free online The mortgage is secured by his home. File your taxes free online To get the new loan, he had to pay three points ($3,000). File your taxes free online Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. File your taxes free online Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. File your taxes free online The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. File your taxes free online Bill's first payment on the new loan was due July 1. File your taxes free online He made six payments on the loan in 2013 and is a cash basis taxpayer. File your taxes free online Bill used the funds from the new mortgage to repay his existing mortgage. File your taxes free online Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. File your taxes free online He cannot deduct all of the points in 2013. File your taxes free online He can deduct two points ($2,000) ratably over the life of the loan. File your taxes free online He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. File your taxes free online The other point ($1,000) was a fee for services and is not deductible. File your taxes free online Example 2. File your taxes free online The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. File your taxes free online Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. File your taxes free online His deduction is $500 ($2,000 × 25%). File your taxes free online Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. File your taxes free online This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. File your taxes free online The total amount Bill deducts in 2013 is $550 ($500 + $50). File your taxes free online Special Situations This section describes certain special situations that may affect your deduction of points. File your taxes free online Original issue discount. File your taxes free online   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. File your taxes free online This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. File your taxes free online Amounts charged for services. File your taxes free online   Amounts charged by the lender for specific services connected to the loan are not interest. File your taxes free online Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. File your taxes free online You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. File your taxes free online Points paid by the seller. File your taxes free online   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. File your taxes free online Treatment by seller. File your taxes free online   The seller cannot deduct these fees as interest. File your taxes free online But they are a selling expense that reduces the amount realized by the seller. File your taxes free online See chapter 15 for information on selling your home. File your taxes free online Treatment by buyer. File your taxes free online    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. File your taxes free online If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. File your taxes free online If any of those tests are not met, the buyer deducts the points over the life of the loan. File your taxes free online   For information about basis, see chapter 13. File your taxes free online Funds provided are less than points. File your taxes free online   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. File your taxes free online In addition, you can deduct any points paid by the seller. File your taxes free online Example 1. File your taxes free online When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). File your taxes free online You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. File your taxes free online Of the $1,000 charged for points, you can deduct $750 in the year paid. File your taxes free online You spread the remaining $250 over the life of the mortgage. File your taxes free online Example 2. File your taxes free online The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. File your taxes free online In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). File your taxes free online You spread the remaining $250 over the life of the mortgage. File your taxes free online You must reduce the basis of your home by the $1,000 paid by the seller. File your taxes free online Excess points. File your taxes free online   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. File your taxes free online You must spread any additional points over the life of the mortgage. File your taxes free online Mortgage ending early. File your taxes free online   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. File your taxes free online However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. File your taxes free online Instead, deduct the remaining balance over the term of the new loan. File your taxes free online    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. File your taxes free online Example. File your taxes free online Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. File your taxes free online He deducts $200 points per year. File your taxes free online Through 2012, Dan has deducted $2,200 of the points. File your taxes free online Dan prepaid his mortgage in full in 2013. File your taxes free online He can deduct the remaining $800 of points in 2013. File your taxes free online Limits on deduction. File your taxes free online   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . File your taxes free online See Publication 936 for details. File your taxes free online Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. File your taxes free online The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. File your taxes free online Qualified mortgage insurance. File your taxes free online   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). File your taxes free online   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. File your taxes free online If provided by the Rural Housing Service, it is commonly known as a guarantee fee. File your taxes free online These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. File your taxes free online Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. File your taxes free online Special rules for prepaid mortgage insurance. File your taxes free online   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. File your taxes free online You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. File your taxes free online No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. File your taxes free online This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. File your taxes free online See the Example below. File your taxes free online Example. File your taxes free online Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. File your taxes free online Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. File your taxes free online Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. File your taxes free online Ryan's adjusted gross income (AGI) for 2012 is $76,000. File your taxes free online Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. File your taxes free online For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. File your taxes free online In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). File your taxes free online Limit on deduction. File your taxes free online   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. File your taxes free online See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. File your taxes free online If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. File your taxes free online Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. File your taxes free online You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. File your taxes free online A governmental unit is a person for purposes of furnishing the statement. File your taxes free online The statement for each year should be sent to you by January 31 of the following year. File your taxes free online A copy of this form will also be sent to the IRS. File your taxes free online The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. File your taxes free online However, it should not show any interest that was paid for you by a government agency. File your taxes free online As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. File your taxes free online However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. File your taxes free online See Points , earlier, to determine whether you can deduct points not shown on Form 1098. File your taxes free online Prepaid interest on Form 1098. File your taxes free online   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. File your taxes free online However, you cannot deduct the prepaid amount for January 2014 in 2013. File your taxes free online (See Prepaid interest , earlier. File your taxes free online ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. File your taxes free online You will include the interest for January 2014 with the other interest you pay for 2014. File your taxes free online See How To Report , later. File your taxes free online Refunded interest. File your taxes free online   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. File your taxes free online See Refunds of interest , earlier. File your taxes free online Mortgage insurance premiums. File your taxes free online   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. File your taxes free online See Mortgage Insurance Premiums, earlier. File your taxes free online Investment Interest This section discusses interest expenses you may be able to deduct as an investor. File your taxes free online If you borrow money to buy property you hold for investment, the interest you pay is investment interest. File your taxes free online You can deduct investment interest subject to the limit discussed later. File your taxes free online However, you cannot deduct interest you incurred to produce tax-exempt income. File your taxes free online Nor can you deduct interest expenses on straddles. File your taxes free online Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. File your taxes free online Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. File your taxes free online It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). File your taxes free online Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). File your taxes free online Partners, shareholders, and beneficiaries. File your taxes free online   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. File your taxes free online Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. File your taxes free online Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. File your taxes free online The allocation is not affected by the use of property that secures the debt. File your taxes free online Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. File your taxes free online You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. File your taxes free online The interest carried over is treated as investment interest paid or accrued in that next year. File your taxes free online You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. File your taxes free online Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. File your taxes free online Investment income. File your taxes free online    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). File your taxes free online Investment income does not include Alaska Permanent Fund dividends. File your taxes free online It also does not include qualified dividends or net capital gain unless you choose to include them. File your taxes free online Choosing to include qualified dividends. File your taxes free online   Investment income generally does not include qualified dividends, discussed in chapter 8. File your taxes free online However, you can choose to include all or part of your qualified dividends in investment income. File your taxes free online   You make this choice by completing Form 4952, line 4g, according to its instructions. File your taxes free online   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. File your taxes free online Choosing to include net capital gain. File your taxes free online   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). File your taxes free online However, you can choose to include all or part of your net capital gain in investment income. File your taxes free online    You make this choice by completing Form 4952, line 4g, according to its instructions. File your taxes free online   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. File your taxes free online    Before making either choice, consider the overall effect on your tax liability. File your taxes free online Compare your tax if you make one or both of these choices with your tax if you do not. File your taxes free online Investment income of child reported on parent's return. File your taxes free online    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. File your taxes free online If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. File your taxes free online Child's qualified dividends. File your taxes free online   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. File your taxes free online However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. File your taxes free online   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). File your taxes free online Child's Alaska Permanent Fund dividends. File your taxes free online   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. File your taxes free online To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. File your taxes free online Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. File your taxes free online Subtract the result from the amount on Form 8814, line 12. File your taxes free online Child's capital gain distributions. File your taxes free online    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. File your taxes free online However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. File your taxes free online   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). File your taxes free online Investment expenses. File your taxes free online   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. File your taxes free online Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. File your taxes free online Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. File your taxes free online Losses from passive activities. File your taxes free online   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). File your taxes free online See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. File your taxes free online Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. File your taxes free online Exception to use of Form 4952. File your taxes free online   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. File your taxes free online Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. File your taxes free online You do not have any other deductible investment expenses. File your taxes free online You have no carryover of investment interest expense from 2012. File your taxes free online If you meet all of these tests, you can deduct all of your investment interest. File your taxes free online More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. File your taxes free online Items You Cannot Deduct Some interest payments are not deductible. File your taxes free online Certain expenses similar to interest also are not deductible. File your taxes free online Nondeductible expenses include the following items. File your taxes free online Personal interest (discussed later). File your taxes free online Service charges (however, see Other Expenses (Line 23) in chapter 28). File your taxes free online Annual fees for credit cards. File your taxes free online Loan fees. File your taxes free online Credit investigation fees. File your taxes free online Interest to purchase or carry tax-exempt securities. File your taxes free online Penalties. File your taxes free online   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. File your taxes free online Personal Interest Personal interest is not deductible. File your taxes free online Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. File your taxes free online It includes the following items. File your taxes free online Interest on car loans (unless you use the car for business). File your taxes free online Interest on federal, state, or local income tax. File your taxes free online Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. File your taxes free online Late payment charges by a public utility. File your taxes free online You may be able to deduct interest you pay on a qualified student loan. File your taxes free online For details, see Publication 970, Tax Benefits for Education. File your taxes free online Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. File your taxes free online However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. File your taxes free online You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. File your taxes free online You do this by tracing disbursements of the debt proceeds to specific uses. File your taxes free online For details on how to do this, see chapter 4 of Publication 535. File your taxes free online How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. File your taxes free online Where you deduct your interest expense generally depends on how you use the loan proceeds. File your taxes free online See Table 23-1 for a summary of where to deduct your interest expense. File your taxes free online Home mortgage interest and points. File your taxes free online   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. File your taxes free online If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. File your taxes free online Attach a statement explaining the difference and print “See attached” next to line 10. File your taxes free online    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. File your taxes free online If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. File your taxes free online The seller must give you this number and you must give the seller your TIN. File your taxes free online A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. File your taxes free online Failure to meet any of these requirements may result in a $50 penalty for each failure. File your taxes free online The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. File your taxes free online See Social Security Number (SSN) in chapter 1 for more information about TINs. File your taxes free online    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. File your taxes free online   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. File your taxes free online More than one borrower. File your taxes free online   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. File your taxes free online Show how much of the interest each of you paid, and give the name and address of the person who received the form. File your taxes free online Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. File your taxes free online Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. File your taxes free online   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. File your taxes free online You should let each of the other borrowers know what his or her share is. File your taxes free online Mortgage proceeds used for business or investment. File your taxes free online    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. File your taxes free online It shows where to deduct the part of your excess interest that is for those activities. File your taxes free online Investment interest. File your taxes free online    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. File your taxes free online Amortization of bond premium. File your taxes free online   There are various ways to treat the premium you pay to buy taxable bonds. File your taxes free online See Bond Premium Amortization in Publication 550. File your taxes free online Income-producing rental or royalty interest. File your taxes free online   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). File your taxes free online Example. File your taxes free online You rent out part of your home and borrow money to make repairs. File your taxes free online You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). File your taxes free online Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. File your taxes free online Table 23-1. File your taxes free online Where To Deduct Your Interest Expense IF you have . File your taxes free online . File your taxes free online . File your taxes free online THEN deduct it on . File your taxes free online . File your taxes free online . File your taxes free online AND for more information go to . File your taxes free online . File your taxes free online . File your taxes free online deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. File your taxes free online deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. File your taxes free online deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. File your taxes free online deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. File your taxes free online deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. File your taxes free online deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. File your taxes free online deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. File your taxes free online deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. File your taxes free online deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. File your taxes free online personal interest not deductible. File your taxes free online Prev  Up  Next   Home   More Online Publications
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File your taxes free online Publication 4492-B - Main Content Table of Contents DefinitionsMidwestern Disaster Areas Applicable Disaster Date Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Casualty and Theft LossesTime limit for making election. File your taxes free online Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Disaster Recovery Assistance Distributions Repayment of Qualified Disaster Recovery Assistance Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesEmployee Retention Credit Employer Housing Credit and Exclusion Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). File your taxes free online Definitions The following definitions are used throughout this publication. File your taxes free online Midwestern Disaster Areas A Midwestern disaster area is an area for which a major disaster was declared by the President during the period beginning on May 20, 2008, and ending on July 31, 2008, in the state of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, or Wisconsin, as a result of severe storms, tornadoes, or flooding that occurred on the applicable disaster date. File your taxes free online See Tables 1 and 2 for a list of the counties included in the Midwestern disaster areas. File your taxes free online Applicable Disaster Date The term “applicable disaster date” as used in this publication, refers to the date on which the severe storms, tornadoes, or flooding occurred in the Midwestern disaster areas. File your taxes free online You will need to know this date when using this publication for the various tax provisions. File your taxes free online Table 1 The counties listed in Table 1 below are eligible for all tax provisions shown in this publication. File your taxes free online Applicable Disaster Dates* State Affected Counties—Midwestern Disaster Areas 05/02/2008through05/12/2008 Arkansas Arkansas, Benton, Cleburne, Conway, Crittenden, Grant, Lonoke, Mississippi, Phillips, Pulaski, Saline, and Van Buren. File your taxes free online 06/01/2008through07/22/2008 Illinois Adams, Calhoun, Clark, Coles, Crawford, Cumberland, Douglas, Edgar, Hancock, Henderson, Jasper, Jersey, Lake, Lawrence, Mercer, Rock Island, Whiteside, and Winnebago. File your taxes free online 05/30/2008through06/27/2008 Indiana Adams, Bartholomew, Brown, Clay, Daviess, Dearborn, Decatur, Gibson, Grant, Greene, Hamilton, Hancock, Hendricks, Henry, Huntington, Jackson, Jefferson, Jennings, Johnson, Knox, Lawrence, Madison, Marion, Monroe, Morgan, Owen, Parke, Pike, Posey, Putnam, Randolph, Ripley, Rush, Shelby, Sullivan, Tippecanoe, Vermillion, Vigo, Washington, and Wayne. File your taxes free online 05/25/2008through08/13/2008 Iowa Adair, Adams, Allamakee, Appanoose, Audubon, Benton, Black Hawk, Boone, Bremer, Buchanan, Butler, Cass, Cedar, Cerro Gordo, Chickasaw, Clarke, Clayton, Clinton, Crawford, Dallas, Davis, Decatur, Delaware, Des Moines, Dubuque, Fayette, Floyd, Franklin, Fremont, Greene, Grundy, Guthrie, Hamilton, Hancock, Hardin, Harrison, Henry, Howard, Humboldt, Iowa, Jackson, Jasper, Johnson, Jones, Keokuk, Kossuth, Lee, Linn, Louisa, Lucas, Madison, Mahaska, Marion, Marshall, Mills, Mitchell, Monona, Monroe, Montgomery, Muscatine, Page, Polk, Pottawattamie, Poweshiek, Ringgold, Scott, Story, Tama, Union, Van Buren, Wapello, Warren, Washington, Webster, Winnebago, Winneshiek, Worth, and Wright. File your taxes free online 05/10/2008through05/11/2008 Missouri Barry, Jasper, and Newton. File your taxes free online 06/01/2008through08/13/2008 Missouri Adair, Andrew, Callaway, Cass, Chariton, Clark, Gentry, Greene, Harrison, Holt, Johnson, Lewis, Lincoln, Linn, Livingston, Macon, Marion, Monroe, Nodaway, Pike, Putnam, Ralls, St. File your taxes free online Charles, Stone, Taney, Vernon, and Webster. File your taxes free online 05/22/2008through06/24/2008 Nebraska Buffalo, Butler, Colfax, Custer, Dawson, Douglas, Gage, Hamilton, Holt, Jefferson, Kearney, Lancaster, Platte, Richardson, Sarpy, and Saunders. File your taxes free online 06/05/2008through07/25/2008 Wisconsin Adams, Calumet, Crawford, Columbia, Dane, Dodge, Fond du Lac, Grant, Green, Green Lake, Iowa, Jefferson, Juneau, Kenosha, La Crosse, Manitowoc, Marquette, Milwaukee, Monroe, Ozaukee, Racine, Richland, Rock, Sauk, Sheboygan, Vernon, Walworth, Washington, Waukesha, and Winnebago. File your taxes free online *For more details, go to www. File your taxes free online fema. File your taxes free online gov Table 2 The counties listed in Table 2 below are eligible for all of the special tax provisions shown in this publication except the following. File your taxes free online Charitable Giving Incentives. File your taxes free online Net Operating Losses. File your taxes free online Education Credits. File your taxes free online Recapture of Federal Mortgage Subsidy. File your taxes free online Tax Relief for Temporary Relocation. File your taxes free online Employee Retention Credit. File your taxes free online Employer Housing Credit and Exclusion. File your taxes free online Demolition and Clean-up Costs. File your taxes free online Increase in Rehabilitation Credit. File your taxes free online Applicable Disaster Dates* State Affected Counties—Midwestern Disaster Areas 06/01/2008through07/22/2008 Illinois Greene, Madison, Monroe, Pike, Randolph, St. File your taxes free online Clair, and Scott. File your taxes free online 05/30/2008through06/27/2008 Indiana Benton, Boone, Fountain, Franklin, Jay, Montgomery, Ohio, Switzerland, Union, and Wabash. File your taxes free online 05/25/2008through08/13/2008 Iowa Carroll, Cherokee, Lyon, Palo Alto, Pocahontas, Taylor, and Wayne. File your taxes free online 05/22/2008through06/16/2008 Kansas Barber, Barton, Bourbon, Brown, Butler, Chautauqua, Cherokee, Clark, Clay, Comanche, Cowley, Crawford, Decatur, Dickinson, Edwards, Elk, Ellis, Ellsworth, Franklin, Gove, Graham, Harper, Haskell, Hodgeman, Jackson, Jewell, Kingman, Kiowa, Lane, Linn, Logan, Mitchell, Montgomery, Ness, Norton, Osborne, Pawnee, Phillips, Pratt, Reno, Republic, Riley, Rooks, Rush, Saline, Seward, Sheridan, Smith, Stafford, Sumner, Thomas, Trego, Wallace, and Wilson. File your taxes free online 06/06/2008through06/13/2008 Michigan Allegan, Barry, Eaton, Ingham, Lake, Manistee, Mason, Missaukee, Osceola, Ottawa, Saginaw, and Wexford. File your taxes free online 06/06/2008through06/12/2008 Minnesota Cook, Fillmore, Freeborn, Houston, Mower, and Nobles. File your taxes free online 06/01/2008through08/13/2008 Missouri Atchison, Audrain, Bates, Buchanan, Cape Girardeau, Carroll, Christian, Daviess, Grundy, Howard, Jefferson, Knox, Mercer, Miller, Mississippi, Morgan, New Madrid, Pemiscot, Perry, Pettis, Platte, Polk, Randolph, Ray, Saline, Schuyler, Scotland, Shelby, St. File your taxes free online Genevieve, St. File your taxes free online Louis, the Independent City of St. File your taxes free online Louis, Scott, Sullivan, and Worth. File your taxes free online 04/23/2008through04/26/2008 Nebraska Gage, Johnson, Morrill, Nemaha, and Pawnee. File your taxes free online 05/22/2008through06/24/2008 Nebraska Adams, Blaine, Boone, Boyd, Brown, Burt, Cass, Chase, Cherry, Cuming, Dundy, Fillmore, Frontier, Furnas, Garfield, Gosper, Greeley, Hall, Hayes, Howard, Johnson, Keya Paha, Lincoln, Logan, Loup, Merrick, McPherson, Morrill, Nance, Nemaha, Otoe, Phelps, Polk, Red Willow, Rock, Saline, Seward, Sherman, Stanton, Thayer, Thomas, Thurston, Valley, Webster, Wheeler, and York. File your taxes free online 06/27/2008 Nebraska Dodge, Douglas, Sarpy, and Saunders. File your taxes free online 06/05/2008through07/25/2008 Wisconsin Lafayette. File your taxes free online * For more details, go to www. File your taxes free online fema. File your taxes free online gov Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions This benefit applies only to the counties in Table 1. File your taxes free online Individuals. File your taxes free online   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% of adjusted gross income (AGI) limit. File your taxes free online A qualified contribution is a charitable contribution paid in cash or by check to a 50% limit organization if you make an election to have the 50% limit not apply to these contributions. File your taxes free online   A qualified contribution must also meet all of the following requirements. File your taxes free online Be paid after May 1, 2008, and before January 1, 2009. File your taxes free online The contribution must be for relief efforts in one or more Midwestern disaster areas. File your taxes free online Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. File your taxes free online   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. File your taxes free online You can carry over any contributions you are not able to deduct for 2008 because of this limit. File your taxes free online In 2009, the carryover of your unused qualified contributions is subject to the 50% of AGI limit. File your taxes free online Exception. File your taxes free online   Qualified contributions do not include contributions to certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund. File your taxes free online Corporations. File your taxes free online   A corporation can elect to deduct qualified cash contributions without regard to the 10% of taxable income limit if the contributions were paid after May 1, 2008, and before January 1, 2009, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund), for relief efforts in one or more Midwestern disaster areas. File your taxes free online Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. File your taxes free online The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. File your taxes free online Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% of taxable income limit. File your taxes free online Partners and shareholders. File your taxes free online   Each partner in a partnership and each shareholder in an S corporation must make a separate election to have the appropriate limit not apply. File your taxes free online More information. File your taxes free online   For more information, see Publication 526 or Publication 542, Corporations. File your taxes free online Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. File your taxes free online Standard Mileage Rate for Charitable Use of Vehicles This benefit applies only to the counties in Table 1. File your taxes free online The following are special standard mileage rates in effect for 2008 for the cost of operating your vehicle for providing charitable services related only to the severe storms, tornadoes, or flooding. File your taxes free online 36 cents per mile for the period beginning on the applicable disaster date through June 30, 2008. File your taxes free online 41 cents per mile for the period July 1 through December 31, 2008. File your taxes free online Mileage Reimbursements to Charitable Volunteers This benefit applies only to the counties in Table 1. File your taxes free online You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger vehicle for the benefit of a qualified charitable organization in providing relief related to the severe storms, tornadoes, or flooding during the period beginning on the applicable disaster date, and ending on December 31, 2008. File your taxes free online You cannot claim a deduction or credit for amounts you exclude. File your taxes free online You must keep records of miles driven, time, place (or use), and purpose of the mileage. File your taxes free online The amount you can exclude cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. File your taxes free online 50. File your taxes free online 5 cents per mile for the period beginning on the applicable disaster date through June 30, 2008. File your taxes free online 58. File your taxes free online 5 cents per mile for the period July 1 through December 31, 2008. File your taxes free online Casualty and Theft Losses This benefit applies to the counties in both Tables 1 and 2. File your taxes free online The following paragraphs explain changes to casualty and theft losses that were caused by the severe storms, tornadoes, or flooding in the Midwestern disaster areas. File your taxes free online For more information, see Publication 547. File your taxes free online Limits on personal casualty or theft losses. File your taxes free online   Losses of personal use property that arose in a Midwestern disaster area on or after the applicable disaster date are not subject to the $100 or 10% of AGI limits. File your taxes free online Qualifying losses include losses from casualties and thefts that arose in a Midwestern disaster area that were attributable to the severe storms, tornadoes, or flooding. File your taxes free online When completing Form 4684, do not include on line 17 any losses that arose in a Midwestern disaster area. File your taxes free online A loss arising in a Midwestern disaster area is not considered a loss attributable to a federally declared disaster for purposes of that line and cannot be added to your standard deduction. File your taxes free online When to deduct the loss. File your taxes free online   Casualty and theft losses are generally deductible only in the year the casualty occurred or the theft was discovered. File your taxes free online However, you can elect to deduct losses caused by the severe storms, tornadoes, or flooding on your return for the prior year. File your taxes free online Special instructions for individuals who elect to claim a Midwestern disaster area casualty or theft loss for 2007. File your taxes free online   Individuals filing or amending their 2007 tax return for casualty or theft losses that were attributable to the severe storms, tornadoes, or flooding should: Enter “Midwestern Disaster Area” at the top of Form 1040 or Form 1040X, and Complete the 2008 version of Form 4684. File your taxes free online Cross out “2008” and enter “2007” at the top of Form 4684. File your taxes free online Time limit for making election. File your taxes free online   You must make this election to claim your casualty or theft loss in 2007 by the later of the following dates. File your taxes free online The due date (without extensions) for filing your 2008 income tax return. File your taxes free online The due date (with extensions) for filing your 2007 income tax return. File your taxes free online Example. File your taxes free online If you are a calendar year individual taxpayer, you have until April 15, 2009, to amend your 2007 tax return to claim a casualty or theft loss that occurred during 2008. File your taxes free online Replacement Period for Nonrecognition of Gain This benefit applies to the counties in both Tables 1 and 2. File your taxes free online Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. File your taxes free online Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a federally declared disaster area). File your taxes free online However, for property that was involuntarily converted on or after the applicable disaster date, as a result of the severe storms, tornadoes, or flooding, a 5-year replacement period applies if substantially all of the use of the replacement property is in a Midwestern disaster area. File your taxes free online For more information, see the Instructions for Form 4684. File your taxes free online Net Operating Losses This benefit applies only to the counties in Table 1. File your taxes free online Qualified disaster recovery assistance loss. File your taxes free online   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. File your taxes free online However, the portion of an NOL that is a qualified disaster recovery assistance loss can be carried back to the 5 tax years before the NOL year. File your taxes free online In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. File your taxes free online   A qualified disaster recovery assistance loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified disaster recovery assistance casualty loss (as defined below), Moving expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the employment of an individual whose main home was in a Midwestern disaster area before the applicable disaster date, who was unable to remain in that home because of the severe storms, tornadoes, or flooding, and whose main job location (after the move) is in a Midwestern disaster area, Temporary housing expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, to house employees of the taxpayer whose main job location is in a Midwestern disaster area, Depreciation or amortization allowable for any qualified disaster recovery assistance property (even if you elected not to claim the special disaster recovery assistance depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred on or after the applicable disaster date, and before January 1, 2011, for any damage from the severe storms, tornadoes, or flooding to property located in a Midwestern disaster area. File your taxes free online Qualified disaster recovery assistance casualty loss. File your taxes free online   A qualified disaster recovery assistance casualty loss is any deductible section 1231 loss of property located in a Midwestern disaster area if the loss was caused by the severe storms, tornadoes, or flooding. File your taxes free online For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by the severe storms, tornadoes, or flooding of property located in a Midwestern disaster area. File your taxes free online Any such loss taken into account in figuring your qualified disaster recovery assistance loss is not eligible for the election to be treated as having occurred in the previous tax year. File your taxes free online More information. File your taxes free online   For more information on NOLs, see Publication 536 or Publication 542, Corporations. File your taxes free online IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of the severe storms, tornadoes, or flooding. File your taxes free online Definitions Qualified disaster recovery assistance distribution. File your taxes free online   A qualified disaster recovery assistance distribution is any distribution you received from an eligible retirement plan if all of the following apply. File your taxes free online The distribution was made on or after the applicable disaster date and before January 1, 2010. File your taxes free online Your main home was located in a Midwestern disaster area on the applicable disaster date. File your taxes free online You sustained an economic loss because of the severe storms, tornadoes, or flooding and your main home was in a Midwestern disaster area on the applicable disaster date. File your taxes free online Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File your taxes free online   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified disaster recovery assistance distribution, regardless of whether the distribution was made on account of the severe storms, tornadoes, or flooding. File your taxes free online Qualified disaster recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss. File your taxes free online   The total of your qualified disaster recovery assistance distributions from all plans is limited to $100,000. File your taxes free online If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you can allocate the $100,000 limit among the plans any way you choose. File your taxes free online   A reduction or offset (on or after the applicable disaster date) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified disaster recovery assistance distribution. File your taxes free online Eligible retirement plan. File your taxes free online   An eligible retirement plan can be any of the following. File your taxes free online A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). File your taxes free online A qualified annuity plan. File your taxes free online A tax-sheltered annuity contract. File your taxes free online A governmental section 457 deferred compensation plan. File your taxes free online A traditional, SEP, SIMPLE, or Roth IRA. File your taxes free online Main home. File your taxes free online   Generally, your main home is the home where you live most of the time. File your taxes free online A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. File your taxes free online Taxation of Qualified Disaster Recovery Assistance Distributions This benefit applies to the counties in both Tables 1 and 2. File your taxes free online Qualified disaster recovery assistance distributions are included in income in equal amounts over three years. File your taxes free online However, if you elect, you can include the entire distribution in your income in the year it was received. File your taxes free online Qualified disaster recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). File your taxes free online However, any distributions you receive in excess of the $100,000 qualified disaster recovery assistance distribution limit may be subject to the additional tax on early distributions. File your taxes free online For more information, see Form 8930. File your taxes free online Repayment of Qualified Disaster Recovery Assistance Distributions This benefit applies to the counties in both Tables 1 and 2. File your taxes free online If you choose, you generally can repay any portion of a qualified disaster recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. File your taxes free online Also, you can repay a qualified disaster recovery assistance distribution made on account of a hardship from a retirement plan. File your taxes free online However, see Exceptions later for qualified disaster recovery assistance distributions you cannot repay. File your taxes free online You have three years from the day after the date you received the distribution to make a repayment. File your taxes free online Amounts that are repaid are treated as a qualified rollover and are not included in income. File your taxes free online Also, a repayment of a qualified disaster recovery assistance distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. File your taxes free online See Form 8930 for more information on how to report repayments. File your taxes free online Exceptions. File your taxes free online   You cannot repay the following types of distributions. File your taxes free online Qualified disaster recovery assistance distributions received as a beneficiary (other than a surviving spouse). File your taxes free online Required minimum distributions. File your taxes free online Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. File your taxes free online Repayment of Qualified Distributions for the Purchase or Construction of a Main Home This benefit applies to the counties in both Tables 1 and 2. File your taxes free online If you received a qualified distribution to purchase or construct a main home in a Midwestern disaster area, you can repay part or all of that distribution on or after the applicable disaster date, but no later than March 3, 2009, to an eligible retirement plan. File your taxes free online For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. File your taxes free online To be a qualified distribution, the distribution must meet all of the following requirements. File your taxes free online The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. File your taxes free online The distribution was received after the date that was 6 months before the day after the applicable disaster date. File your taxes free online The distribution was to be used to purchase or construct a main home in a Midwestern disaster area that was not purchased or constructed because of the severe storms, tornadoes, or flooding. File your taxes free online Amounts that are repaid before March 4, 2009, are treated as a qualified rollover and are not included in income. File your taxes free online Also, a repayment of a qualified distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. File your taxes free online A qualified distribution not repaid before March 4, 2009, may be taxable for 2007 or 2008 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. File your taxes free online You must file Form 8930 if you received a qualified distribution that you repaid, in whole or in part, before March 4, 2009. File your taxes free online Loans From Qualified Plans This benefit applies to the counties in both Tables 1 and 2. File your taxes free online The following benefits are available to qualified individuals. File your taxes free online Increases to the limits for distributions treated as loans from employer plans. File your taxes free online A 1-year suspension for payments due on plan loans. File your taxes free online Qualified individual. File your taxes free online   You are a qualified individual if your main home was located in a Midwestern disaster area on the applicable disaster date and you had an economic loss because of the severe storms, tornadoes, or flooding. File your taxes free online Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File your taxes free online Limits on plan loans. File your taxes free online   The $50,000 limit for distributions treated as plan loans is increased to $100,000. File your taxes free online In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. File your taxes free online If your main home was located in a Midwestern disaster area, the higher limits apply only to loans received during the period beginning on October 3, 2008, and ending on December 31, 2009. File your taxes free online One-year suspension of loan payments. File your taxes free online   Payments on plan loans outstanding on or after the applicable disaster date, may be suspended for 1 year by the plan administrator. File your taxes free online To qualify for the suspension, the due date for any loan payment must occur during the period beginning on the applicable disaster date and ending on December 31, 2009. File your taxes free online Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit This benefit applies to the counties in both Tables 1 and 2. File your taxes free online You can elect to use your 2007 earned income to figure your earned income credit (EIC) and additional child tax credit for 2008 if: Your 2008 earned income is less than your 2007 earned income, and At least one of the following statements is true. File your taxes free online Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 1. File your taxes free online Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 2, and you were displaced from that home because of the severe storms, tornadoes, or flooding. File your taxes free online Earned income. File your taxes free online    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. File your taxes free online If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. File your taxes free online Joint returns. File your taxes free online   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. File your taxes free online If you make the election, your 2007 earned income is the sum of your 2007 earned income and your spouse's 2007 earned income. File your taxes free online Making the election. File your taxes free online   If you make the election to use your 2007 earned income, the election applies for figuring both the EIC and the additional child tax credit. File your taxes free online However, you can make the election for the additional child tax credit even if you do not take the EIC. File your taxes free online   Electing to use your 2007 earned income can increase or decrease your EIC. File your taxes free online Take the following steps to decide whether to make the election. File your taxes free online Figure your 2008 EIC using your 2007 earned income. File your taxes free online Figure your 2008 additional child tax credit using your 2007 earned income for EIC purposes. File your taxes free online Add the results of (1) and (2). File your taxes free online Figure your 2008 EIC using your 2008 earned income. File your taxes free online Figure your 2008 additional child tax credit using your 2008 earned income for additional child tax credit purposes. File your taxes free online Add the results of (4) and (5). File your taxes free online Compare the results of (3) and (6). File your taxes free online If (3) is larger than (6), it is to your benefit to make the election. File your taxes free online If (3) is equal to or smaller than (6), making the election will not help you. File your taxes free online   If you elect to use your 2007 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2007 earned income on the dotted line next to line 64a of Form 1040, on the line next to line 40a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. File your taxes free online   If you elect to use your 2007 earned income and you are claiming the additional child tax credit, enter your 2007 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. File your taxes free online Getting your 2007 tax return information. File your taxes free online   If you do not have your 2007 tax records, you can get the amount of earned income used to figure your 2007 EIC by calling 1-866-562-5227. File your taxes free online You can also get this information by visiting the IRS website at www. File your taxes free online irs. File your taxes free online gov. File your taxes free online   If you prefer to figure your 2007 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. File your taxes free online See Request for Copy or Transcript of Tax Return on page 11. File your taxes free online Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding This benefit applies to the counties in both Tables 1 and 2. File your taxes free online You can claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by the severe storms, tornadoes, or flooding. File your taxes free online The additional exemption amount is claimed on Form 8914. File your taxes free online You can claim an additional exemption amount only one time for a specific individual. File your taxes free online If you claimed an additional exemption amount for an individual in 2008, you cannot claim that amount again for the same individual in 2009. File your taxes free online The maximum additional exemption amount you can claim for all displaced individuals is $2,000. File your taxes free online Any additional exemption amount you claimed for displaced individuals in 2008 will reduce the $2,000 maximum for 2009. File your taxes free online The $2,000 limit applies to a husband and wife, whether the husband and wife file joint returns or separate returns. File your taxes free online If married filing separately, the $2,000 can be divided in $500 increments between the spouses. File your taxes free online For example, if one spouse claims an additional exemption amount for one displaced individual, the other spouse, if otherwise eligible, can claim additional exemption amounts for three different displaced individuals. File your taxes free online If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. File your taxes free online In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). File your taxes free online To qualify as a displaced individual, the individual: Must have had his or her main home in a Midwestern disaster area on the applicable disaster date, and he or she must have been displaced from that home. File your taxes free online If the individual's main home was located in a Midwestern disaster area as shown in Table 2, that home must have been damaged by the severe storms, tornadoes, or flooding or the individual must have been evacuated from that home because of the severe storms, tornadoes, or flooding, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. File your taxes free online You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. File your taxes free online You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. File your taxes free online Food, clothing, or personal items consumed or used by the displaced individual. File your taxes free online Reimbursement for the cost of any long distance telephone calls made by the displaced individual. File your taxes free online Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. File your taxes free online However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. File your taxes free online Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. File your taxes free online For more information, see Form 8914. File your taxes free online Education Credits This benefit applies only to the counties in Table 1. File your taxes free online The education credits have been expanded for students attending an eligible educational institution located in a Midwestern disaster area (Midwestern disaster area students) for any tax year beginning in 2008 or 2009. File your taxes free online The Hope credit for a Midwestern disaster area student is increased to 100% of the first $2,400 in qualified education expenses and 50% of the next $2,400 of qualified education expenses for a maximum credit of $3,600 per student. File your taxes free online The lifetime learning credit rate for a Midwestern disaster area student is increased from 20% to 40%. File your taxes free online The definition of qualified education expenses for a Midwestern disaster area student also has been expanded. File your taxes free online This expanded definition also applies to the tuition and fees deduction claimed on Form 8917. File your taxes free online In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a Midwestern disaster area student include the following. File your taxes free online Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. File your taxes free online For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. File your taxes free online For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. File your taxes free online The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. File your taxes free online The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. File your taxes free online You will need to contact the eligible educational institution for qualified room and board costs. File your taxes free online For more information, see Form 8863. File your taxes free online See Form 8917 for the tuition and fees deduction. File your taxes free online Recapture of Federal Mortgage Subsidy This benefit applies only to the counties in Table 1. File your taxes free online Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. File your taxes free online However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. File your taxes free online This amount is increased to $150,000 if the loan was provided before 2011 and was used to alter, repair, or improve an existing owner-occupied residence in a Midwestern disaster area as shown in Table 1. File your taxes free online Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding This benefit applies to the counties in both Tables 1 and 2. File your taxes free online Generally, discharges of nonbusiness debts (such as mortgages) made on or after the applicable disaster date and before January 1, 2010, are excluded from income for individuals whose main home was in a Midwestern disaster area on the applicable disaster date. File your taxes free online If the individual's main home was located in a Midwestern disaster area as shown in Table 2, the individual also must have had an economic loss because of the severe storms, tornadoes, or flooding. File your taxes free online Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. File your taxes free online This relief does not apply to any debt secured by real property located outside a Midwestern disaster area. File your taxes free online You may also have to reduce certain tax attributes by the amount excluded. File your taxes free online For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). File your taxes free online Tax Relief for Temporary Relocation This benefit applies only to the counties in Table 1. File your taxes free online The IRS can adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2008 or 2009 as a result of a temporary relocation caused by the severe storms, tornadoes, or flooding. File your taxes free online However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. File your taxes free online The IRS has exercised this authority as follows. File your taxes free online In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding. File your taxes free online In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding. File your taxes free online You can treat as a student an individual who enrolled in school before the applicable disaster date, and who is unable to attend classes because of the severe storms, tornadoes, or flooding, for each month of the enrollment period that individual is prevented by the severe storms, tornadoes, or flooding from attending school as planned. File your taxes free online Additional Tax Relief for Businesses Employee Retention Credit This benefit applies only to the counties in Table 1. File your taxes free online An eligible employer who conducted an active trade or business in a Midwestern disaster area can claim the employee retention credit. File your taxes free online The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). File your taxes free online Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). File your taxes free online Use Form 5884-A to claim the credit. File your taxes free online Employers affected by the severe storms, tornadoes, or flooding. File your taxes free online   The following definitions apply to employers affected by the severe storms, tornadoes, or flooding. File your taxes free online Eligible employer. File your taxes free online   For this purpose, an eligible employer is any employer who meets all of the following. File your taxes free online Employed an average of not more than 200 employees on business days during the tax year before the applicable disaster date. File your taxes free online Conducted an active trade or business on the applicable disaster date in a Midwestern disaster area. File your taxes free online Whose trade or business was inoperable on any day after the applicable disaster date and before January 1, 2009, because of the damage caused by the severe storms, tornadoes, or flooding. File your taxes free online Eligible employee. File your taxes free online   For this purpose, an eligible employee is an employee whose principal place of employment on the applicable disaster date with such eligible employer was in a Midwestern disaster area. File your taxes free online An employee is not an eligible employee for purposes of the severe storms, tornadoes, or flooding if the employee is treated as an eligible employee for the work opportunity credit. File your taxes free online Qualified wages. File your taxes free online   Qualified wages are wages (up to $6,000 per employee) you paid or incurred before January 1, 2009, for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable disaster, and ending on the date your trade or business resumed significant operations at that place. File your taxes free online In addition, the wages must have been paid or incurred after the applicable disaster date. File your taxes free online    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. File your taxes free online    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). File your taxes free online Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. File your taxes free online Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. File your taxes free online   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. File your taxes free online For a special rule that applies to railroad employees, see section 51(h)(1)(B). File your taxes free online   Qualified wages do not include the following. File your taxes free online Wages paid to your dependent or a related individual. File your taxes free online See section 51(i)(1). File your taxes free online Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. File your taxes free online Wages for services of replacement workers during a strike or lockout. File your taxes free online   For more information, see Form 5884-A. File your taxes free online Employer Housing Credit and Exclusion This benefit applies only to the counties in Table 1. File your taxes free online An employer who conducted an active trade or business in a Midwestern disaster area can claim the employer housing credit. File your taxes free online The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from November 1, 2008, through May 1, 2009. File your taxes free online The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). File your taxes free online Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). File your taxes free online The employer must use Form 5884-A to claim the credit. File your taxes free online A qualified employee is an individual who had a main home in a Midwestern disaster area on the applicable disaster date, and who performs substantially all employment services in a Midwestern disaster area for the employer furnishing the lodging. File your taxes free online The employee cannot be your dependent or a related individual. File your taxes free online See section 51(i)(1). File your taxes free online For more information, see Form 5884-A. File your taxes free online Demolition and Clean-up Costs This benefit applies only to the counties in Table 1. File your taxes free online You can elect to deduct 50% of any qualified disaster recovery assistance clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. File your taxes free online Qualified disaster recovery assistance clean-up costs are any amounts paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the removal of debris from, or the demolition of structures on, real property located in a Midwestern disaster area that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. File your taxes free online Qualified disaster recovery assistance clean-up costs are limited to amounts necessary due to damage attributable to the severe storms, tornadoes, or flooding in the Midwestern disaster areas. File your taxes free online Increase in Rehabilitation Tax Credit This benefit applies only to the counties in Table 1. File your taxes free online The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred on or after the applicable disaster date, and before January 1, 2012, on buildings located in a Midwestern disaster area as follows. File your taxes free online For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. File your taxes free online For certified historic structures, the credit percentage is increased from 20% to 26%. File your taxes free online For more information, see Form 3468, Investment Credit. File your taxes free online Request for Copy or Transcript of Tax Return Request for copy of tax return. File your taxes free online   You can use Form 4506 to order a copy of your tax return. File your taxes free online Generally, there is a $57 fee for requesting each copy of a tax return. File your taxes free online If your main home, principal place of business, or tax records are located in a Midwestern disaster area, the fee will be waived if “Midwestern Disaster Area” is written in red across the top of the form when filed. File your taxes free online Request for transcript of tax return. File your taxes free online   You can use Form 4506-T to order a free transcript of your tax return. File your taxes free online A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. File your taxes free online You can also call 1-800-829-1040 to order a transcript. File your taxes free online How To Get Tax Help Special IRS assistance. File your taxes free online   The IRS is providing special help for those affected by the severe storms, tornadoes, or flooding, as well as survivors and personal representatives of the victims. File your taxes free online We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by recent federally declared disasters, or who have other tax issues related to the severe storms, tornadoes, or flooding. File your taxes free online Call 1-866-562-5227 Monday through FridayIn English–7 a. File your taxes free online m. File your taxes free online to 10 p. File your taxes free online m. File your taxes free online local timeIn Spanish–8 a. File your taxes free online m. File your taxes free online to 9:30 p. File your taxes free online m. File your taxes free online local time   The IRS website at www. File your taxes free online irs. File your taxes free online gov has notices and other tax relief information. File your taxes free online Check it periodically for any new guidance. File your taxes free online You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. File your taxes free online By selecting the method that is best for you, you will have quick and easy access to tax help. File your taxes free online Contacting your Taxpayer Advocate. File your taxes free online   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. File your taxes free online Here are seven things every taxpayer should know about TAS: TAS is your voice at the IRS. File your taxes free online Our service is free, confidential, and tailored to meet your needs. File your taxes free online You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. File your taxes free online TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. File your taxes free online This includes businesses as well as individuals. File your taxes free online TAS employees know the IRS and how to navigate it. File your taxes free online We will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. File your taxes free online TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. File your taxes free online You can call your local advocate, whose number is in your phone book, in Pub. File your taxes free online 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. File your taxes free online irs. File your taxes free online gov/advocate. File your taxes free online You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. File your taxes free online You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. File your taxes free online taxtoolkit. File your taxes free online irs. File your taxes free online gov. File your taxes free online Low Income Taxpayer Clinics (LITCs). File your taxes free online   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. File your taxes free online LITCs are independent from the IRS. File your taxes free online Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. File your taxes free online If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. File your taxes free online For more information, see Publication 4134, Low Income Taxpayer Clinic List. File your taxes free online This publication is available at www. File your taxes free online irs. File your taxes free online gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. File your taxes free online Free tax services. File your taxes free online   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. File your taxes free online It contains lists of free tax information sources, including publications, services, and free tax education and assistance programs. File your taxes free online It also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on your telephone. File your taxes free online   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. File your taxes free online Free help with your return. File your taxes free online   Free help in preparing your return is available nationwide from IRS-trained volunteers. File your taxes free online The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. File your taxes free online Many VITA sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. File your taxes free online To find the nearest VITA or TCE site, call 1-800-829-1040. File your taxes free online   As part of the TCE program, AARP offers the Tax-Aide counseling program. File your taxes free online To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website atwww. File your taxes free online aarp. File your taxes free online org/money/taxaide. File your taxes free online   For more information on these programs, go to www. File your taxes free online irs. File your taxes free online gov and enter keyword “VITA” in the upper right-hand corner. File your taxes free online Internet. File your taxes free online You can access the IRS website at www. File your taxes free online irs. File your taxes free online gov 24 hours a day, 7 days a week to: E-file your return. File your taxes free online Find out about commercial tax preparation and e-file services available free to eligible taxpayers. File your taxes free online Check the status of your 2009 refund. File your taxes free online Go to www. File your taxes free online irs. File your taxes free online gov and click on Where's My Refund. File your taxes free online Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. File your taxes free online If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). File your taxes free online Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. File your taxes free online Download forms, instructions, and publications. File your taxes free online Order IRS products online. File your taxes free online Research your tax questions online. File your taxes free online Search publications online by topic or keyword. File your taxes free online Use the online Internal Revenue Code, Regulations, or other official guidance. File your taxes free online View Internal Revenue Bulletins (IRBs) published in the last few years. File your taxes free online Figure your withholding allowances using the withholding calculator online at www. File your taxes free online irs. File your taxes free online gov/individuals. File your taxes free online Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant. File your taxes free online Sign up to receive local and national tax news by email. File your taxes free online Get information on starting and operating a small business. File your taxes free online Phone. File your taxes free online Many services are available by phone. File your taxes free online Ordering forms, instructions, and publications. File your taxes free online Call 1-800-TAX FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. File your taxes free online You should receive your order within 10 days. File your taxes free online Asking tax questions. File your taxes free online Call the IRS with your tax questions at 1-800-829-1040. File your taxes free online Solving problems. File your taxes free online You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. File your taxes free online An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. File your taxes free online Call your local Taxpayer Assistance Center for an appointment. File your taxes free online To find the number, go to www. File your taxes free online irs. File your taxes free online gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. File your taxes free online TTY/TDD equipment. File your taxes free online If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. File your taxes free online TeleTax topics. File your taxes free online Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. File your taxes free online Refund information. File your taxes free online To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). File your taxes free online Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. File your taxes free online If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). File your taxes free online Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. File your taxes free online Refunds are sent out weekly on Fridays. File your taxes free online If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. File your taxes free online Other refund information. File your taxes free online To check the status of a prior year refund or amended return refund, call 1-800-829-1954. File your taxes free online Evaluating the quality of our telephone services. File your taxes free online To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. File your taxes free online One method is for a second IRS representative to listen in on or record random telephone calls. File your taxes free online Another is to ask some callers to complete a short survey at the end of the call. File your taxes free online Walk-in. File your taxes free online Many products and services are available on a walk-in basis. File your taxes free online Products. File your taxes free online You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. File your taxes free online Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. File your taxes free online Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. File your taxes free online Services. File your taxes free online You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. File your taxes free online An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. File your taxes free online If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. File your taxes free online No appointment is necessary—just walk in. File your taxes free online If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. File your taxes free online A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. File your taxes free online If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. File your taxes free online All other issues will be handled without an appointment. File your taxes free online To find the number of your local office, go to www. File your taxes free online irs. File your taxes free online gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. File your taxes free online Mail. File your taxes free online You can send your order for forms, instructions, and publications to the address below. File your taxes free online You should receive a response within 10 days after your request is received. File your taxes free online Internal Revenue Service1201 N. File your taxes free online Mitsubishi MotorwayBloomington, IL 61705-6613 DVD for tax products. File your taxes free online You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. File your taxes free online Prior-year forms, instructions, and publications. File your taxes free online Tax Map: an electronic research tool and finding aid. File your taxes free online Tax law frequently asked questions. File your taxes free online Tax Topics from the IRS telephone response system. File your taxes free online Internal Revenue Code—Title 26 of the U. File your taxes free online S. File your taxes free online Code. File your taxes free online Fill-in, print, and save features for most tax forms. File your taxes free online Internal Revenue Bulletins. File your taxes free online Toll-free and email technical support. File your taxes free online Two releases during the year. File your taxes free online – The first release will ship the beginning of January 2010. File your taxes free online – The final release will ship the beginning of March 2010. File your taxes free online Purchase the DVD from National Technical Information Service (NTIS) at www. File your taxes free online irs. File your taxes free online gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). File your taxes free online Prev  Up  Next   Home   More Online Publications