Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Fill Out 1040x Online

Form 1040x InstructionsHrblock FreereturnIrs Amendment Forms1040a 2011 Tax FormHr Block Free Filing2012 Federal Tax Form 10402011 Irs Form 1040H & R Block Free Tax Filing2011 1040ezState Tax FormsHrblock 2010 Tax CalculatorCan You File Your State Taxes For FreeFree H And R BlockH&r Block Tax FreeFiling 2012 Tax Return OnlineIrs 1040 FormHow To File Taxes For 2011Federal Tax Form 1040ezFree 2011 TaxesTax Forms 1040 EzHow To File 2012 Taxes LateFree TaxFree 2011 Tax FormsFill Out 1040x OnlineFree Turbotax For Students1040 Ez Form Online1040ez Tax Form And BookletIrsFilling Out A 1040ezTax 1040ezI Need To Find A Place On Line To File Back TaxesWhere Do I Mail My 1040xMypay Military Pay1040 Ez TaxAmendment2011 1040 Tax FormMilitary Free Turbo TaxFillable 1040xHarold Washington College Free Tax ServiceStudent Tax Form

Fill Out 1040x Online

Fill out 1040x online Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. Fill out 1040x online Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. Fill out 1040x online However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Fill out 1040x online Even then, the deductible amount of these types of expenses may be limited. Fill out 1040x online Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Fill out 1040x online To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). Fill out 1040x online Additional tests for employee use. Fill out 1040x online   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. Fill out 1040x online You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. Fill out 1040x online If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Fill out 1040x online Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Fill out 1040x online The area used for business can be a room or other separately identifiable space. Fill out 1040x online The space does not need to be marked off by a permanent partition. Fill out 1040x online You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Fill out 1040x online Example. Fill out 1040x online You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Fill out 1040x online Your family also uses the den for recreation. Fill out 1040x online The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Fill out 1040x online Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Fill out 1040x online You use part of your home for the storage of inventory or product samples (discussed next). Fill out 1040x online You use part of your home as a daycare facility, discussed later under Daycare Facility . Fill out 1040x online Note. Fill out 1040x online With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Fill out 1040x online Storage of inventory or product samples. Fill out 1040x online    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. Fill out 1040x online However, you must meet all the following tests. Fill out 1040x online You sell products at wholesale or retail as your trade or business. Fill out 1040x online You keep the inventory or product samples in your home for use in your trade or business. Fill out 1040x online Your home is the only fixed location of your trade or business. Fill out 1040x online You use the storage space on a regular basis. Fill out 1040x online The space you use is a separately identifiable space suitable for storage. Fill out 1040x online Example. Fill out 1040x online Your home is the only fixed location of your business of selling mechanics' tools at retail. Fill out 1040x online You regularly use half of your basement for storage of inventory and product samples. Fill out 1040x online You sometimes use the area for personal purposes. Fill out 1040x online The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Fill out 1040x online Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Fill out 1040x online Incidental or occasional business use is not regular use. Fill out 1040x online You must consider all facts and circumstances in determining whether your use is on a regular basis. Fill out 1040x online Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. Fill out 1040x online If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. Fill out 1040x online Example. Fill out 1040x online You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. Fill out 1040x online You do not make investments as a broker or dealer. Fill out 1040x online So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Fill out 1040x online Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Fill out 1040x online To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. Fill out 1040x online To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. Fill out 1040x online Your home office will qualify as your principal place of business if you meet the following requirements. Fill out 1040x online You use it exclusively and regularly for administrative or management activities of your trade or business. Fill out 1040x online You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Fill out 1040x online If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Fill out 1040x online However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. Fill out 1040x online Administrative or management activities. Fill out 1040x online   There are many activities that are administrative or managerial in nature. Fill out 1040x online The following are a few examples. Fill out 1040x online Billing customers, clients, or patients. Fill out 1040x online Keeping books and records. Fill out 1040x online Ordering supplies. Fill out 1040x online Setting up appointments. Fill out 1040x online Forwarding orders or writing reports. Fill out 1040x online Administrative or management activities performed at other locations. Fill out 1040x online   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Fill out 1040x online You have others conduct your administrative or management activities at locations other than your home. Fill out 1040x online (For example, another company does your billing from its place of business. Fill out 1040x online ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. Fill out 1040x online You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Fill out 1040x online You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Fill out 1040x online (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Fill out 1040x online ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Fill out 1040x online Please click here for the text description of the image. Fill out 1040x online Can you deduct business use of the home expenses? Example 1. Fill out 1040x online John is a self-employed plumber. Fill out 1040x online Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Fill out 1040x online He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. Fill out 1040x online John writes up estimates and records of work completed at his customers' premises. Fill out 1040x online He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Fill out 1040x online John does not do his own billing. Fill out 1040x online He uses a local bookkeeping service to bill his customers. Fill out 1040x online John's home office qualifies as his principal place of business for deducting expenses for its use. Fill out 1040x online He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. Fill out 1040x online His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Fill out 1040x online He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Fill out 1040x online Example 2. Fill out 1040x online Pamela is a self-employed sales representative for several different product lines. Fill out 1040x online She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. Fill out 1040x online She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Fill out 1040x online Pamela's business is selling products to customers at various locations throughout her territory. Fill out 1040x online To make these sales, she regularly visits customers to explain the available products and take orders. Fill out 1040x online Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Fill out 1040x online She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Fill out 1040x online The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. Fill out 1040x online She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. Fill out 1040x online Example 3. Fill out 1040x online Paul is a self-employed anesthesiologist. Fill out 1040x online He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Fill out 1040x online One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Fill out 1040x online Paul very rarely uses the office the hospital provides. Fill out 1040x online He uses a room in his home that he has converted to an office. Fill out 1040x online He uses this room exclusively and regularly to conduct all the following activities. Fill out 1040x online Contacting patients, surgeons, and hospitals regarding scheduling. Fill out 1040x online Preparing for treatments and presentations. Fill out 1040x online Maintaining billing records and patient logs. Fill out 1040x online Satisfying continuing medical education requirements. Fill out 1040x online Reading medical journals and books. Fill out 1040x online Paul's home office qualifies as his principal place of business for deducting expenses for its use. Fill out 1040x online He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. Fill out 1040x online His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. Fill out 1040x online His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. Fill out 1040x online He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Fill out 1040x online Example 4. Fill out 1040x online Kathleen is employed as a teacher. Fill out 1040x online She is required to teach and meet with students at the school and to grade papers and tests. Fill out 1040x online The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. Fill out 1040x online The school does not require her to work at home. Fill out 1040x online Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Fill out 1040x online She uses this home office exclusively and regularly for the administrative duties of her teaching job. Fill out 1040x online Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. Fill out 1040x online Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. Fill out 1040x online More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Fill out 1040x online Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. Fill out 1040x online You must use the home office exclusively and regularly for one or more of the following purposes. Fill out 1040x online As the principal place of business for one or more of your trades or businesses. Fill out 1040x online As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. Fill out 1040x online If your home office is a separate structure, in connection with one or more of your trades or businesses. Fill out 1040x online You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Fill out 1040x online e. Fill out 1040x online , personal) activities. Fill out 1040x online If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Fill out 1040x online See Rental to employer , later, if you rent part of your home to your employer. Fill out 1040x online Example. Fill out 1040x online Tracy White is employed as a teacher. Fill out 1040x online Her principal place of work is the school, which provides her office space to do her school work. Fill out 1040x online She also has a mail order jewelry business. Fill out 1040x online All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Fill out 1040x online If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Fill out 1040x online If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. Fill out 1040x online As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Fill out 1040x online She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. Fill out 1040x online Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. Fill out 1040x online You physically meet with patients, clients, or customers on your premises. Fill out 1040x online Their use of your home is substantial and integral to the conduct of your business. Fill out 1040x online Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Fill out 1040x online Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Fill out 1040x online The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. Fill out 1040x online Example. Fill out 1040x online June Quill, a self-employed attorney, works 3 days a week in her city office. Fill out 1040x online She works 2 days a week in her home office used only for business. Fill out 1040x online She regularly meets clients there. Fill out 1040x online Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Fill out 1040x online Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. Fill out 1040x online The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Fill out 1040x online Example. Fill out 1040x online John Berry operates a floral shop in town. Fill out 1040x online He grows the plants for his shop in a greenhouse behind his home. Fill out 1040x online He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. Fill out 1040x online Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. Fill out 1040x online When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. Fill out 1040x online Electing to use the simplified method. Fill out 1040x online   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Fill out 1040x online You choose whether or not to figure your deduction using the simplified method each taxable year. Fill out 1040x online See Using the Simplified Method , later. Fill out 1040x online Rental to employer. Fill out 1040x online   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. Fill out 1040x online You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Fill out 1040x online However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. Fill out 1040x online Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. Fill out 1040x online You will also need to figure the percentage of your home used for business and the limit on the deduction. Fill out 1040x online If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. Fill out 1040x online If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. Fill out 1040x online Part-year use. Fill out 1040x online   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. Fill out 1040x online For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. Fill out 1040x online Expenses related to tax-exempt income. Fill out 1040x online   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Fill out 1040x online However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. Fill out 1040x online No deduction is allowed for other expenses related to the tax-exempt allowance. Fill out 1040x online   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. Fill out 1040x online Actual Expenses You must divide the expenses of operating your home between personal and business use. Fill out 1040x online The part of a home operating expense you can use to figure your deduction depends on both of the following. Fill out 1040x online Whether the expense is direct, indirect, or unrelated. Fill out 1040x online The percentage of your home used for business. Fill out 1040x online Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Fill out 1040x online Table 1. Fill out 1040x online Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Fill out 1040x online Deductible in full. Fill out 1040x online *   Examples:  Painting or repairs  only in the area  used for business. Fill out 1040x online Exception: May be only partially  deductible in a daycare facility. Fill out 1040x online See Daycare Facility , later. Fill out 1040x online Indirect Expenses for  keeping up and running your  entire home. Fill out 1040x online Deductible based on the percentage of your home used for business. Fill out 1040x online *   Examples:  Insurance, utilities, and  general repairs. Fill out 1040x online   Unrelated Expenses only for  the parts of your  home not used  for business. Fill out 1040x online Not deductible. Fill out 1040x online   Examples:  Lawn care or painting  a room not used  for business. Fill out 1040x online   *Subject to the deduction limit, discussed later. Fill out 1040x online Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Fill out 1040x online Certain expenses are deductible whether or not you use your home for business. Fill out 1040x online If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. Fill out 1040x online These expenses include the following. Fill out 1040x online Real estate taxes. Fill out 1040x online Qualified mortgage insurance premiums. Fill out 1040x online Deductible mortgage interest. Fill out 1040x online Casualty losses. Fill out 1040x online Other expenses are deductible only if you use your home for business. Fill out 1040x online You can use the business percentage of these expenses to figure your total business use of the home deduction. Fill out 1040x online These expenses generally include (but are not limited to) the following. Fill out 1040x online Depreciation (covered under Depreciating Your Home , later). Fill out 1040x online Insurance. Fill out 1040x online Rent paid for the use of property you do not own but use in your trade or business. Fill out 1040x online Repairs. Fill out 1040x online Security system. Fill out 1040x online Utilities and services. Fill out 1040x online Real estate taxes. Fill out 1040x online   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. Fill out 1040x online   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Fill out 1040x online Deductible mortgage interest. Fill out 1040x online   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Fill out 1040x online You can include interest on a second mortgage in this computation. Fill out 1040x online If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. Fill out 1040x online For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Fill out 1040x online Qualified mortgage insurance premiums. Fill out 1040x online   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Fill out 1040x online You can include premiums for insurance on a second mortgage in this computation. Fill out 1040x online If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. Fill out 1040x online For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Fill out 1040x online Casualty losses. Fill out 1040x online    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. Fill out 1040x online A direct expense is the loss on the portion of the property you use only in your business. Fill out 1040x online Use the entire loss to figure the business use of the home deduction. Fill out 1040x online An indirect expense is the loss on property you use for both business and personal purposes. Fill out 1040x online Use only the business portion to figure the deduction. Fill out 1040x online An unrelated expense is the loss on property you do not use in your business. Fill out 1040x online Do not use any of the loss to figure the deduction. Fill out 1040x online Example. Fill out 1040x online You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Fill out 1040x online A storm damages your roof. Fill out 1040x online This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. Fill out 1040x online You would complete Form 4684, Casualties and Thefts, to report your loss. Fill out 1040x online You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. Fill out 1040x online Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. Fill out 1040x online Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. Fill out 1040x online Forms and worksheets to use. Fill out 1040x online   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Fill out 1040x online If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Fill out 1040x online You will also need to get Form 4684. Fill out 1040x online More information. Fill out 1040x online   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Fill out 1040x online Insurance. Fill out 1040x online   You can deduct the cost of insurance that covers the business part of your home. Fill out 1040x online However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. Fill out 1040x online You can deduct the business percentage of the part that applies to the following year in that year. Fill out 1040x online Rent. Fill out 1040x online   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. Fill out 1040x online To figure your deduction, multiply your rent payments by the percentage of your home used for business. Fill out 1040x online   If you own your home, you cannot deduct the fair rental value of your home. Fill out 1040x online However, see Depreciating Your Home , later. Fill out 1040x online Repairs. Fill out 1040x online   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Fill out 1040x online For example, a furnace repair benefits the entire home. Fill out 1040x online If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Fill out 1040x online   Repairs keep your home in good working order over its useful life. Fill out 1040x online Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Fill out 1040x online However, repairs are sometimes treated as a permanent improvement and are not deductible. Fill out 1040x online See Permanent improvements , later, under Depreciating Your Home. Fill out 1040x online Security system. Fill out 1040x online   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. Fill out 1040x online You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. Fill out 1040x online Utilities and services. Fill out 1040x online   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Fill out 1040x online However, if you use part of your home for business, you can deduct the business part of these expenses. Fill out 1040x online Generally, the business percentage for utilities is the same as the percentage of your home used for business. Fill out 1040x online Telephone. Fill out 1040x online   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Fill out 1040x online e. Fill out 1040x online , landline) is a nondeductible personal expense. Fill out 1040x online However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Fill out 1040x online Do not include these expenses as a cost of using your home for business. Fill out 1040x online Deduct these charges separately on the appropriate form or schedule. Fill out 1040x online For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). Fill out 1040x online Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Fill out 1040x online Depreciation is an allowance for the wear and tear on the part of your home used for business. Fill out 1040x online You cannot depreciate the cost or value of the land. Fill out 1040x online You recover its cost when you sell or otherwise dispose of the property. Fill out 1040x online Before you figure your depreciation deduction, you need to know the following information. Fill out 1040x online The month and year you started using your home for business. Fill out 1040x online The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Fill out 1040x online The cost of any improvements before and after you began using the property for business. Fill out 1040x online The percentage of your home used for business. Fill out 1040x online See Business Percentage , later. Fill out 1040x online Adjusted basis defined. Fill out 1040x online   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. Fill out 1040x online For a discussion of adjusted basis, see Publication 551. Fill out 1040x online Permanent improvements. Fill out 1040x online   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Fill out 1040x online Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Fill out 1040x online    You must carefully distinguish between repairs and improvements. Fill out 1040x online See Repairs , earlier, under Actual Expenses. Fill out 1040x online You also must keep accurate records of these expenses. Fill out 1040x online These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Fill out 1040x online However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Fill out 1040x online Example. Fill out 1040x online You buy an older home and fix up two rooms as a beauty salon. Fill out 1040x online You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Fill out 1040x online Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Fill out 1040x online However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. Fill out 1040x online You cannot deduct any portion of it as a repair expense. Fill out 1040x online Adjusting for depreciation deducted in earlier years. Fill out 1040x online   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. Fill out 1040x online If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. Fill out 1040x online If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Fill out 1040x online   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. Fill out 1040x online   If you deducted the incorrect amount of depreciation, see Publication 946. Fill out 1040x online Fair market value defined. Fill out 1040x online   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Fill out 1040x online Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. Fill out 1040x online Figuring the depreciation deduction for the current year. Fill out 1040x online   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Fill out 1040x online   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). Fill out 1040x online Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Fill out 1040x online For more information on MACRS and other methods of depreciation, see Publication 946. Fill out 1040x online   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Fill out 1040x online The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Fill out 1040x online The adjusted basis of your home (excluding land) on the date you began using your home for business. Fill out 1040x online The fair market value of your home (excluding land) on the date you began using your home for business. Fill out 1040x online Depreciation table. Fill out 1040x online   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. Fill out 1040x online Table 2. Fill out 1040x online MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Fill out 1040x online 461% 2 2. Fill out 1040x online 247% 3 2. Fill out 1040x online 033% 4 1. Fill out 1040x online 819% 5 1. Fill out 1040x online 605% 6 1. Fill out 1040x online 391% 7 1. Fill out 1040x online 177% 8 0. Fill out 1040x online 963% 9 0. Fill out 1040x online 749% 10 0. Fill out 1040x online 535% 11 0. Fill out 1040x online 321% 12 0. Fill out 1040x online 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. Fill out 1040x online See Publication 946 for the percentages for the remaining tax years of the recovery period. Fill out 1040x online Example. Fill out 1040x online In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Fill out 1040x online This room is 8% of the square footage of his home. Fill out 1040x online He bought the home in 2003 for $125,000. Fill out 1040x online He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Fill out 1040x online In May, the house had a fair market value of $165,000. Fill out 1040x online He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Fill out 1040x online The result is $9,200, his depreciable basis for the business part of the house. Fill out 1040x online George files his return based on the calendar year. Fill out 1040x online May is the 5th month of his tax year. Fill out 1040x online He multiplies his depreciable basis of $9,200 by 1. Fill out 1040x online 605% (. Fill out 1040x online 01605), the percentage from the table for the 5th month. Fill out 1040x online His depreciation deduction is $147. Fill out 1040x online 66. Fill out 1040x online Depreciating permanent improvements. Fill out 1040x online   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Fill out 1040x online Depreciate these costs as part of the cost of your home as explained earlier. Fill out 1040x online The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. Fill out 1040x online Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. Fill out 1040x online For improvements made this year, the recovery period is 39 years. Fill out 1040x online For the percentage to use for the first year, see Table 2, earlier. Fill out 1040x online For more information on recovery periods, see Publication 946. Fill out 1040x online Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Fill out 1040x online Use the resulting percentage to figure the business part of the expenses for operating your entire home. Fill out 1040x online You can use any reasonable method to determine the business percentage. Fill out 1040x online The following are two commonly used methods for figuring the percentage. Fill out 1040x online Divide the area (length multiplied by the width) used for business by the total area of your home. Fill out 1040x online If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. Fill out 1040x online Example 1. Fill out 1040x online Your office is 240 square feet (12 feet × 20 feet). Fill out 1040x online Your home is 1,200 square feet. Fill out 1040x online Your office is 20% (240 ÷ 1,200) of the total area of your home. Fill out 1040x online Your business percentage is 20%. Fill out 1040x online Example 2. Fill out 1040x online You use one room in your home for business. Fill out 1040x online Your home has 10 rooms, all about equal size. Fill out 1040x online Your office is 10% (1 ÷ 10) of the total area of your home. Fill out 1040x online Your business percentage is 10%. Fill out 1040x online Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. Fill out 1040x online Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Fill out 1040x online If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Fill out 1040x online Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. Fill out 1040x online The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Fill out 1040x online These expenses are discussed in detail under Actual Expenses , earlier. Fill out 1040x online The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Fill out 1040x online If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Fill out 1040x online Carryover of unallowed expenses. Fill out 1040x online   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. Fill out 1040x online They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Fill out 1040x online Figuring the deduction limit and carryover. Fill out 1040x online   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Fill out 1040x online If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Fill out 1040x online Example. Fill out 1040x online You meet the requirements for deducting expenses for the business use of your home. Fill out 1040x online You use 20% of your home for business. Fill out 1040x online In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. Fill out 1040x online    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). Fill out 1040x online You also can deduct all of your business expenses not related to the use of your home ($2,000). Fill out 1040x online Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Fill out 1040x online Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Fill out 1040x online You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Fill out 1040x online More than one place of business. Fill out 1040x online   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. Fill out 1040x online In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. Fill out 1040x online If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Fill out 1040x online For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Fill out 1040x online Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Fill out 1040x online In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. Fill out 1040x online The area you use to figure your deduction is limited to 300 square feet. Fill out 1040x online See Simplified Amount , later, for information about figuring the amount of the deduction. Fill out 1040x online For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Fill out 1040x online R. Fill out 1040x online B. Fill out 1040x online 478, available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2013-06_IRB/ar09. Fill out 1040x online html. Fill out 1040x online Actual expenses and depreciation of your home. Fill out 1040x online   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. Fill out 1040x online You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. Fill out 1040x online The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Fill out 1040x online If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. Fill out 1040x online More information. Fill out 1040x online   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Fill out 1040x online R. Fill out 1040x online B. Fill out 1040x online 478, available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2013-06_IRB/ar09. Fill out 1040x online html. Fill out 1040x online See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). Fill out 1040x online Expenses deductible without regard to business use. Fill out 1040x online   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. Fill out 1040x online These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Fill out 1040x online See Where To Deduct , later. Fill out 1040x online If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). Fill out 1040x online No deduction of carryover of actual expenses. Fill out 1040x online   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. Fill out 1040x online Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Fill out 1040x online Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Fill out 1040x online Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. Fill out 1040x online An election for a taxable year, once made, is irrevocable. Fill out 1040x online A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. Fill out 1040x online Shared use. Fill out 1040x online   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. Fill out 1040x online More than one qualified business use. Fill out 1040x online   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. Fill out 1040x online More than one home. Fill out 1040x online   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. Fill out 1040x online You must figure the deduction for any other home using actual expenses. Fill out 1040x online Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. Fill out 1040x online To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. Fill out 1040x online The allowable area of your home used in conducting the business. Fill out 1040x online If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. Fill out 1040x online The gross income from the business use of your home. Fill out 1040x online The amount of the business expenses that are not related to the use of your home. Fill out 1040x online If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. Fill out 1040x online To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Fill out 1040x online Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). Fill out 1040x online See Allowable area and Space used regularly for daycare , later. Fill out 1040x online Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. Fill out 1040x online If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. Fill out 1040x online See Gross income limitation , later. Fill out 1040x online Take the smaller of the amounts from (1) and (2). Fill out 1040x online This is the amount you can deduct for this qualified business use of your home using the simplified method. Fill out 1040x online If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. Fill out 1040x online If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. Fill out 1040x online Allowable area. Fill out 1040x online   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. Fill out 1040x online Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. Fill out 1040x online You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. Fill out 1040x online Area used by a qualified joint venture. Fill out 1040x online   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. Fill out 1040x online Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Fill out 1040x online Then, each spouse will figure the allowable area separately. Fill out 1040x online For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Fill out 1040x online Shared use. Fill out 1040x online   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. Fill out 1040x online You must allocate the shared space between you and the other person in a reasonable manner. Fill out 1040x online Example. Fill out 1040x online Kristin and Lindsey are roommates. Fill out 1040x online Kristin uses 300 square feet of their home for a qualified business use. Fill out 1040x online Lindsey uses 200 square feet of their home for a separate qualified business use. Fill out 1040x online The qualified business uses share 100 square feet. Fill out 1040x online In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. Fill out 1040x online If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Fill out 1040x online More than one qualified business use. Fill out 1040x online   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. Fill out 1040x online Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Fill out 1040x online However, do not allocate more square feet to a qualified business use than you actually use for that business. Fill out 1040x online Rental use. Fill out 1040x online   The simplified method does not apply to rental use. Fill out 1040x online A rental use that qualifies for the deduction must be figured using actual expenses. Fill out 1040x online If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. Fill out 1040x online You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. Fill out 1040x online Part-year use or area changes. Fill out 1040x online   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. Fill out 1040x online You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. Fill out 1040x online When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Fill out 1040x online Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Fill out 1040x online Example 1. Fill out 1040x online Andy files his federal income tax return on a calendar year basis. Fill out 1040x online On July 20, he began using 420 square feet of his home for a qualified business use. Fill out 1040x online He continued to use the 420 square feet until the end of the year. Fill out 1040x online His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). Fill out 1040x online Example 2. Fill out 1040x online Amy files her federal income tax return on a calendar year basis. Fill out 1040x online On April 20, she began using 100 square feet of her home for a qualified business use. Fill out 1040x online On August 5, she expanded the area of her qualified use to 330 square feet. Fill out 1040x online Amy continued to use the 330 square feet until the end of the year. Fill out 1040x online Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). Fill out 1040x online Gross income limitation. Fill out 1040x online   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. Fill out 1040x online If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. Fill out 1040x online Business expenses not related to use of the home. Fill out 1040x online   These expenses relate to the business activity in the home, but not to the use of the home itself. Fill out 1040x online You can still deduct business expenses that are unrelated to the use of the home. Fill out 1040x online See Where To Deduct , later. Fill out 1040x online Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Fill out 1040x online Space used regularly for daycare. Fill out 1040x online   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. Fill out 1040x online The reduced rate will equal the prescribed rate times a fraction. Fill out 1040x online The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. Fill out 1040x online You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Fill out 1040x online    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. Fill out 1040x online Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. Fill out 1040x online To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Fill out 1040x online You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. Fill out 1040x online You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. Fill out 1040x online You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Fill out 1040x online Figuring the deduction. Fill out 1040x online   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. Fill out 1040x online    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. Fill out 1040x online If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Fill out 1040x online   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. Fill out 1040x online A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. Fill out 1040x online You do not have to keep records to show the specific hours the area was used for business. Fill out 1040x online You can use the area occasionally for personal reasons. Fill out 1040x online However, a room you use only occasionally for business does not qualify for the deduction. Fill out 1040x online To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. Fill out 1040x online You can compare the hours of business use in a week with the number of hours in a week (168). Fill out 1040x online Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Fill out 1040x online If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. Fill out 1040x online Example 1. Fill out 1040x online Mary Lake used her basement to operate a daycare business for children. Fill out 1040x online She figures the business percentage of the basement as follows. Fill out 1040x online Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. Fill out 1040x online During the other 12 hours a day, the family could use the basement. Fill out 1040x online She figures the percentage of time the basement was used for daycare as follows. Fill out 1040x online Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. Fill out 1040x online 25%           Mary can deduct 34. Fill out 1040x online 25% of any direct expenses for the basement. Fill out 1040x online However, because her indirect expenses are for the entire house, she can deduct only 17. Fill out 1040x online 13% of the indirect expenses. Fill out 1040x online She figures the percentage for her indirect expenses as follows. Fill out 1040x online Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Fill out 1040x online 25% Percentage for indirect expenses 17. Fill out 1040x online 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. Fill out 1040x online In Part II, Mary figures her deductible expenses. Fill out 1040x online She uses the following information to complete Part II. Fill out 1040x online Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. Fill out 1040x online (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Fill out 1040x online ) The expenses she paid for rent and utilities relate to her entire home. Fill out 1040x online Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Fill out 1040x online She shows the total of these expenses on line 22, column (b). Fill out 1040x online For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Fill out 1040x online Mary paid $500 to have the basement painted. Fill out 1040x online The painting is a direct expense. Fill out 1040x online However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. Fill out 1040x online 25% – line 6). Fill out 1040x online She enters $171 (34. Fill out 1040x online 25% × $500) on line 19, column (a). Fill out 1040x online She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Fill out 1040x online This is less than her deduction limit (line 15), so she can deduct the entire amount. Fill out 1040x online She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Fill out 1040x online She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Fill out 1040x online Example 2. Fill out 1040x online Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. Fill out 1040x online Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. Fill out 1040x online Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. Fill out 1040x online The basement and room are 60% of the total area of her home. Fill out 1040x online In figuring her expenses, 34. Fill out 1040x online 25% of any direct expenses for the basement and room are deductible. Fill out 1040x online In addition, 20. Fill out 1040x online 55% (34. Fill out 1040x online 25% × 60%) of her indirect expenses are deductible. Fill out 1040x online Example 3. Fill out 1040x online Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Fill out 1040x online She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. Fill out 1040x online During the other 12 hours a day, the family could still use the basement. Fill out 1040x online She figures the percentage of time the basement was used for business as follows. Fill out 1040x online Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. Fill out 1040x online 71%           Mary can deduct 35. Fill out 1040x online 71% of any direct expenses for the basement. Fill out 1040x online However, because her indirect expenses are for the entire house, she can deduct only 17. Fill out 1040x online 86% of the indirect expenses. Fill out 1040x online She figures the percentage for her indirect expenses as follows. Fill out 1040x online Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Fill out 1040x online 71% Percentage for indirect expenses 17. Fill out 1040x online 86% Meals. Fill out 1040x online   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Fill out 1040x online Claim it as a separate deduction on your Schedule C (Form 1040). Fill out 1040x online You can never deduct the cost of food consumed by you or your family. Fill out 1040x online You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. Fill out 1040x online However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. Fill out 1040x online For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. Fill out 1040x online   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Fill out 1040x online   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. Fill out 1040x online If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Fill out 1040x online If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Fill out 1040x online Do not include payments or expenses for your own children if they are eligible for the program. Fill out 1040x online Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Fill out 1040x online Standard meal and snack rates. Fill out 1040x online   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. Fill out 1040x online For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Fill out 1040x online Family daycare is childcare provided to eligible children in the home of the family daycare provider. Fill out 1040x online The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Fill out 1040x online Eligible children are minor children receiving family daycare in the home of the family daycare provider. Fill out 1040x online Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. Fill out 1040x online Eligible children do not include children who receive daycare services for personal reasons of the provider. Fill out 1040x online For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Fill out 1040x online   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. Fill out 1040x online You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. Fill out 1040x online If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. Fill out 1040x online   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. Fill out 1040x online If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. Fill out 1040x online However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. Fill out 1040x online   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. Fill out 1040x online The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. Fill out 1040x online This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Fill out 1040x online   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. Fill out 1040x online These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Fill out 1040x online     Table 3. Fill out 1040x online Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
Print - Click this link to Print this page

IRS Criminal Investigation Combats Identity Theft Refund Fraud

IRS YouTube Videos
ID Theft: IRS Efforts on Identity Theft

FS-2014-3, January 2014

The Internal Revenue Service (IRS) has seen a significant increase in refund fraud that involves identity thieves who file false claims for refunds by stealing and using someone's Social Security number. The investigative work done by Criminal Investigation (CI) is a major component of the IRS’s efforts to combat tax-related identity theft. 

Statistical Data 

In Fiscal Year (FY) 2013, the IRS initiated approximately 1,492 identity theft related criminal investigations, an increase of 66 percent over investigations initiated in FY 2012. Direct investigative time applied to identity theft related investigations has increased 216 percent over the last two years. Prosecution recommendations, indictments, and those convicted and sentenced for identity theft violations have increased dramatically since FY 2011. Sentences handed down for convictions relating to identity theft have been significant, ranging from two months to 317 months.  
 

 

FY2013

FY 2012

  FY 2011

 Investigations Initiated

1492

898

276

 Prosecution Recommendations

1257

544

218

 Indictments/Informations

1050

494

165

 Sentenced

438

223

80


Enforcement Efforts 

Criminal Investigation is committed to investigating and prosecuting identity thieves who attempt to defraud the federal government by filing fraudulent refund claims using another person’s identifying information.

The IRS continues to seek out and identify additional tools and methods to combat the proliferation of tax-related identity theft.  FY 2013 efforts include: 

Identity Theft Enforcement Sweeps - In January 2013, Criminal Investigation conducted a coordinated identity theft enforcement sweep in collaboration with DOJ-Tax and United States Attorney’s Offices throughout the country.  This nationwide effort resulted in 734 enforcement actions related to identity theft and refund fraud and involved 389 individuals, 109 arrests, 48 search warrants, and 189 indictments, information and criminal complaints.

Law Enforcement Assistance Program - In March 2013, IRS announced to the public that the Law Enforcement Assistance Program, formerly known as the Identity Theft Pilot Disclosure Program, was expanded nationwide.  This program provides for the disclosure of federal tax return information associated with the accounts of known and suspected identity victims of identity theft with the express written consent of those victims.  There are currently more than 300 state/local law enforcement agencies from 35 states participating.  For FY 2013, more than 2,400 requests had been received from state and local law enforcement agencies.

Identify Theft Clearinghouse (ITC) - The Identity Theft Clearinghouse (ITC) continues to develop and refer identity theft refund fraud schemes to CI Field Offices for investigation.  For FY 2013 the ITC had received more than 1,400 identity theft related leads. 

Data Processing Center(DPC) Identity Theft Victims List Process - This process centralizes identity theft victims’ lists and information forwarded to IRS-CI by other federal, state and local agencies during nationwide investigative efforts.  The information is analyzed and necessary adjustments are made to accounts of taxpayers that are likely targets of ID theft.  The DPC processed over 71.7 percent more identity records in FY 2013 than it did in FY 2012.

Multi-Agency Task Forces and Working Groups - CI is the lead agency or actively involved in more than 30 multi-regional task forces or working groups including state/local and federal law enforcement agencies solely focusing on identity theft.      

The following are highlights from significant identity-theft cases. All details are based on court documents.

Self-Proclaimed “First Lady” of Tax Fraud Sentenced

On July 16, 2013, in Tampa, Fla., Rashia Wilson, was sentenced to 234 months in prison on wire fraud and aggravated identity theft charges stemming from her scheme to defraud the IRS, and to a consecutive 18 months in prison for being a felon in possession of a firearm.  Wilson was also ordered to forfeit $2,240,096, which constituted the proceeds traceable to the offense.  According to court documents, from at least April 2009 through their arrests in September 2012, Wilson and her co-conspirator, Maurice J. Larry, engaged in a scheme to defraud the IRS by negotiating fraudulently obtained tax refunds. They did so by receiving U.S. Treasury checks and pre-paid debit cards that were loaded with proceeds derived from filing false and fraudulent federal income tax returns in other persons' names, without those persons’ permission or knowledge.  Wilson and Larry filed these false and fraudulent federal income tax returns from multiple locations, including Wilson's residence and hotels in the Tampa area.  Wilson, Larry, and others then used these fraudulently obtained tax refunds to make hundreds of thousands of dollars’ worth of retail purchases, to purchase money orders, and to withdraw cash. Larry was sentenced to 174 months in prison and ordered to forfeit $2,240,096.

Woman Sentenced for Running Stolen Identity Tax Fraud Scheme
On July 30, 2013, in St. Louis, Mo., Tania Henderson was sentenced to 144 months in prison and ordered to pay $835,883 in restitution to the IRS. Henderson pleaded guilty on April 29, 2013, to theft of government funds and aggravated identity theft. According to her plea agreement and other court documents, Henderson stole the identities of more than 400 individuals, many of whom were deceased, and filed fraudulent tax returns using their names and Social Security account numbers. Between August and November 2012, Henderson filed 236 fraudulent tax returns. Using a network of family and friends, she would collect refund checks or prepaid debit cards for the refund amounts and liquidate the proceeds of her scheme.  

Leaders of Multi-Million Dollar Fraud Ring Sentenced
On May 8, 2012, in Montgomery, Ala., Veronica Dale and Alchico Grant, who jointly ran a stolen identity refund fraud ring that attempted to defraud the United States of millions of dollars over several years, were sentenced to prison. Veronica Dale was sentenced to 334 months in prison and Alchico Grant was sentenced to 310 months in prison.  Dale and Grant were both ordered to pay more than $2.8 million in restitution to the IRS. In September 2011, Grant pleaded guilty to five charges from two separate indictments, including conspiracy, wire fraud and aggravated identity theft. In October 2011, Dale pleaded guilty to seven charges from two indictments, including conspiracy, filing false claims, wire fraud and aggravated identity theft.  According to court documents, beginning in 2009 and continuing through 2010, the defendants were part of a scheme that involved fraudulently obtaining tax refunds by filing false tax returns using stolen identities. Dale admitted that she filed more than 500 fraudulent returns that sought at least $3,741,908 in tax refunds.  These returns were filed using the names of Medicaid beneficiaries, whose personal information Dale obtained while working for a company that serviced Medicaid programs.  Dale directed the refunds to different bank accounts that she and other co-conspirators controlled.

The latest information on Identity Theft enforcement efforts and individual cases are available on IRS.gov.

Page Last Reviewed or Updated: 07-Jan-2014

The Fill Out 1040x Online

Fill out 1040x online 14. Fill out 1040x online   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Fill out 1040x online  If you are a U. Fill out 1040x online S. Fill out 1040x online citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Fill out 1040x online S. Fill out 1040x online law. Fill out 1040x online This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Fill out 1040x online Introduction This chapter discusses the tax consequences of selling or trading investment property. Fill out 1040x online It explains the following. Fill out 1040x online What a sale or trade is. Fill out 1040x online Figuring gain or loss. Fill out 1040x online Nontaxable trades. Fill out 1040x online Related party transactions. Fill out 1040x online Capital gains or losses. Fill out 1040x online Capital assets and noncapital assets. Fill out 1040x online Holding period. Fill out 1040x online Rollover of gain from publicly traded securities. Fill out 1040x online Other property transactions. Fill out 1040x online   Certain transfers of property are not discussed here. Fill out 1040x online They are discussed in other IRS publications. Fill out 1040x online These include the following. Fill out 1040x online Sales of a main home, covered in chapter 15. Fill out 1040x online Installment sales, covered in Publication 537, Installment Sales. Fill out 1040x online Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Fill out 1040x online Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Fill out 1040x online    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Fill out 1040x online Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Fill out 1040x online It also discusses investment-related expenses. Fill out 1040x online Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Fill out 1040x online Generally, you should receive the statement by February 15 of the next year. Fill out 1040x online It will show the gross proceeds from the sale. Fill out 1040x online If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Fill out 1040x online Generally, a covered security is a security you acquired after 2010, with certain exceptions. Fill out 1040x online See the Instructions for Form 8949. Fill out 1040x online The IRS will also get a copy of Form 1099-B from the broker. Fill out 1040x online Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Fill out 1040x online What Is a Sale or Trade? This section explains what is a sale or trade. Fill out 1040x online It also explains certain transactions and events that are treated as sales or trades. Fill out 1040x online A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Fill out 1040x online A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Fill out 1040x online Sale and purchase. Fill out 1040x online   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Fill out 1040x online The sale and purchase are two separate transactions. Fill out 1040x online But see Like-kind exchanges under Nontaxable Trades, later. Fill out 1040x online Redemption of stock. Fill out 1040x online   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Fill out 1040x online Dividend versus sale or trade. Fill out 1040x online   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Fill out 1040x online Both direct and indirect ownership of stock will be considered. Fill out 1040x online The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Fill out 1040x online Redemption or retirement of bonds. Fill out 1040x online   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Fill out 1040x online   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Fill out 1040x online For details, see Regulations section 1. Fill out 1040x online 1001-3. Fill out 1040x online Surrender of stock. Fill out 1040x online   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Fill out 1040x online The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Fill out 1040x online Worthless securities. Fill out 1040x online    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Fill out 1040x online This affects whether your capital loss is long term or short term. Fill out 1040x online See Holding Period , later. Fill out 1040x online   Worthless securities also include securities that you abandon after March 12, 2008. Fill out 1040x online To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Fill out 1040x online All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Fill out 1040x online    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Fill out 1040x online Do not deduct them in the year the stock became worthless. Fill out 1040x online How to report loss. Fill out 1040x online    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Fill out 1040x online In column (a), enter “Worthless. Fill out 1040x online ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Fill out 1040x online See Form 8949 and the Instructions for Form 8949. Fill out 1040x online For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Fill out 1040x online See also Schedule D (Form 1040), Form 8949, and their separate instructions. Fill out 1040x online Filing a claim for refund. Fill out 1040x online   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Fill out 1040x online You must use Form 1040X, Amended U. Fill out 1040x online S. Fill out 1040x online Individual Income Tax Return, to amend your return for the year the security became worthless. Fill out 1040x online You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Fill out 1040x online For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Fill out 1040x online How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Fill out 1040x online Gain. Fill out 1040x online   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Fill out 1040x online Loss. Fill out 1040x online   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Fill out 1040x online Adjusted basis. Fill out 1040x online   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Fill out 1040x online See chapter 13 for more information about determining the adjusted basis of property. Fill out 1040x online Amount realized. Fill out 1040x online   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Fill out 1040x online Amount realized includes the money you receive plus the fair market value of any property or services you receive. Fill out 1040x online If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Fill out 1040x online If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Fill out 1040x online For more information, see Publication 537. Fill out 1040x online Fair market value. Fill out 1040x online   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Fill out 1040x online Example. Fill out 1040x online You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Fill out 1040x online Your gain is $3,000 ($10,000 − $7,000). Fill out 1040x online Debt paid off. Fill out 1040x online    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. Fill out 1040x online This is true even if neither you nor the buyer is personally liable for the debt. Fill out 1040x online For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Fill out 1040x online Example. Fill out 1040x online You sell stock that you had pledged as security for a bank loan of $8,000. Fill out 1040x online Your basis in the stock is $6,000. Fill out 1040x online The buyer pays off your bank loan and pays you $20,000 in cash. Fill out 1040x online The amount realized is $28,000 ($20,000 + $8,000). Fill out 1040x online Your gain is $22,000 ($28,000 − $6,000). Fill out 1040x online Payment of cash. Fill out 1040x online   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Fill out 1040x online Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Fill out 1040x online If the result is a positive number, it is a gain. Fill out 1040x online If the result is a negative number, it is a loss. Fill out 1040x online No gain or loss. Fill out 1040x online   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Fill out 1040x online In this case, you may have neither a gain nor a loss. Fill out 1040x online See Basis Other Than Cost in chapter 13. Fill out 1040x online Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Fill out 1040x online For more information on nontaxable trades, see chapter 1 of Publication 544. Fill out 1040x online Like-kind exchanges. Fill out 1040x online   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Fill out 1040x online To be nontaxable, a trade must meet all six of the following conditions. Fill out 1040x online The property must be business or investment property. Fill out 1040x online You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Fill out 1040x online Neither property may be property used for personal purposes, such as your home or family car. Fill out 1040x online The property must not be held primarily for sale. Fill out 1040x online The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Fill out 1040x online The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Fill out 1040x online However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Fill out 1040x online Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Fill out 1040x online There must be a trade of like property. Fill out 1040x online The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Fill out 1040x online The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Fill out 1040x online The trade of a piece of machinery for a store building is not a trade of like property. Fill out 1040x online Real property located in the United States and real property located outside the United States are not like property. Fill out 1040x online Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Fill out 1040x online The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Fill out 1040x online The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Fill out 1040x online    If you trade property with a related party in a like-kind exchange, a special rule may apply. Fill out 1040x online See Related Party Transactions , later in this chapter. Fill out 1040x online Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Fill out 1040x online Partly nontaxable exchange. Fill out 1040x online   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Fill out 1040x online You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Fill out 1040x online You cannot deduct a loss. Fill out 1040x online Like property and unlike property transferred. Fill out 1040x online   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Fill out 1040x online The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Fill out 1040x online Like property and money transferred. Fill out 1040x online   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Fill out 1040x online Basis of property received. Fill out 1040x online   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Fill out 1040x online How to report. Fill out 1040x online   You must report the trade of like property on Form 8824. Fill out 1040x online If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Fill out 1040x online See the instructions for Line 22 in the Instructions for Form 8824. Fill out 1040x online   For information on using Form 4797, see chapter 4 of Publication 544. Fill out 1040x online Corporate stocks. Fill out 1040x online   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Fill out 1040x online Corporate reorganizations. Fill out 1040x online   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Fill out 1040x online If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Fill out 1040x online Stock for stock of the same corporation. Fill out 1040x online   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Fill out 1040x online This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Fill out 1040x online Convertible stocks and bonds. Fill out 1040x online   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Fill out 1040x online Property for stock of a controlled corporation. Fill out 1040x online   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Fill out 1040x online This rule applies both to individuals and to groups who transfer property to a corporation. Fill out 1040x online It does not apply if the corporation is an investment company. Fill out 1040x online   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Fill out 1040x online   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Fill out 1040x online For details, see Regulations section 1. Fill out 1040x online 351-3. Fill out 1040x online Additional information. Fill out 1040x online   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Fill out 1040x online Insurance policies and annuities. Fill out 1040x online   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Fill out 1040x online   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Fill out 1040x online For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Fill out 1040x online Revenue Ruling 2003-76 is available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2003-33_IRB/ar11. Fill out 1040x online html. Fill out 1040x online Revenue Procedure 2008-24 is available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2008-13_IRB/ar13. Fill out 1040x online html. Fill out 1040x online For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Fill out 1040x online Revenue Procedure 2011-38 is available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2011-30_IRB/ar09. Fill out 1040x online html. Fill out 1040x online   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Fill out 1040x online A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Fill out 1040x online The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Fill out 1040x online   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Fill out 1040x online Demutualization of life insurance companies. Fill out 1040x online   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Fill out 1040x online See Demutualization of Life Insurance Companies in Publication 550. Fill out 1040x online U. Fill out 1040x online S. Fill out 1040x online Treasury notes or bonds. Fill out 1040x online   You can trade certain issues of U. Fill out 1040x online S. Fill out 1040x online Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Fill out 1040x online See Savings bonds traded in chapter 1 of Publication 550 for more information. Fill out 1040x online Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Fill out 1040x online This nonrecognition rule does not apply in the following situations. Fill out 1040x online The recipient spouse or former spouse is a nonresident alien. Fill out 1040x online Property is transferred in trust and liability exceeds basis. Fill out 1040x online Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Fill out 1040x online For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Fill out 1040x online Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Fill out 1040x online The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Fill out 1040x online This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Fill out 1040x online This rule applies for purposes of determining loss as well as gain. Fill out 1040x online Any gain recognized on a transfer in trust increases the basis. Fill out 1040x online A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Fill out 1040x online Related Party Transactions Special rules apply to the sale or trade of property between related parties. Fill out 1040x online Gain on sale or trade of depreciable property. Fill out 1040x online   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Fill out 1040x online See chapter 3 of Publication 544 for more information. Fill out 1040x online Like-kind exchanges. Fill out 1040x online   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Fill out 1040x online See Like-kind exchanges , earlier, under Nontaxable Trades. Fill out 1040x online   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Fill out 1040x online However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Fill out 1040x online See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Fill out 1040x online Losses on sales or trades of property. Fill out 1040x online   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Fill out 1040x online Members of your family. Fill out 1040x online This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Fill out 1040x online ), and lineal descendants (children, grandchildren, etc. Fill out 1040x online ). Fill out 1040x online A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Fill out 1040x online A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Fill out 1040x online (See Constructive ownership of stock , later. Fill out 1040x online ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Fill out 1040x online   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Fill out 1040x online A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Fill out 1040x online Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Fill out 1040x online A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Fill out 1040x online A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. Fill out 1040x online Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Fill out 1040x online Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Fill out 1040x online An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Fill out 1040x online Two corporations that are members of the same controlled group. Fill out 1040x online (Under certain conditions, however, these losses are not disallowed but must be deferred. Fill out 1040x online ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Fill out 1040x online Multiple property sales or trades. Fill out 1040x online   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Fill out 1040x online The gain on each item may be taxable. Fill out 1040x online However, you cannot deduct the loss on any item. Fill out 1040x online Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Fill out 1040x online Indirect transactions. Fill out 1040x online   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Fill out 1040x online This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Fill out 1040x online Constructive ownership of stock. Fill out 1040x online   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Fill out 1040x online Rule 1. Fill out 1040x online   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Fill out 1040x online Rule 2. Fill out 1040x online   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Fill out 1040x online Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Fill out 1040x online Rule 3. Fill out 1040x online   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Fill out 1040x online Rule 4. Fill out 1040x online   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Fill out 1040x online But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Fill out 1040x online Property received from a related party. Fill out 1040x online    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Fill out 1040x online This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Fill out 1040x online This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Fill out 1040x online   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Fill out 1040x online Example 1. Fill out 1040x online Your brother sells you stock for $7,600. Fill out 1040x online His cost basis is $10,000. Fill out 1040x online Your brother cannot deduct the loss of $2,400. Fill out 1040x online Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Fill out 1040x online Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Fill out 1040x online Example 2. Fill out 1040x online If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Fill out 1040x online You cannot deduct the loss that was not allowed to your brother. Fill out 1040x online Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Fill out 1040x online Character of gain or loss. Fill out 1040x online   You need to classify your gains and losses as either ordinary or capital gains or losses. Fill out 1040x online You then need to classify your capital gains and losses as either short term or long term. Fill out 1040x online If you have long-term gains and losses, you must identify your 28% rate gains and losses. Fill out 1040x online If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Fill out 1040x online   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Fill out 1040x online Reporting capital gains and losses is explained in chapter 16. Fill out 1040x online Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Fill out 1040x online Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Fill out 1040x online A sale or trade of a noncapital asset generally results in ordinary gain or loss. Fill out 1040x online Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Fill out 1040x online In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Fill out 1040x online Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Fill out 1040x online Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Fill out 1040x online Any property you own is a capital asset, except the following noncapital assets. Fill out 1040x online Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Fill out 1040x online For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Fill out 1040x online Depreciable property used in your trade or business, even if fully depreciated. Fill out 1040x online Real property used in your trade or business. Fill out 1040x online A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Fill out 1040x online For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Fill out 1040x online Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Fill out 1040x online U. Fill out 1040x online S. Fill out 1040x online Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Fill out 1040x online Certain commodities derivative financial instruments held by commodities derivatives dealers. Fill out 1040x online Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Fill out 1040x online Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Fill out 1040x online Investment Property Investment property is a capital asset. Fill out 1040x online Any gain or loss from its sale or trade is generally a capital gain or loss. Fill out 1040x online Gold, silver, stamps, coins, gems, etc. Fill out 1040x online   These are capital assets except when they are held for sale by a dealer. Fill out 1040x online Any gain or loss you have from their sale or trade generally is a capital gain or loss. Fill out 1040x online Stocks, stock rights, and bonds. Fill out 1040x online   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Fill out 1040x online However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Fill out 1040x online Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Fill out 1040x online However, you cannot deduct a loss from selling personal use property. Fill out 1040x online Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Fill out 1040x online You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Fill out 1040x online You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Fill out 1040x online You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Fill out 1040x online For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Fill out 1040x online See also Schedule D (Form 1040), Form 8949, and their separate instructions. Fill out 1040x online You can revoke the election if you have IRS approval. Fill out 1040x online To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Fill out 1040x online See, for example, Rev. Fill out 1040x online Proc. Fill out 1040x online 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Fill out 1040x online Proc. Fill out 1040x online 2013–32, available at www. Fill out 1040x online irs. Fill out 1040x online gov/irb/2013-01_IRB/ar06. Fill out 1040x online html. Fill out 1040x online Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Fill out 1040x online Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Fill out 1040x online Short-term government obligations. Fill out 1040x online   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Fill out 1040x online This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Fill out 1040x online Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Fill out 1040x online   However, do not treat these gains as income to the extent you previously included the discount in income. Fill out 1040x online See Discount on Short-Term Obligations in chapter 1 of Publication 550. Fill out 1040x online Short-term nongovernment obligations. Fill out 1040x online   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Fill out 1040x online This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Fill out 1040x online   However, to the extent you previously included the discount in income, you do not have to include it in income again. Fill out 1040x online See Discount on Short-Term Obligations in chapter 1 of Publication 550. Fill out 1040x online Tax-exempt state and local government bonds. Fill out 1040x online   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Fill out 1040x online To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Fill out 1040x online   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Fill out 1040x online For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Fill out 1040x online   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Fill out 1040x online If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Fill out 1040x online If you bought the bonds after April 30, 1993, the gain is ordinary income. Fill out 1040x online   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Fill out 1040x online For more information, see Market Discount Bonds in chapter 1 of Publication 550. Fill out 1040x online    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Fill out 1040x online Redeemed before maturity. Fill out 1040x online   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Fill out 1040x online   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Fill out 1040x online However, you must report the unearned part of OID as a capital gain. Fill out 1040x online Example. Fill out 1040x online On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Fill out 1040x online The face amount of the bond was $1,000. Fill out 1040x online The $200 discount was OID. Fill out 1040x online At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Fill out 1040x online The bond was callable at its face amount beginning 10 years after the issue date. Fill out 1040x online The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Fill out 1040x online The OID earned during the time you held the bond, $73, is not taxable. Fill out 1040x online The $60 accrued annual interest also is not taxable. Fill out 1040x online However, you must report the unearned part of OID ($127) as a capital gain. Fill out 1040x online Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Fill out 1040x online   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Fill out 1040x online The rest of the gain is capital gain. Fill out 1040x online If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Fill out 1040x online This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Fill out 1040x online Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Fill out 1040x online   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Fill out 1040x online Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Fill out 1040x online See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Fill out 1040x online   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Fill out 1040x online However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Fill out 1040x online In this case, the rest of the gain is capital gain. Fill out 1040x online Market discount bonds. Fill out 1040x online   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Fill out 1040x online If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Fill out 1040x online The rest of the gain is capital gain. Fill out 1040x online See Market Discount Bonds in chapter 1 of Publication 550. Fill out 1040x online   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Fill out 1040x online See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Fill out 1040x online Retirement of debt instrument. Fill out 1040x online   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Fill out 1040x online Notes of individuals. Fill out 1040x online   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Fill out 1040x online An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Fill out 1040x online The lender is not in the business of lending money. Fill out 1040x online The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Fill out 1040x online Avoiding federal tax is not one of the principal purposes of the loan. Fill out 1040x online   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Fill out 1040x online When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Fill out 1040x online The rest of the gain, if any, is capital gain. Fill out 1040x online Any loss on the sale or redemption is capital loss. Fill out 1040x online Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Fill out 1040x online Ordinary loss. Fill out 1040x online Casualty loss. Fill out 1040x online Nonbusiness bad debt (short-term capital loss). Fill out 1040x online  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Fill out 1040x online Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Fill out 1040x online Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Fill out 1040x online Report the loss on Form 4797, line 10. Fill out 1040x online Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Fill out 1040x online Report the gain on Form 8949. Fill out 1040x online See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Fill out 1040x online For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Fill out 1040x online See also Schedule D (Form 1040), Form 8949, and their separate instructions. Fill out 1040x online Holding Period If you sold or traded investment property, you must determine your holding period for the property. Fill out 1040x online Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Fill out 1040x online Long-term or short-term. Fill out 1040x online   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Fill out 1040x online If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Fill out 1040x online   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Fill out 1040x online The day you disposed of the property is part of your holding period. Fill out 1040x online Example. Fill out 1040x online If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Fill out 1040x online If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Fill out 1040x online Securities traded on established market. Fill out 1040x online   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Fill out 1040x online    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Fill out 1040x online Example. Fill out 1040x online You are a cash method, calendar year taxpayer. Fill out 1040x online You sold stock at a gain on December 30, 2013. Fill out 1040x online According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Fill out 1040x online You received payment of the sales price on that same day. Fill out 1040x online Report your gain on your 2013 return, even though you received the payment in 2014. Fill out 1040x online The gain is long term or short term depending on whether you held the stock more than 1 year. Fill out 1040x online Your holding period ended on December 30. Fill out 1040x online If you had sold the stock at a loss, you would also report it on your 2013 return. Fill out 1040x online U. Fill out 1040x online S. Fill out 1040x online Treasury notes and bonds. Fill out 1040x online   The holding period of U. Fill out 1040x online S. Fill out 1040x online Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Fill out 1040x online The holding period of U. Fill out 1040x online S. Fill out 1040x online Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Fill out 1040x online Automatic investment service. Fill out 1040x online   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Fill out 1040x online Your holding period starts on the day after the bank's purchase date. Fill out 1040x online If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Fill out 1040x online A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Fill out 1040x online Nontaxable trades. Fill out 1040x online   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Fill out 1040x online Property received as a gift. Fill out 1040x online   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Fill out 1040x online   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Fill out 1040x online Inherited property. Fill out 1040x online   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Fill out 1040x online This is true regardless of how long you actually held the property. Fill out 1040x online However, if you inherited property from someone who died in 2010, see the information below. Fill out 1040x online Inherited property from someone who died in 2010. Fill out 1040x online   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Fill out 1040x online Real property bought. Fill out 1040x online   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Fill out 1040x online However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Fill out 1040x online The holding period cannot start until there is an actual contract of sale. Fill out 1040x online The holding period of the seller cannot end before that time. Fill out 1040x online Real property repossessed. Fill out 1040x online   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Fill out 1040x online Your holding period does not include the time between the original sale and the repossession. Fill out 1040x online That is, it does not include the period during which the first buyer held the property. Fill out 1040x online Stock dividends. Fill out 1040x online   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Fill out 1040x online   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Fill out 1040x online This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Fill out 1040x online Nontaxable stock rights. Fill out 1040x online   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Fill out 1040x online The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Fill out 1040x online Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Fill out 1040x online You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Fill out 1040x online Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Fill out 1040x online To be deductible, nonbusiness bad debts must be totally worthless. Fill out 1040x online You cannot deduct a partly worthless nonbusiness debt. Fill out 1040x online Genuine debt required. Fill out 1040x online   A debt must be genuine for you to deduct a loss. Fill out 1040x online A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Fill out 1040x online Basis in bad debt required. Fill out 1040x online    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Fill out 1040x online For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Fill out 1040x online If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Fill out 1040x online When deductible. Fill out 1040x online   You can take a bad debt deduction only in the year the debt becomes worthless. Fill out 1040x online You do not have to wait until a debt is due to determine whether it is worthless. Fill out 1040x online A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Fill out 1040x online   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Fill out 1040x online You must only show that you have taken reasonable steps to collect the debt. Fill out 1040x online Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Fill out 1040x online How to report bad debts. Fill out 1040x online    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Fill out 1040x online    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Fill out 1040x online    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Fill out 1040x online See also Schedule D (Form 1040), Form 8949, and their separate instructions. Fill out 1040x online   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Fill out 1040x online For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Fill out 1040x online Filing a claim for refund. Fill out 1040x online    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Fill out 1040x online To do this, use Form 1040X to amend your return for the year the debt became worthless. Fill out 1040x online You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Fill out 1040x online For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Fill out 1040x online Additional information. Fill out 1040x online   For more information, see Nonbusiness Bad Debts in Publication 550. Fill out 1040x online For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Fill out 1040x online Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Fill out 1040x online A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Fill out 1040x online If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Fill out 1040x online The result is your basis in the new stock or securities. Fill out 1040x online This adjustment postpones the loss deduction until the disposition of the new stock or securities. Fill out 1040x online Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Fill out 1040x online For more information, see Wash Sales, in chapter 4 of Publication 550. Fill out 1040x online Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Fill out 1040x online This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Fill out 1040x online You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Fill out 1040x online This postpones your gain until the year you dispose of the replacement property. Fill out 1040x online You qualify to make this choice if you meet all the following tests. Fill out 1040x online You sell publicly traded securities at a gain. Fill out 1040x online Publicly traded securities are securities traded on an established securities market. Fill out 1040x online Your gain from the sale is a capital gain. Fill out 1040x online During the 60-day period beginning on the date of the sale, you buy replacement property. Fill out 1040x online This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Fill out 1040x online This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Fill out 1040x online Amount of gain recognized. Fill out 1040x online   If you make the choice described in this section, you must recognize gain only up to the following amount. Fill out 1040x online The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Fill out 1040x online  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Fill out 1040x online If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Fill out 1040x online Limit on gain postponed. Fill out 1040x online   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Fill out 1040x online Basis of replacement property. Fill out 1040x online   You must subtract the amount of postponed gain from the basis of your replacement property. Fill out 1040x online How to report and postpone gain. Fill out 1040x online    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. Fill out 1040x online Prev  Up  Next   Home   More Online Publications