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Fillable 1040x Form

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Fillable 1040x Form

Fillable 1040x form 7. Fillable 1040x form   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Fillable 1040x form Custodian account for your child. Fillable 1040x form Penalty for failure to supply SSN. Fillable 1040x form Reporting backup withholding. Fillable 1040x form Savings account with parent as trustee. Fillable 1040x form Interest not reported on Form 1099-INT. Fillable 1040x form Nominees. Fillable 1040x form Incorrect amount. Fillable 1040x form Information reporting requirement. Fillable 1040x form Taxable InterestInterest subject to penalty for early withdrawal. Fillable 1040x form Money borrowed to invest in certificate of deposit. Fillable 1040x form U. Fillable 1040x form S. Fillable 1040x form Savings Bonds Education Savings Bond Program U. Fillable 1040x form S. Fillable 1040x form Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Fillable 1040x form How To Report Interest IncomeSchedule B (Form 1040A or 1040). Fillable 1040x form Reporting tax-exempt interest. Fillable 1040x form U. Fillable 1040x form S. Fillable 1040x form savings bond interest previously reported. Fillable 1040x form Reminder Foreign-source income. Fillable 1040x form  If you are a U. Fillable 1040x form S. Fillable 1040x form citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Fillable 1040x form S. Fillable 1040x form law. Fillable 1040x form This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Fillable 1040x form Introduction This chapter discusses the following topics. Fillable 1040x form Different types of interest income. Fillable 1040x form What interest is taxable and what interest is nontaxable. Fillable 1040x form When to report interest income. Fillable 1040x form How to report interest income on your tax return. Fillable 1040x form In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Fillable 1040x form Exceptions to this rule are discussed later in this chapter. Fillable 1040x form You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Fillable 1040x form See Money borrowed to invest in certificate of deposit , later, and chapter 28. Fillable 1040x form Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. Fillable 1040x form S. Fillable 1040x form Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Fillable 1040x form S. Fillable 1040x form Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Fillable 1040x form Recordkeeping. Fillable 1040x form You should keep a list showing sources and interest amounts received during the year. Fillable 1040x form Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Fillable 1040x form Tax on unearned income of certain children. Fillable 1040x form    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Fillable 1040x form If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Fillable 1040x form If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Fillable 1040x form   Some parents can choose to include the child's interest and dividends on the parent's return. Fillable 1040x form If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Fillable 1040x form   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Fillable 1040x form Beneficiary of an estate or trust. Fillable 1040x form   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Fillable 1040x form You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Fillable 1040x form , from the fiduciary. Fillable 1040x form Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Fillable 1040x form Social security number (SSN). Fillable 1040x form   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Fillable 1040x form This includes payers of interest. Fillable 1040x form If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Fillable 1040x form SSN for joint account. Fillable 1040x form   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Fillable 1040x form (For information on who owns the funds in a joint account, see Joint accounts , later. Fillable 1040x form ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Fillable 1040x form This is because only one name and SSN can be shown on Form 1099. Fillable 1040x form   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Fillable 1040x form For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Fillable 1040x form Custodian account for your child. Fillable 1040x form   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Fillable 1040x form For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Fillable 1040x form Penalty for failure to supply SSN. Fillable 1040x form   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Fillable 1040x form See Failure to supply SSN under Penalties in chapter 1. Fillable 1040x form Backup withholding also may apply. Fillable 1040x form Backup withholding. Fillable 1040x form   Your interest income is generally not subject to regular withholding. Fillable 1040x form However, it may be subject to backup withholding to ensure that income tax is collected on the income. Fillable 1040x form Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Fillable 1040x form   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Fillable 1040x form For more information, see Backup Withholding in chapter 4. Fillable 1040x form Reporting backup withholding. Fillable 1040x form   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. Fillable 1040x form The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Fillable 1040x form ” Joint accounts. Fillable 1040x form   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. Fillable 1040x form Income from property given to a child. Fillable 1040x form   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Fillable 1040x form   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Fillable 1040x form Savings account with parent as trustee. Fillable 1040x form   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Fillable 1040x form The savings account legally belongs to the child. Fillable 1040x form The parents are not legally permitted to use any of the funds to support the child. Fillable 1040x form Form 1099-INT. Fillable 1040x form   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Fillable 1040x form This form shows you the interest you received during the year. Fillable 1040x form Keep this form for your records. Fillable 1040x form You do not have to attach it to your tax return. Fillable 1040x form   Report on your tax return the total interest income you receive for the tax year. Fillable 1040x form Interest not reported on Form 1099-INT. Fillable 1040x form   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Fillable 1040x form For example, you may receive distributive shares of interest from partnerships or S corporations. Fillable 1040x form This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Fillable 1040x form , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Fillable 1040x form Nominees. Fillable 1040x form   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Fillable 1040x form   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. Fillable 1040x form Incorrect amount. Fillable 1040x form   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Fillable 1040x form The new Form 1099-INT you receive will be marked “Corrected. Fillable 1040x form ” Form 1099-OID. Fillable 1040x form   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Fillable 1040x form For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Fillable 1040x form Exempt-interest dividends. Fillable 1040x form   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Fillable 1040x form (However, see Information reporting requirement , next. Fillable 1040x form ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Fillable 1040x form You do not reduce your basis for distributions that are exempt-interest dividends. Fillable 1040x form Information reporting requirement. Fillable 1040x form   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Fillable 1040x form This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Fillable 1040x form Note. Fillable 1040x form Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Fillable 1040x form See Alternative Minimum Tax (AMT) in chapter 30 for more information. Fillable 1040x form Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Fillable 1040x form Interest on VA dividends. Fillable 1040x form   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Fillable 1040x form This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Fillable 1040x form Individual retirement arrangements (IRAs). Fillable 1040x form   Interest on a Roth IRA generally is not taxable. Fillable 1040x form Interest on a traditional IRA is tax deferred. Fillable 1040x form You generally do not include it in your income until you make withdrawals from the IRA. Fillable 1040x form See chapter 17. Fillable 1040x form Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Fillable 1040x form The following are some sources of taxable interest. Fillable 1040x form Dividends that are actually interest. Fillable 1040x form   Certain distributions commonly called dividends are actually interest. Fillable 1040x form You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Fillable 1040x form  The “dividends” will be shown as interest income on Form 1099-INT. Fillable 1040x form Money market funds. Fillable 1040x form   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Fillable 1040x form Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Fillable 1040x form Certificates of deposit and other deferred interest accounts. Fillable 1040x form   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Fillable 1040x form You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Fillable 1040x form The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Fillable 1040x form If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Fillable 1040x form Interest subject to penalty for early withdrawal. Fillable 1040x form   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Fillable 1040x form You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Fillable 1040x form See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. Fillable 1040x form Money borrowed to invest in certificate of deposit. Fillable 1040x form   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Fillable 1040x form You must report the total interest you earn on the certificate in your income. Fillable 1040x form If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Fillable 1040x form See Interest Expenses in chapter 3 of Publication 550. Fillable 1040x form Example. Fillable 1040x form You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Fillable 1040x form The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Fillable 1040x form The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Fillable 1040x form The bank also gives you a statement showing that you paid $310 interest for 2013. Fillable 1040x form You must include the $575 in your income. Fillable 1040x form If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Fillable 1040x form Gift for opening account. Fillable 1040x form   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Fillable 1040x form   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Fillable 1040x form For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Fillable 1040x form The value is determined by the cost to the financial institution. Fillable 1040x form Example. Fillable 1040x form You open a savings account at your local bank and deposit $800. Fillable 1040x form The account earns $20 interest. Fillable 1040x form You also receive a $15 calculator. Fillable 1040x form If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Fillable 1040x form You must report $35 interest income on your tax return. Fillable 1040x form Interest on insurance dividends. Fillable 1040x form   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Fillable 1040x form However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Fillable 1040x form Prepaid insurance premiums. Fillable 1040x form   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Fillable 1040x form U. Fillable 1040x form S. Fillable 1040x form obligations. Fillable 1040x form   Interest on U. Fillable 1040x form S. Fillable 1040x form obligations, such as U. Fillable 1040x form S. Fillable 1040x form Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Fillable 1040x form Interest on tax refunds. Fillable 1040x form   Interest you receive on tax refunds is taxable income. Fillable 1040x form Interest on condemnation award. Fillable 1040x form   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Fillable 1040x form Installment sale payments. Fillable 1040x form   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Fillable 1040x form That interest is taxable when you receive it. Fillable 1040x form If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Fillable 1040x form See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Fillable 1040x form Interest on annuity contract. Fillable 1040x form   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Fillable 1040x form Usurious interest. Fillable 1040x form   Usurious interest is interest charged at an illegal rate. Fillable 1040x form This is taxable as interest unless state law automatically changes it to a payment on the principal. Fillable 1040x form Interest income on frozen deposits. Fillable 1040x form   Exclude from your gross income interest on frozen deposits. Fillable 1040x form A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Fillable 1040x form   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Fillable 1040x form If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. Fillable 1040x form   The interest you exclude is treated as credited to your account in the following year. Fillable 1040x form You must include it in income in the year you can withdraw it. Fillable 1040x form Example. Fillable 1040x form $100 of interest was credited on your frozen deposit during the year. Fillable 1040x form You withdrew $80 but could not withdraw any more as of the end of the year. Fillable 1040x form You must include $80 in your income and exclude $20 from your income for the year. Fillable 1040x form You must include the $20 in your income for the year you can withdraw it. Fillable 1040x form Bonds traded flat. Fillable 1040x form   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Fillable 1040x form The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Fillable 1040x form When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Fillable 1040x form Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Fillable 1040x form See Bonds Sold Between Interest Dates , later, for more information. Fillable 1040x form Below-market loans. Fillable 1040x form   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Fillable 1040x form See Below-Market Loans in chapter 1 of Publication 550 for more information. Fillable 1040x form U. Fillable 1040x form S. Fillable 1040x form Savings Bonds This section provides tax information on U. Fillable 1040x form S. Fillable 1040x form savings bonds. Fillable 1040x form It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Fillable 1040x form For other information on U. Fillable 1040x form S. Fillable 1040x form savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Fillable 1040x form O. Fillable 1040x form Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Fillable 1040x form O. Fillable 1040x form Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Fillable 1040x form O. Fillable 1040x form Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Fillable 1040x form treasurydirect. Fillable 1040x form gov/indiv/indiv. Fillable 1040x form htm. Fillable 1040x form Accrual method taxpayers. Fillable 1040x form   If you use an accrual method of accounting, you must report interest on U. Fillable 1040x form S. Fillable 1040x form savings bonds each year as it accrues. Fillable 1040x form You cannot postpone reporting interest until you receive it or until the bonds mature. Fillable 1040x form Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Fillable 1040x form Cash method taxpayers. Fillable 1040x form   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Fillable 1040x form S. Fillable 1040x form savings bonds when you receive it. Fillable 1040x form The cash method of accounting is explained in chapter 1 under Accounting Methods. Fillable 1040x form But see Reporting options for cash method taxpayers , later. Fillable 1040x form Series HH bonds. Fillable 1040x form    These bonds were issued at face value. Fillable 1040x form Interest is paid twice a year by direct deposit to your bank account. Fillable 1040x form If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Fillable 1040x form   Series HH bonds were first offered in 1980 and last offered in August 2004. Fillable 1040x form Before 1980, series H bonds were issued. Fillable 1040x form Series H bonds are treated the same as series HH bonds. Fillable 1040x form If you are a cash method taxpayer, you must report the interest when you receive it. Fillable 1040x form   Series H bonds have a maturity period of 30 years. Fillable 1040x form Series HH bonds mature in 20 years. Fillable 1040x form The last series H bonds matured in 2009. Fillable 1040x form Series EE and series I bonds. Fillable 1040x form   Interest on these bonds is payable when you redeem the bonds. Fillable 1040x form The difference between the purchase price and the redemption value is taxable interest. Fillable 1040x form Series EE bonds. Fillable 1040x form   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Fillable 1040x form   Before July 1980, series E bonds were issued. Fillable 1040x form The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Fillable 1040x form Paper series EE and series E bonds are issued at a discount. Fillable 1040x form The face value is payable to you at maturity. Fillable 1040x form Electronic series EE bonds are issued at their face value. Fillable 1040x form The face value plus accrued interest is payable to you at maturity. Fillable 1040x form As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Fillable 1040x form   Owners of paper series EE bonds can convert them to electronic bonds. Fillable 1040x form These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Fillable 1040x form Series I bonds. Fillable 1040x form   Series I bonds were first offered in 1998. Fillable 1040x form These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Fillable 1040x form The face value plus all accrued interest is payable to you at maturity. Fillable 1040x form Reporting options for cash method taxpayers. Fillable 1040x form   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Fillable 1040x form Method 1. Fillable 1040x form Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Fillable 1040x form (However, see Savings bonds traded , later. Fillable 1040x form )  Note. Fillable 1040x form Series EE bonds issued in 1983 matured in 2013. Fillable 1040x form If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Fillable 1040x form The last series E bonds were issued in 1980 and matured in 2010. Fillable 1040x form If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Fillable 1040x form Method 2. Fillable 1040x form Choose to report the increase in redemption value as interest each year. Fillable 1040x form You must use the same method for all series EE, series E, and series I bonds you own. Fillable 1040x form If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Fillable 1040x form    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Fillable 1040x form To learn how, see Education Savings Bond Program, later. Fillable 1040x form Change from method 1. Fillable 1040x form   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Fillable 1040x form In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Fillable 1040x form   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Fillable 1040x form Change from method 2. Fillable 1040x form   To change from method 2 to method 1, you must request permission from the IRS. Fillable 1040x form Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Fillable 1040x form You have typed or printed the following number at the top: “131. Fillable 1040x form ” It includes your name and social security number under “131. Fillable 1040x form ” It includes the year of change (both the beginning and ending dates). Fillable 1040x form It identifies the savings bonds for which you are requesting this change. Fillable 1040x form It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Fillable 1040x form   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Fillable 1040x form   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Fillable 1040x form On the statement, type or print “Filed pursuant to section 301. Fillable 1040x form 9100-2. Fillable 1040x form ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Fillable 1040x form    By the date you file the original statement with your return, you must also send a signed copy to the address below. Fillable 1040x form   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Fillable 1040x form O. Fillable 1040x form Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Fillable 1040x form   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. Fillable 1040x form In that case, follow the form instructions for an automatic change. Fillable 1040x form No user fee is required. Fillable 1040x form Co-owners. Fillable 1040x form   If a U. Fillable 1040x form S. Fillable 1040x form savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Fillable 1040x form One co-owner's funds used. Fillable 1040x form    If you used your funds to buy the bond, you must pay the tax on the interest. Fillable 1040x form This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Fillable 1040x form Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Fillable 1040x form The co-owner who redeemed the bond is a “nominee. Fillable 1040x form ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. Fillable 1040x form Both co-owners' funds used. Fillable 1040x form   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Fillable 1040x form Community property. Fillable 1040x form   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Fillable 1040x form If you file separate returns, each of you generally must report one-half of the bond interest. Fillable 1040x form For more information about community property, see Publication 555. Fillable 1040x form Table 7-1. Fillable 1040x form   These rules are also shown in Table 7-1. Fillable 1040x form Ownership transferred. Fillable 1040x form   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Fillable 1040x form But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Fillable 1040x form   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Fillable 1040x form Purchased jointly. Fillable 1040x form   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Fillable 1040x form The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Fillable 1040x form This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Fillable 1040x form   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Fillable 1040x form But the new co-owner will report only his or her share of the interest earned after the transfer. Fillable 1040x form   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Fillable 1040x form    Table 7-1. Fillable 1040x form Who Pays the Tax on U. Fillable 1040x form S. Fillable 1040x form Savings Bond Interest IF . Fillable 1040x form . Fillable 1040x form . Fillable 1040x form THEN the interest must be reported by . Fillable 1040x form . Fillable 1040x form . Fillable 1040x form you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Fillable 1040x form you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Fillable 1040x form you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Fillable 1040x form you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Fillable 1040x form If you file separate returns, both you and your spouse generally report one-half of the interest. Fillable 1040x form Example 1. Fillable 1040x form You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Fillable 1040x form The bond was issued to you and your spouse as co-owners. Fillable 1040x form You both postpone reporting interest on the bond. Fillable 1040x form You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Fillable 1040x form At that time neither you nor your spouse has to report the interest earned to the date of reissue. Fillable 1040x form Example 2. Fillable 1040x form You bought a $1,000 series EE savings bond entirely with your own funds. Fillable 1040x form The bond was issued to you and your spouse as co-owners. Fillable 1040x form You both postpone reporting interest on the bond. Fillable 1040x form You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Fillable 1040x form You must report half the interest earned to the date of reissue. Fillable 1040x form Transfer to a trust. Fillable 1040x form   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Fillable 1040x form However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Fillable 1040x form You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Fillable 1040x form   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Fillable 1040x form See Savings bonds traded , later. Fillable 1040x form Decedents. Fillable 1040x form   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Fillable 1040x form This is explained in chapter 1 of Publication 550. Fillable 1040x form Savings bonds traded. Fillable 1040x form   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Fillable 1040x form (You cannot trade series I bonds for series HH bonds. Fillable 1040x form After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Fillable 1040x form ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Fillable 1040x form When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Fillable 1040x form Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Fillable 1040x form Example. Fillable 1040x form You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Fillable 1040x form You reported the $223 as taxable income on your tax return. Fillable 1040x form At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Fillable 1040x form You hold the series HH bonds until maturity, when you receive $2,500. Fillable 1040x form You must report $300 as interest income in the year of maturity. Fillable 1040x form This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Fillable 1040x form (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Fillable 1040x form ) Choice to report interest in year of trade. Fillable 1040x form   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. Fillable 1040x form If you made this choice, it is treated as a change from method 1. Fillable 1040x form See Change from method 1 under Series EE and series I bonds, earlier. Fillable 1040x form Form 1099-INT for U. Fillable 1040x form S. Fillable 1040x form savings bonds interest. Fillable 1040x form   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Fillable 1040x form Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Fillable 1040x form However, your Form 1099-INT may show more interest than you have to include on your income tax return. Fillable 1040x form For example, this may happen if any of the following are true. Fillable 1040x form You chose to report the increase in the redemption value of the bond each year. Fillable 1040x form The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Fillable 1040x form You received the bond from a decedent. Fillable 1040x form The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Fillable 1040x form Ownership of the bond was transferred. Fillable 1040x form The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Fillable 1040x form You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Fillable 1040x form The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Fillable 1040x form (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Fillable 1040x form ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Fillable 1040x form The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Fillable 1040x form (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Fillable 1040x form , for the year of distribution. Fillable 1040x form )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Fillable 1040x form Publication 550 includes examples showing how to report these amounts. Fillable 1040x form    Interest on U. Fillable 1040x form S. Fillable 1040x form savings bonds is exempt from state and local taxes. Fillable 1040x form The Form 1099-INT you receive will indicate the amount that is for U. Fillable 1040x form S. Fillable 1040x form savings bond interest in box 3. Fillable 1040x form Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Fillable 1040x form S. Fillable 1040x form savings bonds during the year if you pay qualified higher educational expenses during the same year. Fillable 1040x form This exclusion is known as the Education Savings Bond Program. Fillable 1040x form You do not qualify for this exclusion if your filing status is married filing separately. Fillable 1040x form Form 8815. Fillable 1040x form   Use Form 8815 to figure your exclusion. Fillable 1040x form Attach the form to your Form 1040 or Form 1040A. Fillable 1040x form Qualified U. Fillable 1040x form S. Fillable 1040x form savings bonds. Fillable 1040x form   A qualified U. Fillable 1040x form S. Fillable 1040x form savings bond is a series EE bond issued after 1989 or a series I bond. Fillable 1040x form The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Fillable 1040x form You must be at least 24 years old before the bond's issue date. Fillable 1040x form For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Fillable 1040x form    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Fillable 1040x form Beneficiary. Fillable 1040x form   You can designate any individual (including a child) as a beneficiary of the bond. Fillable 1040x form Verification by IRS. Fillable 1040x form   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Fillable 1040x form Qualified expenses. Fillable 1040x form   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Fillable 1040x form   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Fillable 1040x form   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Fillable 1040x form Eligible educational institutions. Fillable 1040x form   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. Fillable 1040x form S. Fillable 1040x form Department of Education. Fillable 1040x form Reduction for certain benefits. Fillable 1040x form   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Fillable 1040x form Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Fillable 1040x form Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Fillable 1040x form Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Fillable 1040x form Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Fillable 1040x form Any expense used in figuring the American Opportunity and lifetime learning credits. Fillable 1040x form Amount excludable. Fillable 1040x form   If the total proceeds (interest and principal) from the qualified U. Fillable 1040x form S. Fillable 1040x form savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Fillable 1040x form If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Fillable 1040x form   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Fillable 1040x form The numerator of the fraction is the qualified higher educational expenses you paid during the year. Fillable 1040x form The denominator of the fraction is the total proceeds you received during the year. Fillable 1040x form Example. Fillable 1040x form In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Fillable 1040x form S. Fillable 1040x form savings bond they bought in April 1997. Fillable 1040x form They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Fillable 1040x form In 2013, they paid $4,000 of their daughter's college tuition. Fillable 1040x form They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Fillable 1040x form They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Fillable 1040x form They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Fillable 1040x form Modified adjusted gross income limit. Fillable 1040x form   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. Fillable 1040x form You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. Fillable 1040x form   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. Fillable 1040x form   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Fillable 1040x form If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. Fillable 1040x form   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. Fillable 1040x form Recordkeeping. Fillable 1040x form If you claim the interest exclusion, you must keep a written record of the qualified U. Fillable 1040x form S. Fillable 1040x form savings bonds you redeem. Fillable 1040x form Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Fillable 1040x form You can use Form 8818 to record this information. Fillable 1040x form You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Fillable 1040x form U. Fillable 1040x form S. Fillable 1040x form Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Fillable 1040x form S. Fillable 1040x form Government. Fillable 1040x form Taxation of interest. Fillable 1040x form   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Fillable 1040x form You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Fillable 1040x form   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Fillable 1040x form Treasury bills. Fillable 1040x form   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Fillable 1040x form They are generally issued at a discount in the amount of $100 and multiples of $100. Fillable 1040x form The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Fillable 1040x form Generally, you report this interest income when the bill is paid at maturity. Fillable 1040x form If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. Fillable 1040x form Treasury notes and bonds. Fillable 1040x form   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Fillable 1040x form Maturity periods for Treasury bonds are longer than 10 years. Fillable 1040x form Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Fillable 1040x form Generally, you report this interest for the year paid. Fillable 1040x form For more information, see U. Fillable 1040x form S. Fillable 1040x form Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Fillable 1040x form For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Fillable 1040x form O. Fillable 1040x form Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Fillable 1040x form treasurydirect. Fillable 1040x form gov/indiv/indiv. Fillable 1040x form htm. Fillable 1040x form For information on series EE, series I, and series HH savings bonds, see U. Fillable 1040x form S. Fillable 1040x form Savings Bonds , earlier. Fillable 1040x form Treasury inflation-protected securities (TIPS). Fillable 1040x form   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Fillable 1040x form For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Fillable 1040x form Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. Fillable 1040x form You must report that part of the sales price as interest income for the year of sale. Fillable 1040x form If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Fillable 1040x form When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. Fillable 1040x form See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Fillable 1040x form Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Fillable 1040x form But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Fillable 1040x form For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Fillable 1040x form Annuity. Fillable 1040x form   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. Fillable 1040x form See chapter 10 for information on pension and annuity income from nonqualified plans. Fillable 1040x form State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. Fillable 1040x form Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. Fillable 1040x form Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. Fillable 1040x form For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. Fillable 1040x form Information reporting requirement. Fillable 1040x form   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Fillable 1040x form This is an information reporting requirement only. Fillable 1040x form It does not change tax-exempt interest to taxable interest. Fillable 1040x form Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Fillable 1040x form You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. Fillable 1040x form A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Fillable 1040x form OID is the difference between the stated redemption price at maturity and the issue price. Fillable 1040x form All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Fillable 1040x form Zero coupon bonds are one example of these instruments. Fillable 1040x form The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). Fillable 1040x form See Discount on Short-Term Obligations in chapter 1 of Publication 550. Fillable 1040x form De minimis OID. Fillable 1040x form   You can treat the discount as zero if it is less than one-fourth of 1% (. Fillable 1040x form 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Fillable 1040x form This small discount is known as “de minimis” OID. Fillable 1040x form Example 1. Fillable 1040x form You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Fillable 1040x form One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Fillable 1040x form Because the $20 discount is less than $25, the OID is treated as zero. Fillable 1040x form (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Fillable 1040x form ) Example 2. Fillable 1040x form The facts are the same as in Example 1, except that the bond was issued at $950. Fillable 1040x form The OID is $50. Fillable 1040x form Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. Fillable 1040x form Debt instrument bought after original issue. Fillable 1040x form   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Fillable 1040x form If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Fillable 1040x form See Market Discount Bonds in chapter 1 of Publication 550. Fillable 1040x form Exceptions to reporting OID. Fillable 1040x form   The OID rules discussed in this chapter do not apply to the following debt instruments. Fillable 1040x form Tax-exempt obligations. Fillable 1040x form (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Fillable 1040x form U. Fillable 1040x form S. Fillable 1040x form savings bonds. Fillable 1040x form Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Fillable 1040x form Obligations issued by an individual before March 2, 1984. Fillable 1040x form Loans between individuals if all the following are true. Fillable 1040x form The lender is not in the business of lending money. Fillable 1040x form The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Fillable 1040x form Avoiding any federal tax is not one of the principal purposes of the loan. Fillable 1040x form Form 1099-OID. Fillable 1040x form   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. Fillable 1040x form Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Fillable 1040x form It also will show, in box 2, the stated interest you must include in your income. Fillable 1040x form A copy of Form 1099-OID will be sent to the IRS. Fillable 1040x form Do not file your copy with your return. Fillable 1040x form Keep it for your records. Fillable 1040x form   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Fillable 1040x form But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Fillable 1040x form Form 1099-OID not received. Fillable 1040x form   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Fillable 1040x form gov that list total OID on certain debt instruments and have information that will help you figure OID. Fillable 1040x form For the latest OID tables, go to www. Fillable 1040x form irs. Fillable 1040x form gov and enter “OID tables” in the Search box. Fillable 1040x form If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Fillable 1040x form Nominee. Fillable 1040x form   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. Fillable 1040x form Refiguring OID shown on Form 1099-OID. Fillable 1040x form   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Fillable 1040x form You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Fillable 1040x form The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Fillable 1040x form For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. Fillable 1040x form Refiguring periodic interest shown on Form 1099-OID. Fillable 1040x form   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. Fillable 1040x form Certificates of deposit (CDs). Fillable 1040x form   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. Fillable 1040x form   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Fillable 1040x form , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Fillable 1040x form Bearer CDs. Fillable 1040x form   CDs issued after 1982 generally must be in registered form. Fillable 1040x form Bearer CDs are CDs not in registered form. Fillable 1040x form They are not issued in the depositor's name and are transferable from one individual to another. Fillable 1040x form   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Fillable 1040x form More information. Fillable 1040x form   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Fillable 1040x form When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. Fillable 1040x form Cash method. Fillable 1040x form   Most individual taxpayers use the cash method. Fillable 1040x form If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Fillable 1040x form However, there are special rules for reporting the discount on certain debt instruments. Fillable 1040x form See U. Fillable 1040x form S. Fillable 1040x form Savings Bonds and Original Issue Discount (OID) , earlier. Fillable 1040x form Example. Fillable 1040x form On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Fillable 1040x form You are not in the business of lending money. Fillable 1040x form The note stated that principal and interest would be due on August 31, 2013. Fillable 1040x form In 2013, you received $2,508. Fillable 1040x form 80 ($2,000 principal and $508. Fillable 1040x form 80 interest). Fillable 1040x form If you use the cash method, you must include in income on your 2013 return the $508. Fillable 1040x form 80 interest you received in that year. Fillable 1040x form Constructive receipt. Fillable 1040x form   You constructively receive income when it is credited to your account or made available to you. Fillable 1040x form You do not need to have physical possession of it. Fillable 1040x form For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. Fillable 1040x form This is true even if they are not yet entered in your passbook. Fillable 1040x form   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. Fillable 1040x form Accrual method. Fillable 1040x form   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Fillable 1040x form Interest is earned over the term of the debt instrument. Fillable 1040x form Example. Fillable 1040x form If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Fillable 1040x form You would report the interest as follows: 2011, $80; 2012, $249. Fillable 1040x form 60; and 2013, $179. Fillable 1040x form 20. Fillable 1040x form Coupon bonds. Fillable 1040x form   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Fillable 1040x form It does not matter when you mail the coupon for payment. Fillable 1040x form How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. Fillable 1040x form You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Fillable 1040x form Instead, you must use Form 1040A or Form 1040. Fillable 1040x form Form 1040A. Fillable 1040x form   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Fillable 1040x form Your taxable interest income is more than $1,500. Fillable 1040x form You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Fillable 1040x form You received interest from a seller-financed mortgage, and the buyer used the property as a home. Fillable 1040x form You received a Form 1099-INT for U. Fillable 1040x form S. Fillable 1040x form savings bond interest that includes amounts you reported before 2013. Fillable 1040x form You received, as a nominee, interest that actually belongs to someone else. Fillable 1040x form You received a Form 1099-INT for interest on frozen deposits. Fillable 1040x form You are reporting OID in an amount less than the amount shown on Form 1099-OID. Fillable 1040x form You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Fillable 1040x form You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). Fillable 1040x form List each payer's name and the amount of interest income received from each payer on line 1. Fillable 1040x form If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Fillable 1040x form   You cannot use Form 1040A if you must use Form 1040, as described next. Fillable 1040x form Form 1040. Fillable 1040x form   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. Fillable 1040x form Schedule B (Form 1040A or 1040). Fillable 1040x form   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Fillable 1040x form Your taxable interest income is more than $1,500. Fillable 1040x form You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Fillable 1040x form You received interest from a seller-financed mortgage, and the buyer used the property as a home. Fillable 1040x form You received a Form 1099-INT for U. Fillable 1040x form S. Fillable 1040x form savings bond interest that includes amounts you reported before 2013. Fillable 1040x form You received, as a nominee, interest that actually belongs to someone else. Fillable 1040x form You received a Form 1099-INT for interest on frozen deposits. Fillable 1040x form You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Fillable 1040x form You are reporting OID in an amount less than the amount shown on Form 1099-OID. Fillable 1040x form Statement (2) in the preceding list under Form 1040 is true. Fillable 1040x form In Part I, line 1, list each payer's name and the amount received from each. Fillable 1040x form If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Fillable 1040x form Reporting tax-exempt interest. Fillable 1040x form   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. Fillable 1040x form Add these amounts to any other tax-exempt interest you received. Fillable 1040x form Report the total on line 8b of Form 1040A or 1040. Fillable 1040x form   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Fillable 1040x form Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Fillable 1040x form   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. Fillable 1040x form These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Fillable 1040x form Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Fillable 1040x form    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Fillable 1040x form Form 1099-INT. Fillable 1040x form   Your taxable interest income, except for interest from U. Fillable 1040x form S. Fillable 1040x form savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Fillable 1040x form Add this amount to any other taxable interest income you received. Fillable 1040x form You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Fillable 1040x form Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Fillable 1040x form Your identifying number may be truncated on any paper Form 1099-INT you receive. Fillable 1040x form   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. Fillable 1040x form See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Fillable 1040x form   Box 3 of Form 1099-INT shows the interest income you received from U. Fillable 1040x form S. Fillable 1040x form savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Fillable 1040x form Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. Fillable 1040x form If part of the amount shown in box 3 was previously included in your interest income, see U. Fillable 1040x form S. Fillable 1040x form savings bond interest previously reported , later. Fillable 1040x form   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Fillable 1040x form Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). Fillable 1040x form   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Fillable 1040x form See chapter 28 for more information about investment expenses. Fillable 1040x form   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Fillable 1040x form You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). Fillable 1040x form To take the credit, you may have to file Form 1116, Foreign Tax Credit. Fillable 1040x form For more information, see Publication 514, Foreign Tax Credit for Individuals. Fillable 1040x form U. Fillable 1040x form S. Fillable 1040x form savings bond interest previously reported. Fillable 1040x form   If you received a Form 1099-INT for U. Fillable 1040x form S. Fillable 1040x form savings bond interest, the form may show interest you do not have to report. Fillable 1040x form See Form 1099-INT for U. Fillable 1040x form S. Fillable 1040x form savings bonds interest , earlier, under U. Fillable 1040x form S. Fillable 1040x form Savings Bonds. Fillable 1040x form   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Fillable 1040x form Then follow these steps. Fillable 1040x form Several lines above line 2, enter a subtotal of all interest listed on line 1. Fillable 1040x form Below the subtotal enter “U. Fillable 1040x form S. Fillable 1040x form Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Fillable 1040x form Subtract these amounts from the subtotal and enter the result on line 2. Fillable 1040x form More information. Fillable 1040x form   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Fillable 1040x form Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Colorado Office of the Attorney General

Website: Colorado Office of the Attorney General

Address: Colorado Office of the Attorney General
Consumer Protection Section
1300 Broadway, 10th Floor
Denver, CO 80203

Phone Number: 720-508-6006

Toll-free: 1-800-222-4444 (CO)

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County Consumer Protection Offices

Pueblo County District Attorney's Office

Website: Pueblo County District Attorney's Office

Address: Pueblo County District Attorney's Office
Economic Crimes Unit
701 Court St.
Pueblo, CO 81003

Phone Number: 719-583-6030

Weld County District Attorney's Office

Website: Weld County District Attorney's Office

Address: Weld County District Attorney's Office
915 10th St.
PO Box 1167
Greeley, CO 80632-1167

Phone Number: 970-356-4010

Fourth Judicial District Attorney's Office

Website: Fourth Judicial District Attorney's Office

Address: Fourth Judicial District Attorney's Office
Economic Crimes Division
El Paso and Teller Counties
105 E. Vermijo Ave.
Colorado Springs, CO 80903

Phone Number: 719-520-6000 719-520-6002 (Fraud Hotline)

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City Consumer Protection Offices

Denver District Attorney's Office

Website: Denver District Attorney's Office

Address: Denver District Attorney's Office
Economic Crimes Unit
201 W. Colfax Ave.
Denver, CO 80202

Phone Number: 720-913-9179

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Regulatory Agencies

Website: Department of Regulatory Agencies

Address: Department of Regulatory Agencies
Division of Banking
1560 Broadway, Suite 975
Denver, CO 80202

Phone Number: 303-894-7575

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Regulatory Agencies

Website: Department of Regulatory Agencies

Address: Department of Regulatory Agencies
Division of Insurance
1560 Broadway, Suite 850
Denver, CO 80202

Phone Number: 303-894-7490

Toll-free: 1-800-930-3745 (CO)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Regulatory Agencies

Website: Department of Regulatory Agencies

Address: Department of Regulatory Agencies
Division of Securities
1560 Broadway, Suite 900
Denver, CO 80202

Phone Number: 303-894-2320

TTY: 1-800-659-2656

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Utilities Commission

Website: Public Utilities Commission

Address: Public Utilities Commission
Consumer Protection Division
1560 Broadway, Suite 250
Denver, CO 80202

Phone Number: 303-894-2070

Toll-free: 1-800-456-0858 (CO)

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The Fillable 1040x Form

Fillable 1040x form 3. Fillable 1040x form   Investment Expenses Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Limits on DeductionsPassive activity. Fillable 1040x form Other income (nonpassive income). Fillable 1040x form Expenses. Fillable 1040x form Additional information. Fillable 1040x form Interest ExpensesInvestment Interest Limit on Deduction Bond Premium AmortizationSpecial rules to determine amounts payable on a bond. Fillable 1040x form Basis. Fillable 1040x form How To Figure Amortization Choosing To Amortize How To Report Amortization Expenses of Producing IncomeFees to buy or sell. Fillable 1040x form Including mutual fund or REMIC expenses in income. Fillable 1040x form Nondeductible ExpensesUsed as collateral. Fillable 1040x form Short-sale expenses. Fillable 1040x form Expenses for both tax-exempt and taxable income. Fillable 1040x form State income taxes. Fillable 1040x form Nondeductible amount. Fillable 1040x form Basis adjustment. Fillable 1040x form How To Report Investment Expenses When To Report Investment Expenses Topics - This chapter discusses: Limits on Deductions , Interest Expenses , Bond Premium Amortization , Expenses of Producing Income , Nondeductible Expenses , How To Report Investment Expenses , and When To Report Investment Expenses . Fillable 1040x form Useful Items - You may want to see: Publication 535 Business Expenses 925 Passive Activity and At-Risk Rules 929 Tax Rules for Children and Dependents Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 4952 Investment Interest Expense Deduction See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Fillable 1040x form Limits on Deductions Your deductions for investment expenses may be limited by: The at-risk rules, The passive activity loss limits, The limit on investment interest, or The 2% limit on certain miscellaneous itemized deductions. Fillable 1040x form The at-risk rules and passive activity rules are explained briefly in this section. Fillable 1040x form The limit on investment interest is explained later in this chapter under Interest Expenses . Fillable 1040x form The 2% limit is explained later in this chapter under Expenses of Producing Income . Fillable 1040x form At-risk rules. Fillable 1040x form   Special at-risk rules apply to most income-producing activities. Fillable 1040x form These rules limit the amount of loss you can deduct to the amount you risk losing in the activity. Fillable 1040x form Generally, this is the cash and the adjusted basis of property you contribute to the activity. Fillable 1040x form It also includes money you borrow for use in the activity if you are personally liable for repayment or if you use property not used in the activity as security for the loan. Fillable 1040x form For more information, see Publication 925. Fillable 1040x form Passive activity losses and credits. Fillable 1040x form   The amount of losses and tax credits you can claim from passive activities is limited. Fillable 1040x form Generally, you are allowed to deduct passive activity losses only up to the amount of your passive activity income. Fillable 1040x form Also, you can use credits from passive activities only against tax on the income from passive activities. Fillable 1040x form There are exceptions for certain activities, such as rental real estate activities. Fillable 1040x form Passive activity. Fillable 1040x form   A passive activity generally is any activity involving the conduct of any trade or business in which you do not materially participate and any rental activity. Fillable 1040x form However, if you are involved in renting real estate, the activity is not a passive activity if both of the following are true. Fillable 1040x form More than one-half of the personal services you perform during the year in all trades or businesses are performed in real property trades or businesses in which you materially participate. Fillable 1040x form You perform more than 750 hours of services during the year in real property trades or businesses in which you materially participate. Fillable 1040x form  The term “trade or business” generally means any activity that involves the conduct of a trade or business, is conducted in anticipation of starting a trade or business, or involves certain research or experimental expenditures. Fillable 1040x form However, it does not include rental activities or certain activities treated as incidental to holding property for investment. Fillable 1040x form   You are considered to materially participate in an activity if you are involved on a regular, continuous, and substantial basis in the operations of the activity. Fillable 1040x form Other income (nonpassive income). Fillable 1040x form    Generally, you can use losses from passive activities only to offset income from passive activities. Fillable 1040x form You cannot use passive activity losses to offset your other income, such as your wages or your portfolio income. Fillable 1040x form Portfolio income includes gross income from interest, dividends, annuities, or royalties that is not derived in the ordinary course of a trade or business. Fillable 1040x form It also includes gains or losses (not derived in the ordinary course of a trade or business) from the sale or trade of property (other than an interest in a passive activity) producing portfolio income or held for investment. Fillable 1040x form This includes capital gain distributions from mutual funds (and other regulated investment companies) and real estate investment trusts. Fillable 1040x form   You cannot use passive activity losses to offset Alaska Permanent Fund dividends. Fillable 1040x form Expenses. Fillable 1040x form   Do not include in the computation of your passive activity income or loss: Expenses (other than interest) that are clearly and directly allocable to your portfolio income, or Interest expense properly allocable to portfolio income. Fillable 1040x form However, this interest and other expenses may be subject to other limits. Fillable 1040x form These limits are explained in the rest of this chapter. Fillable 1040x form Additional information. Fillable 1040x form   For more information about determining and reporting income and losses from passive activities, see Publication 925. Fillable 1040x form Interest Expenses This section discusses interest expenses you may be able to deduct as an investor. Fillable 1040x form For information on business interest, see chapter 4 of Publication 535. Fillable 1040x form You cannot deduct personal interest expenses other than qualified home mortgage interest, as explained in Publication 936, Home Mortgage Interest Deduction, and interest on certain student loans, as explained in Publication 970. Fillable 1040x form Investment Interest If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Fillable 1040x form You can deduct investment interest subject to the limit discussed later. Fillable 1040x form However, you cannot deduct interest you incurred to produce tax-exempt income. Fillable 1040x form See Tax-exempt income under Nondeductible Expenses, later. Fillable 1040x form You also cannot deduct interest expenses on straddles discussed under Interest expense and carrying charges on straddles , later. Fillable 1040x form Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Fillable 1040x form Investment property. Fillable 1040x form   Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Fillable 1040x form It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Fillable 1040x form Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Fillable 1040x form Partners, shareholders, and beneficiaries. Fillable 1040x form   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Fillable 1040x form Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Fillable 1040x form Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Fillable 1040x form The allocation is not affected by the use of property that secures the debt. Fillable 1040x form Example 1. Fillable 1040x form You borrow $10,000 and use $8,000 to buy stock. Fillable 1040x form You use the other $2,000 to buy items for your home. Fillable 1040x form Since 80% of the debt is used for, and allocated to, investment purposes, 80% of the interest on that debt is investment interest. Fillable 1040x form The other 20% is nondeductible personal interest. Fillable 1040x form Debt proceeds received in cash. Fillable 1040x form   If you receive debt proceeds in cash, the proceeds are generally not treated as investment property. Fillable 1040x form Debt proceeds deposited in account. Fillable 1040x form   If you deposit debt proceeds in an account, that deposit is treated as investment property, regardless of whether the account bears interest. Fillable 1040x form But, if you withdraw the funds and use them for another purpose, you must reallocate the debt to determine the amount considered to be for investment purposes. Fillable 1040x form Example 2. Fillable 1040x form Assume in Example 1 that you borrowed the money on March 1 and immediately bought the stock for $8,000. Fillable 1040x form You did not buy the household items until June 1. Fillable 1040x form You had deposited the $2,000 in the bank. Fillable 1040x form You had no other transactions on the bank account until June. Fillable 1040x form You did not sell the stock, and you made no principal payments on the debt. Fillable 1040x form You paid interest from another account. Fillable 1040x form The $8,000 is treated as being used for an investment purpose. Fillable 1040x form The $2,000 is treated as being used for an investment purpose for the 3-month period. Fillable 1040x form Your total interest expense for 3 months on this debt is investment interest. Fillable 1040x form In June, when you spend the $2,000 for household items, you must begin to allocate 80% of the debt and the interest expense to investment purposes and 20% to personal purposes. Fillable 1040x form Amounts paid within 30 days. Fillable 1040x form   If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. Fillable 1040x form This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account. Fillable 1040x form   If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment. Fillable 1040x form Payments on debt may require new allocation. Fillable 1040x form   As you repay a debt used for more than one purpose, you must reallocate the balance. Fillable 1040x form You must first reduce the amount allocated to personal purposes by the repayment. Fillable 1040x form You then reallocate the rest of the debt to find what part is for investment purposes. Fillable 1040x form Example 3. Fillable 1040x form If, in Example 2 , you repay $500 on November 1, the entire repayment is applied against the amount allocated to personal purposes. Fillable 1040x form The debt balance is now allocated as $8,000 for investment purposes and $1,500 for personal purposes. Fillable 1040x form Until the next reallocation is necessary, 84% ($8,000 ÷ $9,500) of the debt and the interest expense is allocated to investment. Fillable 1040x form Pass-through entities. Fillable 1040x form   If you use borrowed funds to buy an interest in a partnership or S corporation, then the interest on those funds must be allocated based on the assets of the entity. Fillable 1040x form If you contribute to the capital of the entity, you can make the allocation using any reasonable method. Fillable 1040x form Additional allocation rules. Fillable 1040x form   For more information about allocating interest expense, see chapter 4 of Publication 535. Fillable 1040x form When To Deduct Investment Interest If you use the cash method of accounting, you must pay the interest before you can deduct it. Fillable 1040x form If you use an accrual method of accounting, you can deduct interest over the period it accrues, regardless of when you pay it. Fillable 1040x form For an exception, see Unpaid expenses owed to related party under When To Report Investment Expenses, later in this chapter. Fillable 1040x form Example. Fillable 1040x form You borrowed $1,000 on August 26, 2013, payable in 90 days at 12% interest. Fillable 1040x form On November 26, 2013, you paid this with a new note for $1,030, due on February 26, 2014. Fillable 1040x form If you use the cash method of accounting, you cannot deduct any part of the $30 interest on your return for 2013 because you did not actually pay it. Fillable 1040x form If you use an accrual method, you may be able to deduct a portion of the interest on the loans through December 31, 2013, on your return for 2013. Fillable 1040x form Interest paid in advance. Fillable 1040x form   Generally, if you pay interest in advance for a period that goes beyond the end of the tax year, you must spread the interest over the tax years to which it belongs under the OID rules discussed in chapter 1. Fillable 1040x form You can deduct in each year only the interest for that year. Fillable 1040x form Interest on margin accounts. Fillable 1040x form   If you are a cash method taxpayer, you can deduct interest on margin accounts to buy taxable securities as investment interest in the year you paid it. Fillable 1040x form You are considered to have paid interest on these accounts only when you actually pay the broker or when payment becomes available to the broker through your account. Fillable 1040x form Payment may become available to the broker through your account when the broker collects dividends or interest for your account, or sells securities held for you or received from you. Fillable 1040x form   You cannot deduct any interest on money borrowed for personal reasons. Fillable 1040x form Limit on interest deduction for market discount bonds. Fillable 1040x form   The amount you can deduct for interest expense you paid or accrued during the year to buy or carry a market discount bond may be limited. Fillable 1040x form This limit does not apply if you accrue the market discount and include it in your income currently. Fillable 1040x form   Under this limit, the interest is deductible only to the extent it is more than: The total interest and OID includible in gross income for the bond for the year, plus The market discount for the number of days you held the bond during the year. Fillable 1040x form Figure the amount in (2) above using the rules for figuring accrued market discount in chapter 1 under Market Discount Bonds . Fillable 1040x form Interest not deducted due to limit. Fillable 1040x form   In the year you dispose of the bond, you can deduct any interest expense you were not allowed to deduct in earlier years because of the limit. Fillable 1040x form Choosing to deduct disallowed interest expense before the year of disposition. Fillable 1040x form   You can choose to deduct disallowed interest expense in any year before the year you dispose of the bond, up to your net interest income from the bond during the year. Fillable 1040x form The rest of the disallowed interest expense remains deductible in the year you dispose of the bond. Fillable 1040x form Net interest income. Fillable 1040x form   This is the interest income (including OID) from the bond that you include in income for the year, minus the interest expense paid or accrued during the year to purchase or carry the bond. Fillable 1040x form Limit on interest deduction for short-term obligations. Fillable 1040x form   If the current income inclusion rules discussed in chapter 1 under Discount on Short-Term Obligations do not apply to you, the amount you can deduct for interest expense you paid or accrued during the year to buy or carry a short-term obligation is limited. Fillable 1040x form   The interest is deductible only to the extent it is more than: The amount of acquisition discount or OID on the obligation for the tax year, plus The amount of any interest payable on the obligation for the year that is not included in income because of your accounting method (other than interest taken into account in determining the amount of acquisition discount or OID). Fillable 1040x form The method of determining acquisition discount and OID for short-term obligations is discussed in chapter 1 under Discount on Short-Term Obligations . Fillable 1040x form Interest not deducted due to limit. Fillable 1040x form   In the year you dispose of the obligation, or, if you choose, in another year in which you have net interest income from the obligation, you can deduct any interest expense you were not allowed to deduct for an earlier year because of the limit. Fillable 1040x form Follow the same rules provided in the earlier discussion under Limit on interest deduction for market discount bonds , earlier. Fillable 1040x form Limit on Deduction Generally, your deduction for investment interest expense is limited to your net investment income. Fillable 1040x form You can carry over the amount of investment interest you could not deduct because of this limit to the next tax year. Fillable 1040x form The interest carried over is treated as investment interest paid or accrued in that next year. Fillable 1040x form You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Fillable 1040x form Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Fillable 1040x form Investment income. Fillable 1040x form   This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Fillable 1040x form Investment income does not include Alaska Permanent Fund dividends. Fillable 1040x form It also does not include qualified dividends or net capital gain unless you choose to include them. Fillable 1040x form Choosing to include qualified dividends. Fillable 1040x form   Investment income generally does not include qualified dividends, discussed in chapter 1. Fillable 1040x form However, you can choose to include all or part of your qualified dividends in investment income. Fillable 1040x form   You make this choice by completing Form 4952, line 4g, according to its instructions. Fillable 1040x form   If you choose to include any of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Fillable 1040x form Choosing to include net capital gain. Fillable 1040x form    Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Fillable 1040x form However, you can choose to include all or part of your net capital gain in investment income. Fillable 1040x form   You make this choice by completing Form 4952, line 4g, according to its instructions. Fillable 1040x form   If you choose to include any of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Fillable 1040x form   For more information about the capital gains rates, see Capital Gain Tax Rates in chapter 4. Fillable 1040x form    Before making either choice, consider the overall effect on your tax liability. Fillable 1040x form Compare your tax if you make one or both of these choices with your tax if you do not. Fillable 1040x form Investment income of child reported on parent's return. Fillable 1040x form   Investment income includes the part of your child's interest and dividend income you choose to report on your return. Fillable 1040x form If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814. Fillable 1040x form Include it on line 4a of Form 4952. Fillable 1040x form Example. Fillable 1040x form Your 8-year-old son has interest income of $2,200, which you choose to report on your own return. Fillable 1040x form You enter $2,200 on Form 8814, lines 1a and 4, and $200 on lines 6 and 12 and complete Part II. Fillable 1040x form Also enter $200 on Form 1040, line 21. Fillable 1040x form Your investment income includes this $200. Fillable 1040x form Child's qualified dividends. Fillable 1040x form   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Fillable 1040x form However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Fillable 1040x form   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Fillable 1040x form Child's Alaska Permanent Fund dividends. Fillable 1040x form   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Fillable 1040x form To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Fillable 1040x form Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Fillable 1040x form Subtract the result from the amount on Form 8814, line 12. Fillable 1040x form Example. Fillable 1040x form Your 10-year-old child has taxable interest income of $4,000 and Alaska Permanent Fund dividends of $2,000. Fillable 1040x form You choose to report this on your return. Fillable 1040x form You enter $4,000 on Form 8814, line 1a, $2,000 on line 2a, and $6,000 on line 4. Fillable 1040x form You then enter $4,000 on Form 8814, lines 6 and 12, and Form 1040, line 21. Fillable 1040x form You figure the amount of your child's income that you can consider your investment income as follows: $4,000 − ($4,000 × ($2,000 ÷ $6,000)) = $2,667 You include the result, $2,667, on Form 4952, line 4a. Fillable 1040x form Child's capital gain distributions. Fillable 1040x form   If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D (Form 1040), line 13, or Form 1040, line 13) generally does not count as investment income. Fillable 1040x form However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Fillable 1040x form   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Fillable 1040x form Investment expenses. Fillable 1040x form   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Fillable 1040x form Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Fillable 1040x form Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A (Form 1040), line 27. Fillable 1040x form See Expenses of Producing Income , later, for a discussion of the 2% limit. Fillable 1040x form Losses from passive activities. Fillable 1040x form   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Fillable 1040x form See Publication 925 for information about passive activities. Fillable 1040x form Example. Fillable 1040x form Ted is a partner in a partnership that operates a business. Fillable 1040x form However, he does not materially participate in the partnership's business. Fillable 1040x form Ted's interest in the partnership is considered a passive activity. Fillable 1040x form Ted's investment income from interest and dividends (other than qualified dividends) is $10,000. Fillable 1040x form His investment expenses (other than interest) are $3,200 after taking into account the 2% limit on miscellaneous itemized deductions. Fillable 1040x form His investment interest expense is $8,000. Fillable 1040x form Ted also has income from the partnership of $2,000. Fillable 1040x form Ted figures his net investment income and the limit on his investment interest expense deduction in the following way: Total investment income $10,000 Minus: Investment expenses (other than interest) 3,200 Net investment income $6,800 Deductible investment interest expense for the year $6,800 The $2,000 of income from the passive activity is not used in determining Ted's net investment income. Fillable 1040x form His investment interest deduction for the year is limited to $6,800, the amount of his net investment income. Fillable 1040x form Form 4952 Use Form 4952 to figure your deduction for investment interest. Fillable 1040x form See Form 4952 for more information. Fillable 1040x form Exception to use of Form 4952. Fillable 1040x form   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Fillable 1040x form Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Fillable 1040x form You do not have any other deductible investment expenses. Fillable 1040x form You have no carryover of investment interest expense from 2012. Fillable 1040x form   If you meet all of these tests, you can deduct all of your investment interest. Fillable 1040x form    Bond Premium Amortization If you pay a premium to buy a bond, the premium is part of your basis in the bond. Fillable 1040x form If the bond yields taxable interest, you can choose to amortize the premium. Fillable 1040x form This generally means that each year, over the life of the bond, you use a part of the premium to reduce the amount of interest includible in your income. Fillable 1040x form If you make this choice, you must reduce your basis in the bond by the amortization for the year. Fillable 1040x form If the bond yields tax-exempt interest, you must amortize the premium. Fillable 1040x form This amortized amount is not deductible in determining taxable income. Fillable 1040x form However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. Fillable 1040x form Bond premium. Fillable 1040x form   Bond premium is the amount by which your basis in the bond right after you get it is more than the total of all amounts payable on the bond after you get it (other than payments of qualified stated interest). Fillable 1040x form For example, a bond with a maturity value of $1,000 generally would have a $50 premium if you buy it for $1,050. Fillable 1040x form Special rules to determine amounts payable on a bond. Fillable 1040x form   For special rules that apply to determine the amounts payable on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. Fillable 1040x form 171-3. Fillable 1040x form Basis. Fillable 1040x form   In general, your basis for figuring bond premium amortization is the same as your basis for figuring any loss on the sale of the bond. Fillable 1040x form However, you may need to use a different basis for: Convertible bonds, Bonds you got in a trade, and Bonds whose basis has to be determined using the basis of the person who transferred the bond to you. Fillable 1040x form See Regulations section 1. Fillable 1040x form 171-1(e). Fillable 1040x form Dealers. Fillable 1040x form   A dealer in taxable bonds (or anyone who holds them mainly for sale to customers in the ordinary course of a trade or business or who would properly include bonds in inventory at the close of the tax year) cannot claim a deduction for amortizable bond premium. Fillable 1040x form   See section 75 of the Internal Revenue Code for the treatment of bond premium by a dealer in tax-exempt bonds. Fillable 1040x form How To Figure Amortization For bonds issued after September 27, 1985, you must amortize bond premium using a constant yield method on the basis of the bond's yield to maturity, determined by using the bond's basis and compounding at the close of each accrual period. Fillable 1040x form Constant yield method. Fillable 1040x form   Figure the bond premium amortization for each accrual period as follows. Fillable 1040x form Step 1: Determine your yield. Fillable 1040x form   Your yield is the discount rate that, when used in figuring the present value of all remaining payments to be made on the bond (including payments of qualified stated interest), produces an amount equal to your basis in the bond. Fillable 1040x form Figure the yield as of the date you got the bond. Fillable 1040x form It must be constant over the term of the bond and must be figured to at least two decimal places when expressed as a percentage. Fillable 1040x form   If you do not know the yield, consult your broker or tax advisor. Fillable 1040x form Databases available to them are likely to show the yield at the date of purchase. Fillable 1040x form Step 2: Determine the accrual periods. Fillable 1040x form   You can choose the accrual periods to use. Fillable 1040x form They may be of any length and may vary in length over the term of the bond, but each accrual period can be no longer than 1 year and each scheduled payment of principal or interest must occur either on the first or the final day of an accrual period. Fillable 1040x form The computation is simplest if accrual periods are the same as the intervals between interest payment dates. Fillable 1040x form Step 3: Determine the bond premium for the accrual period. Fillable 1040x form   To do this, multiply your adjusted acquisition price at the beginning of the accrual period by your yield. Fillable 1040x form Then subtract the result from the qualified stated interest for the period. Fillable 1040x form   Your adjusted acquisition price at the beginning of the first accrual period is the same as your basis. Fillable 1040x form After that, it is your basis decreased by the amount of bond premium amortized for earlier periods and the amount of any payment previously made on the bond other than a payment of qualified stated interest. Fillable 1040x form Example. Fillable 1040x form On February 1, 2012, you bought a taxable bond for $110,000. Fillable 1040x form The bond has a stated principal amount of $100,000, payable at maturity on February 1, 2019, making your premium $10,000 ($110,000 − $100,000). Fillable 1040x form The bond pays qualified stated interest of $10,000 on February 1 of each year. Fillable 1040x form Your yield is 8. Fillable 1040x form 07439% compounded annually. Fillable 1040x form You choose to use annual accrual periods ending on February 1 of each year. Fillable 1040x form To find your bond premium amortization for the accrual period ending on February 1, 2013, you multiply the adjusted acquisition price at the beginning of the period ($110,000) by your yield. Fillable 1040x form When you subtract the result ($8,881. Fillable 1040x form 83) from the qualified stated interest for the period ($10,000), you find that your bond premium amortization for the period is $1,118. Fillable 1040x form 17. Fillable 1040x form Special rules to figure amortization. Fillable 1040x form   For special rules to figure the bond premium amortization on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. Fillable 1040x form 171-3. Fillable 1040x form Bonds Issued Before September 28, 1985 For these bonds, you can amortize bond premium using any reasonable method. Fillable 1040x form Reasonable methods include: The straight-line method, and The Revenue Ruling 82-10 method. Fillable 1040x form Straight-line method. Fillable 1040x form   Under this method, the amount of your bond premium amortization is the same each month. Fillable 1040x form Divide the number of months you held the bond during the year by the number of months from the beginning of the tax year (or, if later, the date of acquisition) to the date of maturity or earlier call date. Fillable 1040x form Then multiply the result by the bond premium (reduced by any bond premium amortization claimed in earlier years). Fillable 1040x form This gives you your bond premium amortization for the year. Fillable 1040x form Revenue Ruling 82-10 method. Fillable 1040x form   Under this method, the amount of your bond premium amortization increases each month over the life of the bond. Fillable 1040x form This method is explained in Revenue Ruling 82-10, 1982-1 C. Fillable 1040x form B. Fillable 1040x form 46. Fillable 1040x form Choosing To Amortize You choose to amortize the premium on taxable bonds by reporting the amortization for the year on your income tax return for the first tax year you want the choice to apply. Fillable 1040x form You should attach a statement to your return that you are making this choice under section 171. Fillable 1040x form See How To Report Amortization, next. Fillable 1040x form This choice is binding for the year you make it and for later tax years. Fillable 1040x form It applies to all taxable bonds you own in the year you make the choice and also to those you acquire in later years. Fillable 1040x form You can change your decision to amortize bond premium only with the written approval of the IRS. Fillable 1040x form To request approval, use Form 3115. Fillable 1040x form For more information on requesting approval, see section 5 of the Appendix to Revenue Procedure 2011-14 in Internal Revenue Bulletin 2011-4. Fillable 1040x form You can find Revenue Procedure 2011-14 at www. Fillable 1040x form irs. Fillable 1040x form gov/irb/2011-04_IRB/ar08. Fillable 1040x form html. Fillable 1040x form How To Report Amortization Subtract the bond premium amortization from your interest income from these bonds. Fillable 1040x form Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. Fillable 1040x form Under your last entry on line 1, put a subtotal of all interest listed on line 1. Fillable 1040x form Below this subtotal, print “ABP Adjustment,” and the total interest you received. Fillable 1040x form Subtract this amount from the subtotal, and enter the result on line 2. Fillable 1040x form Bond premium amortization more than interest. Fillable 1040x form   If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can deduct the difference as a miscellaneous itemized deduction on Schedule A (Form 1040), line 28. Fillable 1040x form    But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. Fillable 1040x form Any amount you cannot deduct because of this limit can be carried forward to the next accrual period. Fillable 1040x form Pre-1998 election to amortize bond premium. Fillable 1040x form   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Fillable 1040x form Bonds acquired before October 23, 1986. Fillable 1040x form   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit. Fillable 1040x form Bonds acquired after October 22, 1986, but before 1988. Fillable 1040x form    The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you choose to treat it as an offset to interest income on the bond. Fillable 1040x form Expenses of Producing Income You deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Schedule A (Form 1040). Fillable 1040x form To be deductible, these expenses must be ordinary and necessary expenses paid or incurred: To produce or collect income, or To manage property held for producing income. Fillable 1040x form The expenses must be directly related to the income or income-producing property, and the income must be taxable to you. Fillable 1040x form The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. Fillable 1040x form The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income. Fillable 1040x form For information on how to report expenses of producing income, see How To Report Investment Expenses , later. Fillable 1040x form Attorney or accounting fees. Fillable 1040x form   You can deduct attorney or accounting fees that are necessary to produce or collect taxable income. Fillable 1040x form However, in some cases, attorney or accounting fees are part of the basis of property. Fillable 1040x form See Basis of Investment Property in chapter 4. Fillable 1040x form Automatic investment service and dividend reinvestment plans. Fillable 1040x form   A bank may offer its checking account customers an automatic investment service so that, for a charge, each customer can choose to invest a part of the checking account each month in common stock. Fillable 1040x form Or a bank that is a dividend disbursing agent for a number of publicly-owned corporations may set up an automatic dividend reinvestment service. Fillable 1040x form Through that service, cash dividends are reinvested in more shares of stock after the bank deducts a service charge. Fillable 1040x form   A corporation in which you own stock also may have a dividend reinvestment plan. Fillable 1040x form This plan lets you choose to use your dividends to buy more shares of stock in the corporation instead of receiving the dividends in cash. Fillable 1040x form   You can deduct the monthly service charge you pay to a bank to participate in an automatic investment service. Fillable 1040x form If you participate in a dividend reinvestment plan, you can deduct any service charge subtracted from your cash dividends before the dividends are used to buy more shares of stock. Fillable 1040x form Deduct the charges in the year you pay them. Fillable 1040x form Clerical help and office rent. Fillable 1040x form   You can deduct office expenses, such as rent and clerical help, you incurred in connection with your investments and collecting the taxable income on your investments. Fillable 1040x form Cost of replacing missing securities. Fillable 1040x form   To replace your taxable securities that are mislaid, lost, stolen, or destroyed, you may have to post an indemnity bond. Fillable 1040x form You can deduct the premium you pay to buy the indemnity bond and the related incidental expenses. Fillable 1040x form   You may, however, get a refund of part of the bond premium if the missing securities are recovered within a specified time. Fillable 1040x form Under certain types of insurance policies, you can recover some of the expenses. Fillable 1040x form   If you receive the refund in the tax year you pay the amounts, you can deduct only the difference between the expenses paid and the amount refunded. Fillable 1040x form If the refund is made in a later tax year, you must include the refund in income in the year you received it, but only to the extent that the expenses decreased your tax in the year you deducted them. Fillable 1040x form Fees to collect income. Fillable 1040x form   You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock. Fillable 1040x form Fees to buy or sell. Fillable 1040x form   You cannot deduct a fee you pay to a broker to acquire investment property, such as stocks or bonds. Fillable 1040x form You must add the fee to the cost of the property. Fillable 1040x form See Basis of Investment Property in chapter 4. Fillable 1040x form    You cannot deduct any broker's fees, commissions, or option premiums you pay (or that were netted out) in connection with the sale of investment property. Fillable 1040x form They can be used only to figure gain or loss from the sale. Fillable 1040x form See Reporting Capital Gains and Losses , in chapter 4, for more information about the treatment of these sale expenses. Fillable 1040x form Investment counsel and advice. Fillable 1040x form   You can deduct fees you pay for counsel and advice about investments that produce taxable income. Fillable 1040x form This includes amounts you pay for investment advisory services. Fillable 1040x form Safe deposit box rent. Fillable 1040x form   You can deduct rent you pay for a safe deposit box if you use the box to store taxable income-producing stocks, bonds, or other investment-related papers and documents. Fillable 1040x form If you also use the box to store tax-exempt securities or personal items, you can deduct only part of the rent. Fillable 1040x form See Tax-exempt income under Nondeductible Expenses, later, to figure what part you can deduct. Fillable 1040x form State and local transfer taxes. Fillable 1040x form   You cannot deduct the state and local transfer taxes you pay when you buy or sell securities. Fillable 1040x form If you pay these transfer taxes when you buy securities, you must treat them as part of the cost of the property. Fillable 1040x form If you pay these transfer taxes when you sell securities, you must treat them as a reduction in the amount realized. Fillable 1040x form Trustee's commissions for revocable trust. Fillable 1040x form   If you set up a revocable trust and have its income distributed to you, you can deduct the commission you pay the trustee for managing the trust to the extent it is to produce or collect taxable income or to manage property. Fillable 1040x form However, you cannot deduct any part of the commission used for producing or collecting tax-exempt income or for managing property that produces tax-exempt income. Fillable 1040x form   If you are a cash-basis taxpayer and pay the commissions for several years in advance, you must deduct a part of the commission each year. Fillable 1040x form You cannot deduct the entire amount in the year you pay it. Fillable 1040x form Investment expenses from pass-through entities. Fillable 1040x form   If you hold an interest in a partnership, S corporation, real estate mortgage investment conduit (REMIC), or a nonpublicly offered mutual fund, you can deduct your share of that entity's investment expenses. Fillable 1040x form A partnership or S corporation will show your share of these expenses on your Schedule K-1 (Form 1065) or Schedule K-1 (Form 1120S). Fillable 1040x form A nonpublicly offered mutual fund will indicate your share of these expenses in box 5 of Form 1099-DIV (or substitute statement). Fillable 1040x form Publicly-offered mutual funds are discussed later. Fillable 1040x form   If you hold an interest in a REMIC, any expenses relating to your residual interest investment will be shown on Schedule Q (Form 1066), line 3b. Fillable 1040x form Any expenses relating to your regular interest investment will appear in box 5 of Form 1099-INT (or substitute statement) or box 9 of Form 1099-OID (or substitute statement). Fillable 1040x form   Report your share of these investment expenses on Schedule A (Form 1040), subject to the 2% limit, in the same manner as your other investment expenses. Fillable 1040x form Including mutual fund or REMIC expenses in income. Fillable 1040x form   Your share of the investment expenses of a REMIC or a nonpublicly offered mutual fund, as described above, are considered to be indirect deductions through that pass-through entity. Fillable 1040x form You must include in your gross income an amount equal to the expenses allocated to you, whether or not you are able to claim a deduction for those expenses. Fillable 1040x form If you are a shareholder in a nonpublicly offered mutual fund, you must include on your return the full amount of ordinary dividends or other distributions of stock, as shown in box 1a of Form 1099-DIV (or substitute statement). Fillable 1040x form If you are a residual interest holder in a REMIC, you must report as ordinary income on Schedule E (Form 1040) the total amounts shown on Schedule Q (Form 1066), lines 1b and 3b. Fillable 1040x form If you are a REMIC regular interest holder, you must include the amount of any expense allocation you received on Form 1040, line 8a. Fillable 1040x form Publicly-offered mutual funds. Fillable 1040x form   Most mutual funds are publicly offered. Fillable 1040x form These mutual funds, generally, are traded on an established securities exchange. Fillable 1040x form These funds do not pass investment expenses through to you. Fillable 1040x form Instead, the dividend income they report to you in box 1a of Form 1099-DIV (or substitute statement) is already reduced by your share of investment expenses. Fillable 1040x form As a result, you cannot deduct the expenses on your return. Fillable 1040x form   Include the amount from box 1a of Form 1099-DIV (or substitute statement) in your income. Fillable 1040x form    A publicly offered mutual fund is one that: Is continuously offered pursuant to a public offering, Is regularly traded on an established securities market, and Is held by or for no fewer than 500 persons at any time during the year. Fillable 1040x form Contact your mutual fund if you are not sure whether it is publicly offered. Fillable 1040x form Nondeductible Expenses Some expenses that you incur as an investor are not deductible. Fillable 1040x form Stockholders' meetings. Fillable 1040x form   You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you have no interest other than owning stock. Fillable 1040x form This is true even if your purpose in attending is to get information that would be useful in making further investments. Fillable 1040x form Investment-related seminar. Fillable 1040x form   You cannot deduct expenses for attending a convention, seminar, or similar meeting for investment purposes. Fillable 1040x form Single-premium life insurance, endowment, and annuity contracts. Fillable 1040x form   You cannot deduct interest on money you borrow to buy or carry a single-premium life insurance, endowment, or annuity contract. Fillable 1040x form Used as collateral. Fillable 1040x form   If you use a single premium annuity contract as collateral to obtain or continue a mortgage loan, you cannot deduct any interest on the loan that is collateralized by the annuity contract. Fillable 1040x form Figure the amount of interest expense disallowed by multiplying the current interest rate on the mortgage loan by the lesser of the amount of the annuity contract used as collateral or the amount of the loan. Fillable 1040x form Borrowing on insurance. Fillable 1040x form   Generally, you cannot deduct interest on money you borrow to buy or carry a life insurance, endowment, or annuity contract if you plan to systematically borrow part or all of the increases in the cash value of the contract. Fillable 1040x form This rule applies to the interest on the total amount borrowed to buy or carry the contract, not just the interest on the borrowed increases in the cash value. Fillable 1040x form Tax-exempt income. Fillable 1040x form   You cannot deduct expenses you incur to produce tax-exempt income. Fillable 1040x form Nor can you deduct interest on money you borrow to buy tax-exempt securities or shares in a mutual fund or other regulated investment company that distributes only exempt-interest dividends. Fillable 1040x form Short-sale expenses. Fillable 1040x form   The rule disallowing a deduction for interest expenses on tax-exempt securities applies to amounts you pay in connection with personal property used in a short sale or amounts paid by others for the use of any collateral in connection with the short sale. Fillable 1040x form However, it does not apply to the expenses you incur if you deposit cash as collateral for the property used in the short sale and the cash does not earn a material return during the period of the sale. Fillable 1040x form Short sales are discussed in Short Sales in chapter 4. Fillable 1040x form Expenses for both tax-exempt and taxable income. Fillable 1040x form   You may have expenses that are for both tax-exempt and taxable income. Fillable 1040x form If you cannot specifically identify what part of the expenses is for each type of income, you can divide the expenses, using reasonable proportions based on facts and circumstances. Fillable 1040x form You must attach a statement to your return showing how you divided the expenses and stating that each deduction claimed is not based on tax-exempt income. Fillable 1040x form   One accepted method for dividing expenses is to do it in the same proportion that each type of income is to the total income. Fillable 1040x form If the expenses relate in part to capital gains and losses, include the gains, but not the losses, in figuring this proportion. Fillable 1040x form To find the part of the expenses that is for the tax-exempt income, divide your tax-exempt income by the total income and multiply your expenses by the result. Fillable 1040x form Example. Fillable 1040x form You received $6,000 interest; $4,800 was tax-exempt and $1,200 was taxable. Fillable 1040x form In earning this income, you had $500 of expenses. Fillable 1040x form You cannot specifically identify the amount of each expense item that is for each income item, so you must divide your expenses. Fillable 1040x form 80% ($4,800 tax-exempt interest divided by $6,000 total interest) of your expenses is for the tax-exempt income. Fillable 1040x form You cannot deduct $400 (80% of $500) of the expenses. Fillable 1040x form You can deduct $100 (the rest of the expenses) because they are for the taxable interest. Fillable 1040x form State income taxes. Fillable 1040x form   If you itemize your deductions, you can deduct, as taxes, state income taxes on interest income that is exempt from federal income tax. Fillable 1040x form But you cannot deduct, as either taxes or investment expenses, state income taxes on other exempt income. Fillable 1040x form Interest expense and carrying charges on straddles. Fillable 1040x form   You cannot deduct interest and carrying charges allocable to personal property that is part of a straddle. Fillable 1040x form The nondeductible interest and carrying charges are added to the basis of the straddle property. Fillable 1040x form However, this treatment does not apply if: All the offsetting positions making up the straddle either consist of one or more qualified covered call options and the optioned stock, or consist of section 1256 contracts (and the straddle is not part of a larger straddle); or The straddle is a hedging transaction. Fillable 1040x form  For information about straddles, including definitions of the terms used in this discussion, see Straddles in chapter 4. Fillable 1040x form   Interest includes any amount you pay or incur in connection with personal property used in a short sale. Fillable 1040x form However, you must first apply the rules discussed in Payments in lieu of dividends under Short Sales in chapter 4. Fillable 1040x form   To determine the interest on market discount bonds and short-term obligations that are part of a straddle, you must first apply the rules discussed under Limit on interest deduction for market discount bonds and Limit on interest deduction for short-term obligations (both under Interest Expenses, earlier). Fillable 1040x form Nondeductible amount. Fillable 1040x form   Figure the nondeductible interest and carrying charges on straddle property as follows. Fillable 1040x form Add: Interest on indebtedness incurred or continued to buy or carry the personal property, and All other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property. Fillable 1040x form Subtract from the amount in (1): Interest (including OID) includible in gross income for the year on the personal property, Any income from the personal property treated as ordinary income on the disposition of short-term government obligations or as ordinary income under the market discount and short-term bond provisions — see Discount on Debt Instruments in chapter 1, The dividends includible in gross income for the year from the personal property, and Any payment on a loan of the personal property for use in a short sale that is includible in gross income. Fillable 1040x form Basis adjustment. Fillable 1040x form   Add the nondeductible amount to the basis of your straddle property. Fillable 1040x form How To Report Investment Expenses To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). Fillable 1040x form Enter your deductible investment interest expense on Schedule A (Form1040), line 14. Fillable 1040x form Include any deductible short sale expenses. Fillable 1040x form (See Short Sales in chapter 4 for information on these expenses. Fillable 1040x form ) Also attach a completed Form 4952 if you used that form to figure your investment interest expense. Fillable 1040x form Enter the total amount of your other investment expenses (other than interest expenses) on Schedule A (Form 1040), line 23. Fillable 1040x form List the type and amount of each expense on the dotted lines next to line 23. Fillable 1040x form (If necessary, you can show the required information on an attached statement. Fillable 1040x form ) For information on how to report amortizable bond premium, see Bond Premium Amortization , earlier in this chapter. Fillable 1040x form When To Report Investment Expenses If you use the cash method to report income and expenses, you generally deduct your expenses, except for certain prepaid interest, in the year you pay them. Fillable 1040x form If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you pay them. Fillable 1040x form Also see When To Deduct Investment Interest , earlier in this chapter. Fillable 1040x form Unpaid expenses owed to related party. Fillable 1040x form   If you use an accrual method, you cannot deduct interest and other expenses owed to a related cash-basis person until payment is made and the amount is includible in the gross income of that person. Fillable 1040x form The relationship, for purposes of this rule, is determined as of the end of the tax year for which the interest or expense would otherwise be deductible. Fillable 1040x form If a deduction is denied under this rule, this rule will continue to apply even if your relationship with the person ceases to exist before the amount is includible in the gross income of that person. Fillable 1040x form   This rule generally applies to those relationships listed in chapter 4 under Related Party Transactions . Fillable 1040x form It also applies to accruals by partnerships to partners, partners to partnerships, shareholders to S corporations, and S corporations to shareholders. Fillable 1040x form   The postponement of deductions for unpaid expenses and interest under the related party rule does not apply to OID, regardless of when payment is made. Fillable 1040x form This rule also does not apply to loans with below-market interest rates or to certain payments for the use of property and services when the lender or recipient has to include payments periodically in income, even if a payment has not been made. Fillable 1040x form Prev  Up  Next   Home   More Online Publications