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Free State Tax E-filing

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Free State Tax E-filing

Free state tax e-filing 4. Free state tax e-filing   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. Free state tax e-filing Resident aliens are generally taxed in the same way as U. Free state tax e-filing S. Free state tax e-filing citizens. Free state tax e-filing Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business and how it is taxed. Free state tax e-filing Topics - This chapter discusses: Income that is effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing Income that is not effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing Interrupted period of residence. Free state tax e-filing Expatriation tax. Free state tax e-filing Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. Free state tax e-filing Resident Aliens Resident aliens are generally taxed in the same way as U. Free state tax e-filing S. Free state tax e-filing citizens. Free state tax e-filing This means that their worldwide income is subject to U. Free state tax e-filing S. Free state tax e-filing tax and must be reported on their U. Free state tax e-filing S. Free state tax e-filing tax return. Free state tax e-filing Income of resident aliens is subject to the graduated tax rates that apply to U. Free state tax e-filing S. Free state tax e-filing citizens. Free state tax e-filing Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. Free state tax e-filing S. Free state tax e-filing citizens. Free state tax e-filing Nonresident Aliens A nonresident alien's income that is subject to U. Free state tax e-filing S. Free state tax e-filing income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). Free state tax e-filing The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. Free state tax e-filing These are the same rates that apply to U. Free state tax e-filing S. Free state tax e-filing citizens and residents. Free state tax e-filing Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. Free state tax e-filing If you were formerly a U. Free state tax e-filing S. Free state tax e-filing citizen or resident alien, these rules may not apply. Free state tax e-filing See Expatriation Tax, later, in this chapter. Free state tax e-filing Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. Free state tax e-filing Whether you are engaged in a trade or business in the United States depends on the nature of your activities. Free state tax e-filing The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. Free state tax e-filing Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. Free state tax e-filing Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. Free state tax e-filing For more information, see Services Performed for Foreign Employer in chapter 3. Free state tax e-filing Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. Free state tax e-filing Students and trainees. Free state tax e-filing   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. Free state tax e-filing A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. Free state tax e-filing The taxable part of any scholarship or fellowship grant that is U. Free state tax e-filing S. Free state tax e-filing source income is treated as effectively connected with a trade or business in the United States. Free state tax e-filing Business operations. Free state tax e-filing   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. Free state tax e-filing Partnerships. Free state tax e-filing   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. Free state tax e-filing Beneficiary of an estate or trust. Free state tax e-filing   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. Free state tax e-filing Trading in stocks, securities, and commodities. Free state tax e-filing   If your only U. Free state tax e-filing S. Free state tax e-filing business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. Free state tax e-filing S. Free state tax e-filing resident broker or other agent, you are not engaged in a trade or business in the United States. Free state tax e-filing   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. Free state tax e-filing   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. Free state tax e-filing   This discussion does not apply if you have a U. Free state tax e-filing S. Free state tax e-filing office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. Free state tax e-filing Trading for a nonresident alien's own account. Free state tax e-filing   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. Free state tax e-filing S. Free state tax e-filing business activity. Free state tax e-filing This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. Free state tax e-filing   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. Free state tax e-filing This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. Free state tax e-filing Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . Free state tax e-filing Effectively Connected Income If you are engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. Free state tax e-filing This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. Free state tax e-filing Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. Free state tax e-filing In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. Free state tax e-filing For a discussion of these rules, see Foreign Income , later. Free state tax e-filing Investment Income Investment income from U. Free state tax e-filing S. Free state tax e-filing sources that may or may not be treated as effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business generally falls into the following three categories. Free state tax e-filing Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. Free state tax e-filing ). Free state tax e-filing Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. Free state tax e-filing Timber, coal, or domestic iron ore with a retained economic interest. Free state tax e-filing Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. Free state tax e-filing Patents transferred before October 5, 1966. Free state tax e-filing Original issue discount obligations. Free state tax e-filing Capital gains (and losses). Free state tax e-filing Use the two tests, described next, to determine whether an item of U. Free state tax e-filing S. Free state tax e-filing source income falling in one of the three categories above and received during the tax year is effectively connected with your U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. Free state tax e-filing If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. Free state tax e-filing Asset-use test. Free state tax e-filing   This test usually applies to income that is not directly produced by trade or business activities. Free state tax e-filing Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. Free state tax e-filing   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. Free state tax e-filing Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. Free state tax e-filing Business-activities test. Free state tax e-filing   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. Free state tax e-filing The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. Free state tax e-filing Under this test, if the conduct of the U. Free state tax e-filing S. Free state tax e-filing trade or business was a material factor in producing the income, the income is considered effectively connected. Free state tax e-filing Personal Service Income You usually are engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business when you perform personal services in the United States. Free state tax e-filing Personal service income you receive in a tax year in which you are engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business is effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. Free state tax e-filing Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. Free state tax e-filing The income may be paid to you in the form of cash, services, or property. Free state tax e-filing If you are engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. Free state tax e-filing However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. Free state tax e-filing Pensions. Free state tax e-filing   If you were a nonresident alien engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. Free state tax e-filing This is true whether or not you are engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business in the year you receive the retirement pay. Free state tax e-filing Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. Free state tax e-filing You had a fixed place of business in the United States involved in earning the income. Free state tax e-filing At least 90% of your U. Free state tax e-filing S. Free state tax e-filing source transportation income is attributable to regularly scheduled transportation. Free state tax e-filing “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. Free state tax e-filing “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. Free state tax e-filing This definition applies to both scheduled and chartered air transportation. Free state tax e-filing If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. Free state tax e-filing See Transportation Tax, later, in this chapter. Free state tax e-filing Business Profits and Losses and Sales Transactions All profits or losses from U. Free state tax e-filing S. Free state tax e-filing sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. Free state tax e-filing For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. Free state tax e-filing A share of U. Free state tax e-filing S. Free state tax e-filing source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. Free state tax e-filing Real Property Gain or Loss Gains and losses from the sale or exchange of U. Free state tax e-filing S. Free state tax e-filing real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. Free state tax e-filing You must treat the gain or loss as effectively connected with that trade or business. Free state tax e-filing U. Free state tax e-filing S. Free state tax e-filing real property interest. Free state tax e-filing   This is any interest in real property located in the United States or the U. Free state tax e-filing S. Free state tax e-filing Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. Free state tax e-filing S. Free state tax e-filing real property holding corporation. Free state tax e-filing Real property includes the following. Free state tax e-filing Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. Free state tax e-filing Improvements on land, including buildings, other permanent structures, and their structural components. Free state tax e-filing Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. Free state tax e-filing U. Free state tax e-filing S. Free state tax e-filing real property holding corporation. Free state tax e-filing   A corporation is a U. Free state tax e-filing S. Free state tax e-filing real property holding corporation if the fair market value of the corporation's U. Free state tax e-filing S. Free state tax e-filing real property interests are at least 50% of the total fair market value of: The corporation's U. Free state tax e-filing S. Free state tax e-filing real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. Free state tax e-filing   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business unless you establish that the corporation is not a U. Free state tax e-filing S. Free state tax e-filing real property holding corporation. Free state tax e-filing   A U. Free state tax e-filing S. Free state tax e-filing real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. Free state tax e-filing An interest in a foreign corporation owning U. Free state tax e-filing S. Free state tax e-filing real property generally is not a U. Free state tax e-filing S. Free state tax e-filing real property interest unless the corporation chooses to be treated as a domestic corporation. Free state tax e-filing Qualified investment entities. Free state tax e-filing   Special rules apply to qualified investment entities (QIEs). Free state tax e-filing A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. Free state tax e-filing S. Free state tax e-filing real property holding corporation. Free state tax e-filing    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. Free state tax e-filing S. Free state tax e-filing real property interest is treated as a U. Free state tax e-filing S. Free state tax e-filing real property gain by the shareholder receiving the distribution. Free state tax e-filing A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. Free state tax e-filing S. Free state tax e-filing real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. Free state tax e-filing A distribution that you do not treat as gain from the sale or exchange of a U. Free state tax e-filing S. Free state tax e-filing real property interest is included in your gross income as a regular dividend. Free state tax e-filing Note. Free state tax e-filing Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. Free state tax e-filing S. Free state tax e-filing real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. Free state tax e-filing Domestically controlled QIE. Free state tax e-filing   The sale of an interest in a domestically controlled QIE is not the sale of a U. Free state tax e-filing S. Free state tax e-filing real property interest. Free state tax e-filing The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. Free state tax e-filing The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. Free state tax e-filing Wash sale. Free state tax e-filing    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. Free state tax e-filing An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. Free state tax e-filing S. Free state tax e-filing real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. Free state tax e-filing If this occurs, you are treated as having gain from the sale or exchange of a U. Free state tax e-filing S. Free state tax e-filing real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. Free state tax e-filing This also applies to any substitute dividend payment. Free state tax e-filing   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. Free state tax e-filing Alternative minimum tax. Free state tax e-filing   There may be a minimum tax on your net gain from the disposition of U. Free state tax e-filing S. Free state tax e-filing real property interests. Free state tax e-filing Figure the amount of this tax, if any, on Form 6251. Free state tax e-filing Withholding of tax. Free state tax e-filing   If you dispose of a U. Free state tax e-filing S. Free state tax e-filing real property interest, the buyer may have to withhold tax. Free state tax e-filing See the discussion of Tax Withheld on Real Property Sales in chapter 8. Free state tax e-filing Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Free state tax e-filing An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Free state tax e-filing The three kinds of foreign source income are listed below. Free state tax e-filing Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. Free state tax e-filing Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. Free state tax e-filing Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. Free state tax e-filing A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. Free state tax e-filing Income, gain, or loss from the sale outside the United States, through the U. Free state tax e-filing S. Free state tax e-filing office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Free state tax e-filing Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. Free state tax e-filing Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing For example, foreign source interest and dividend equivalents are treated as U. Free state tax e-filing S. Free state tax e-filing effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. Free state tax e-filing Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. Free state tax e-filing S. Free state tax e-filing citizens and residents. Free state tax e-filing Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. Free state tax e-filing However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. Free state tax e-filing Example. Free state tax e-filing Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. Free state tax e-filing S. Free state tax e-filing office of his overseas employer. Free state tax e-filing He worked in the U. Free state tax e-filing S. Free state tax e-filing office until December 25, 2012, but did not leave this country until January 11, 2013. Free state tax e-filing On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. Free state tax e-filing All of Ted's income during his stay here is U. Free state tax e-filing S. Free state tax e-filing source income. Free state tax e-filing During 2012, Ted was engaged in the trade or business of performing personal services in the United States. Free state tax e-filing Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. Free state tax e-filing The salary payment Ted received in January 2013 is U. Free state tax e-filing S. Free state tax e-filing source income to him in 2013. Free state tax e-filing It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. Free state tax e-filing Real property income. Free state tax e-filing   You may be able to choose to treat all income from real property as effectively connected. Free state tax e-filing See Income From Real Property , later, in this chapter. Free state tax e-filing The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. Free state tax e-filing S. Free state tax e-filing sources but only if the items are not effectively connected with your U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. Free state tax e-filing S. Free state tax e-filing source fixed or determinable annual or periodic gains, profits, or income. Free state tax e-filing Income is fixed when it is paid in amounts known ahead of time. Free state tax e-filing Income is determinable whenever there is a basis for figuring the amount to be paid. Free state tax e-filing Income can be periodic if it is paid from time to time. Free state tax e-filing It does not have to be paid annually or at regular intervals. Free state tax e-filing Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. Free state tax e-filing Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. Free state tax e-filing A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. Free state tax e-filing Other items of income, such as royalties, also may be subject to the 30% tax. Free state tax e-filing Some fixed or determinable income may be exempt from U. Free state tax e-filing S. Free state tax e-filing tax. Free state tax e-filing See chapter 3 if you are not sure whether the income is taxable. Free state tax e-filing Original issue discount (OID). Free state tax e-filing   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. Free state tax e-filing The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. Free state tax e-filing The 30% tax applies in the following circumstances. Free state tax e-filing You received a payment on a debt instrument. Free state tax e-filing In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. Free state tax e-filing But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. Free state tax e-filing You sold or exchanged the debt instrument. Free state tax e-filing The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. Free state tax e-filing   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. Free state tax e-filing S. Free state tax e-filing Source Income Subject to Withholding, if you bought the debt instrument at original issue. Free state tax e-filing However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. Free state tax e-filing You bought the debt instrument at a premium or paid an acquisition premium. Free state tax e-filing The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. Free state tax e-filing S. Free state tax e-filing Treasury securities). Free state tax e-filing The debt instrument is a contingent payment or inflation-indexed debt instrument. Free state tax e-filing For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. Free state tax e-filing   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. Free state tax e-filing See chapter 12. Free state tax e-filing Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business and is not exempted by treaty. Free state tax e-filing However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. Free state tax e-filing Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing Social Security Benefits A nonresident alien must include 85% of any U. Free state tax e-filing S. Free state tax e-filing social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. Free state tax e-filing S. Free state tax e-filing source fixed or determinable annual or periodic income. Free state tax e-filing Social security benefits include monthly retirement, survivor, and disability benefits. Free state tax e-filing This income is exempt under some tax treaties. Free state tax e-filing See Table 1 in Publication 901, U. Free state tax e-filing S. Free state tax e-filing Tax Treaties, for a list of tax treaties that exempt U. Free state tax e-filing S. Free state tax e-filing social security benefits from U. Free state tax e-filing S. Free state tax e-filing tax. Free state tax e-filing Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. Free state tax e-filing They apply even if you are engaged in a trade or business in the United States. Free state tax e-filing These rules do not apply to the sale or exchange of a U. Free state tax e-filing S. Free state tax e-filing real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. Free state tax e-filing See Real Property Gain or Loss , earlier, under Effectively Connected Income. Free state tax e-filing A capital asset is everything you own except: Inventory. Free state tax e-filing Business accounts or notes receivable. Free state tax e-filing Depreciable property used in a trade or business. Free state tax e-filing Real property used in a trade or business. Free state tax e-filing Supplies regularly used in a trade or business. Free state tax e-filing Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. Free state tax e-filing Certain U. Free state tax e-filing S. Free state tax e-filing government publications. Free state tax e-filing Certain commodities derivative financial instruments held by a commodities derivatives dealer. Free state tax e-filing Hedging transactions. Free state tax e-filing A capital gain is a gain on the sale or exchange of a capital asset. Free state tax e-filing A capital loss is a loss on the sale or exchange of a capital asset. Free state tax e-filing If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. Free state tax e-filing S. Free state tax e-filing currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. Free state tax e-filing You may want to read Publication 544. Free state tax e-filing However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. Free state tax e-filing Specific tax treatment that applies to U. Free state tax e-filing S. Free state tax e-filing citizens or residents generally does not apply to you. Free state tax e-filing The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. Free state tax e-filing Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. Free state tax e-filing Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. Free state tax e-filing Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. Free state tax e-filing Gains on the sale or exchange of original issue discount obligations. Free state tax e-filing Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing See Income From Real Property , later. Free state tax e-filing 183-day rule. Free state tax e-filing   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. Free state tax e-filing For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. Free state tax e-filing S. Free state tax e-filing sources over your capital losses from U. Free state tax e-filing S. Free state tax e-filing sources. Free state tax e-filing This rule applies even if any of the transactions occurred while you were not in the United States. Free state tax e-filing   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. Free state tax e-filing S. Free state tax e-filing trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. Free state tax e-filing   In arriving at your net gain, do not take the following into consideration. Free state tax e-filing The four types of gains listed earlier. Free state tax e-filing The deduction for a capital loss carryover. Free state tax e-filing Capital losses in excess of capital gains. Free state tax e-filing Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). Free state tax e-filing Losses from the sale or exchange of property held for personal use. Free state tax e-filing However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). Free state tax e-filing See Itemized Deductions in chapter 5. Free state tax e-filing   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. Free state tax e-filing Also, you must file your tax return on a calendar-year basis. Free state tax e-filing   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. Free state tax e-filing Reporting. Free state tax e-filing   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. Free state tax e-filing Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. Free state tax e-filing Attach them to Form 1040NR. Free state tax e-filing Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. Free state tax e-filing The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. Free state tax e-filing This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. Free state tax e-filing It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. Free state tax e-filing You can make this choice only for real property income that is not otherwise effectively connected with your U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. Free state tax e-filing This choice does not treat a nonresident alien, who is not otherwise engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business, as being engaged in a trade or business in the United States during the year. Free state tax e-filing Example. Free state tax e-filing You are a nonresident alien and are not engaged in a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing You own a single-family house in the United States that you rent out. Free state tax e-filing Your rental income for the year is $10,000. Free state tax e-filing This is your only U. Free state tax e-filing S. Free state tax e-filing source income. Free state tax e-filing As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. Free state tax e-filing You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. Free state tax e-filing You do not have to file a U. Free state tax e-filing S. Free state tax e-filing tax return (Form 1040NR) because your U. Free state tax e-filing S. Free state tax e-filing tax liability is satisfied by the withholding of tax. Free state tax e-filing If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. Free state tax e-filing (See Publication 527, Residential Rental Property, for information on rental expenses. Free state tax e-filing ) Any resulting net income is taxed at graduated rates. Free state tax e-filing If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. Free state tax e-filing For the first year you make the choice, also attach the statement discussed next. Free state tax e-filing Making the choice. Free state tax e-filing   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. Free state tax e-filing Include the following in your statement. Free state tax e-filing That you are making the choice. Free state tax e-filing Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. Free state tax e-filing A complete list of all your real property, or any interest in real property, located in the United States. Free state tax e-filing Give the legal identification of U. Free state tax e-filing S. Free state tax e-filing timber, coal, or iron ore in which you have an interest. Free state tax e-filing The extent of your ownership in the property. Free state tax e-filing The location of the property. Free state tax e-filing A description of any major improvements to the property. Free state tax e-filing The dates you owned the property. Free state tax e-filing Your income from the property. Free state tax e-filing Details of any previous choices and revocations of the real property income choice. Free state tax e-filing   This choice stays in effect for all later tax years unless you revoke it. Free state tax e-filing Revoking the choice. Free state tax e-filing   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. Free state tax e-filing S. Free state tax e-filing Individual Income Tax Return, for the year you made the choice and for later tax years. Free state tax e-filing You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. Free state tax e-filing If this time period has expired for the year of choice, you cannot revoke the choice for that year. Free state tax e-filing However, you may revoke the choice for later tax years only if you have IRS approval. Free state tax e-filing For information on how to get IRS approval, see Regulation section 1. Free state tax e-filing 871-10(d)(2). Free state tax e-filing Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . Free state tax e-filing If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. Free state tax e-filing Attach a statement to your return that includes the following information (if applicable). Free state tax e-filing Your name, taxpayer identification number, and tax year. Free state tax e-filing A description of the types of services performed (whether on or off board). Free state tax e-filing Names of vessels or registration numbers of aircraft on which you performed the services. Free state tax e-filing Amount of U. Free state tax e-filing S. Free state tax e-filing source transportation income derived from each type of service for each vessel or aircraft for the calendar year. Free state tax e-filing Total amount of U. Free state tax e-filing S. Free state tax e-filing source transportation income derived from all types of services for the calendar year. Free state tax e-filing This 4% tax applies to your U. Free state tax e-filing S. Free state tax e-filing source gross transportation income. Free state tax e-filing This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. Free state tax e-filing For transportation income from personal services, the transportation must be between the United States and a U. Free state tax e-filing S. Free state tax e-filing possession. Free state tax e-filing For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. Free state tax e-filing Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. Free state tax e-filing S. Free state tax e-filing residence with a period of nonresidence. Free state tax e-filing The special rule applies if you meet all of the following conditions. Free state tax e-filing You were a U. Free state tax e-filing S. Free state tax e-filing resident for a period that includes at least 3 consecutive calendar years. Free state tax e-filing You were a U. Free state tax e-filing S. Free state tax e-filing resident for at least 183 days in each of those years. Free state tax e-filing You ceased to be treated as a U. Free state tax e-filing S. Free state tax e-filing resident. Free state tax e-filing You then again became a U. Free state tax e-filing S. Free state tax e-filing resident before the end of the third calendar year after the end of the period described in (1) above. Free state tax e-filing Under this special rule, you are subject to tax on your U. Free state tax e-filing S. Free state tax e-filing source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. Free state tax e-filing Example. Free state tax e-filing John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. Free state tax e-filing On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. Free state tax e-filing During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). Free state tax e-filing He returned to the United States on October 5, 2013, as a lawful permanent resident. Free state tax e-filing He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). Free state tax e-filing Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. Free state tax e-filing Reporting requirements. Free state tax e-filing   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. Free state tax e-filing The return is due by the due date (including extensions) for filing your U. Free state tax e-filing S. Free state tax e-filing income tax return for the year that you again become a U. Free state tax e-filing S. Free state tax e-filing resident. Free state tax e-filing If you already filed returns for that period, you must file amended returns. Free state tax e-filing You must attach a statement to your return that identifies the source of all of your U. Free state tax e-filing S. Free state tax e-filing and foreign gross income and the items of income subject to this special rule. Free state tax e-filing Expatriation Tax The expatriation tax provisions apply to U. Free state tax e-filing S. Free state tax e-filing citizens who have renounced their citizenship and long-term residents who have ended their residency. Free state tax e-filing The rules that apply are based on the dates of expatriation, which are described in the following sections. Free state tax e-filing Expatriation Before June 4, 2004. Free state tax e-filing Expatriation After June 3, 2004, and Before June 17, 2008. Free state tax e-filing Expatriation After June 16, 2008. Free state tax e-filing Long-term resident defined. Free state tax e-filing   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. Free state tax e-filing In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. Free state tax e-filing Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. Free state tax e-filing S. Free state tax e-filing taxes. Free state tax e-filing Unless you received a ruling from the IRS that you did not expatriate to avoid U. Free state tax e-filing S. Free state tax e-filing taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. Free state tax e-filing The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). Free state tax e-filing Table 4-1. Free state tax e-filing Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . Free state tax e-filing . Free state tax e-filing . Free state tax e-filing   THEN the rules outlined on this page apply if . Free state tax e-filing . Free state tax e-filing . Free state tax e-filing     Your 5-year average annual net income tax was more than . Free state tax e-filing . Free state tax e-filing . Free state tax e-filing OR Your net worth equaled or exceeded . Free state tax e-filing . Free state tax e-filing . Free state tax e-filing 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. Free state tax e-filing Reporting requirements. Free state tax e-filing   If you lost your U. Free state tax e-filing S. Free state tax e-filing citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. Free state tax e-filing If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. Free state tax e-filing   Your U. Free state tax e-filing S. Free state tax e-filing residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. Free state tax e-filing Penalties. Free state tax e-filing   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. Free state tax e-filing The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. Free state tax e-filing The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. Free state tax e-filing Expatriation tax. Free state tax e-filing   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. Free state tax e-filing It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. Free state tax e-filing See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. Free state tax e-filing Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. Free state tax e-filing Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. Free state tax e-filing $127,000 if you expatriated or terminated residency in 2005. Free state tax e-filing $131,000 if you expatriated or terminated residency in 2006. Free state tax e-filing $136,000 if you expatriated or terminated residency in 2007. Free state tax e-filing $139,000 if you expatriated or terminated residency in 2008. Free state tax e-filing Your net worth is $2 million or more on the date of your expatriation or termination of residency. Free state tax e-filing You fail to certify on Form 8854 that you have complied with all U. Free state tax e-filing S. Free state tax e-filing federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. Free state tax e-filing Exception for dual-citizens and certain minors. Free state tax e-filing   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. Free state tax e-filing However, they still must provide the certification required in (3). Free state tax e-filing Certain dual-citizens. Free state tax e-filing   You may qualify for the exception described above if all of the following apply. Free state tax e-filing You became at birth a U. Free state tax e-filing S. Free state tax e-filing citizen and a citizen of another country and you continue to be a citizen of that other country. Free state tax e-filing You were never a resident alien of the United States (as defined in chapter 1). Free state tax e-filing You never held a U. Free state tax e-filing S. Free state tax e-filing passport. Free state tax e-filing You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. Free state tax e-filing S. Free state tax e-filing citizenship. Free state tax e-filing Certain minors. Free state tax e-filing   You may qualify for the exception described above if you meet all of the following requirements. Free state tax e-filing You became a U. Free state tax e-filing S. Free state tax e-filing citizen at birth. Free state tax e-filing Neither of your parents was a U. Free state tax e-filing S. Free state tax e-filing citizen at the time of your birth. Free state tax e-filing You expatriated before you were 18½. Free state tax e-filing You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. Free state tax e-filing Tax consequences of presence in the United States. Free state tax e-filing   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. Free state tax e-filing   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. Free state tax e-filing Instead, you are treated as a U. Free state tax e-filing S. Free state tax e-filing citizen or resident and taxed on your worldwide income for that tax year. Free state tax e-filing You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. Free state tax e-filing   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. Free state tax e-filing However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. Free state tax e-filing You have ties with other countries. Free state tax e-filing You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. Free state tax e-filing You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. Free state tax e-filing Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. Free state tax e-filing See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. Free state tax e-filing Related employer. Free state tax e-filing   If your employer in the United States is any of the following, then your employer is related to you. Free state tax e-filing You must count any days you performed services in the United States for that employer as days of presence in the United States. Free state tax e-filing Members of your family. Free state tax e-filing This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Free state tax e-filing ), and lineal descendants (children, grandchildren, etc. Free state tax e-filing ). Free state tax e-filing A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Free state tax e-filing A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Free state tax e-filing (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. Free state tax e-filing ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Free state tax e-filing Date of tax expatriation. Free state tax e-filing   For purposes of U. Free state tax e-filing S. Free state tax e-filing tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. Free state tax e-filing You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. Free state tax e-filing You file Form 8854 in accordance with the form instructions. Free state tax e-filing Annual return. Free state tax e-filing   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. Free state tax e-filing You must file this form even if you owe no U. Free state tax e-filing S. Free state tax e-filing tax. Free state tax e-filing Penalty. Free state tax e-filing   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. Free state tax e-filing You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. Free state tax e-filing How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. Free state tax e-filing S. Free state tax e-filing source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. Free state tax e-filing S. Free state tax e-filing trade or business. Free state tax e-filing For this purpose, U. Free state tax e-filing S. Free state tax e-filing source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. Free state tax e-filing S. Free state tax e-filing domestic corporation, and Debt obligations of U. Free state tax e-filing S. Free state tax e-filing persons or of the United States, a state or political subdivision thereof, or the District of Columbia. Free state tax e-filing U. Free state tax e-filing S. Free state tax e-filing source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. Free state tax e-filing The income or gain is considered U. Free state tax e-filing S. Free state tax e-filing source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. Free state tax e-filing Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. Free state tax e-filing S. Free state tax e-filing source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. Free state tax e-filing Other information. Free state tax e-filing   For more information on the expatriation tax provisions, including exceptions to the tax and special U. Free state tax e-filing S. Free state tax e-filing source rules, see section 877 of the Internal Revenue Code. Free state tax e-filing Expatriation Tax Return If you expatriated or terminated your U. Free state tax e-filing S. Free state tax e-filing residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. Free state tax e-filing Attach it to Form 1040NR if you are required to file that form. Free state tax e-filing If you are present in the United States following your expatriation and are subject to tax as a U. Free state tax e-filing S. Free state tax e-filing citizen or resident, file Form 8854 with Form 1040. Free state tax e-filing Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. Free state tax e-filing Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. Free state tax e-filing $145,000 if you expatriated or terminated residency in 2009 or 2010. Free state tax e-filing $147,000 if you expatriated or terminated residency in 2011. Free state tax e-filing $151,000 if you expatriated or terminated residency in 2012. Free state tax e-filing $155,000 if you expatriated or terminated residency in 2013. Free state tax e-filing Your net worth is $2 million or more on the date of your expatriation or termination of residency. Free state tax e-filing You fail to certify on Form 8854 that you have complied with all U. Free state tax e-filing S. Free state tax e-filing federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. Free state tax e-filing Exception for dual-citizens and certain minors. Free state tax e-filing   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. Free state tax e-filing However, they still must provide the certification required in (3) above. Free state tax e-filing Certain dual-citizens. Free state tax e-filing   You may qualify for the exception described above if both of the following apply. Free state tax e-filing You became at birth a U. Free state tax e-filing S. Free state tax e-filing citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. Free state tax e-filing You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. Free state tax e-filing For the purpose of determining U. Free state tax e-filing S. Free state tax e-filing residency, use the substantial presence test described in chapter 1. Free state tax e-filing Certain minors. Free state tax e-filing   You may qualify for the exception described earlier if you meet both of the following requirements. Free state tax e-filing You expatriated before you were 18½. Free state tax e-filing You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. Free state tax e-filing For the purpose of determining U. Free state tax e-filing S. Free state tax e-filing residency, use the substantial presence test described in chapter 1. Free state tax e-filing Expatriation date. Free state tax e-filing   Your expatriation date is the date you relinquish U. Free state tax e-filing S. Free state tax e-filing citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. Free state tax e-filing S. Free state tax e-filing resident). Free state tax e-filing Former U. Free state tax e-filing S. Free state tax e-filing citizen. Free state tax e-filing   You are considered to have relinquished your U. Free state tax e-filing S. Free state tax e-filing citizenship on the earliest of the following dates. Free state tax e-filing The date you renounced U. Free state tax e-filing S. Free state tax e-filing citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). Free state tax e-filing The date you furnished to the State Department a signed statement of voluntary relinquishment of U. Free state tax e-filing S. Free state tax e-filing nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). Free state tax e-filing The date the State Department issued a certificate of loss of nationality. Free state tax e-filing The date that a U. Free state tax e-filing S. Free state tax e-filing court canceled your certificate of naturalization. Free state tax e-filing Former long-term resident. Free state tax e-filing   You are considered to have terminated your long-term residency on the earliest of the following dates. Free state tax e-filing The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. Free state tax e-filing S. Free state tax e-filing consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. Free state tax e-filing The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. Free state tax e-filing If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. Free state tax e-filing See Effect of Tax Treaties in chapter 1 for more information about dual residents. Free state tax e-filing How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). Free state tax e-filing This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. Free state tax e-filing But see Exceptions , later. Free state tax e-filing Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. Free state tax e-filing S. Free state tax e-filing internal revenue laws. Free state tax e-filing Losses from deemed sales must be taken into account to the extent otherwise provided under U. Free state tax e-filing S. Free state tax e-filing internal revenue laws. Free state tax e-filing However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. Free state tax e-filing The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. Free state tax e-filing $626,000 if you expatriated or terminated residency in 2009. Free state tax e-filing $627,000 if you expatriated or terminated residency in 2010. Free state tax e-filing $636,000 if you expatriated or terminated residency in 2011. Free state tax e-filing $651,000 if you expatriated or terminated residency in 2012. Free state tax e-filing $668,000 if you expatriated or terminated residency in 2013. Free state tax e-filing Exceptions. Free state tax e-filing   The mark-to-market tax does not apply to the following. Free state tax e-filing Eligible deferred compensation items. Free state tax e-filing Ineligible deferred compensation items. Free state tax e-filing Interests in nongrantor trusts. Free state tax e-filing Specified tax deferred accounts. Free state tax e-filing Instead, items (1) and (3) may be subject to withholding at source. Free state tax e-filing In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. Free state tax e-filing In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. Free state tax e-filing See paragraphs (d), (e), and (f) of section 877A for more information. Free state tax e-filing Expatriation Tax Return If you expatriated or terminated your U. Free state tax e-filing S. Free state tax e-filing residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. Free state tax e-filing Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. Free state tax e-filing Deferral of payment of mark-to-market tax. Free state tax e-filing   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. Free state tax e-filing If you make this election, the following rules apply. Free state tax e-filing You can make the election on a property-by-property basis. Free state tax e-filing The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. Free state tax e-filing Interest is charged for the period the tax is deferred. Free state tax e-filing The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. Free state tax e-filing The due date of the return required for the year of death. Free state tax e-filing The time that the security provided for the property fails to be adequate. Free state tax e-filing See item (6) below. Free state tax e-filing You make the election on Form 8854. Free state tax e-filing You must provide adequate security (such as a bond). Free state tax e-filing You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. Free state tax e-filing   For more information about the deferral of payment, see the Instructions for Form 8854. Free state tax e-filing Prev  Up  Next   Home   More Online Publications
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The Free State Tax E-filing

Free state tax e-filing 2. Free state tax e-filing   Filing Status Table of Contents What's New Introduction Useful Items - You may want to see: Marital StatusDivorced persons. Free state tax e-filing Divorce and remarriage. Free state tax e-filing Annulled marriages. Free state tax e-filing Head of household or qualifying widow(er) with dependent child. Free state tax e-filing Considered married. Free state tax e-filing Same-sex marriage. Free state tax e-filing Spouse died during the year. Free state tax e-filing Married persons living apart. Free state tax e-filing Single Married Filing JointlyFiling a Joint Return Married Filing SeparatelySpecial Rules Head of HouseholdConsidered Unmarried Keeping Up a Home Qualifying Person Qualifying Widow(er) With Dependent Child What's New Filing status for same-sex married couples. Free state tax e-filing  If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. Free state tax e-filing See Same-sex marriage under Marital Status, later. Free state tax e-filing Introduction This chapter helps you determine which filing status to use. Free state tax e-filing There are five filing statuses. Free state tax e-filing Single. Free state tax e-filing Married Filing Jointly. Free state tax e-filing Married Filing Separately. Free state tax e-filing Head of Household. Free state tax e-filing Qualifying Widow(er) With Dependent Child. Free state tax e-filing If more than one filing status applies to you, choose the one that will give you the lowest tax. Free state tax e-filing You must determine your filing status before you can determine whether you must file a tax return (chapter 1), your standard deduction (chapter 20), and your tax (chapter 30). Free state tax e-filing You also use your filing status to determine whether you are eligible to claim certain deductions and credits. Free state tax e-filing Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 519 U. Free state tax e-filing S. Free state tax e-filing Tax Guide for Aliens 555 Community Property Marital Status In general, your filing status depends on whether you are considered unmarried or married. Free state tax e-filing Unmarried persons. Free state tax e-filing   You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree. Free state tax e-filing State law governs whether you are married or legally separated under a divorce or separate maintenance decree. Free state tax e-filing Divorced persons. Free state tax e-filing   If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year. Free state tax e-filing Divorce and remarriage. Free state tax e-filing   If you obtain a divorce for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to and do, in fact, remarry each other in the next tax year, you and your spouse must file as married individuals in both years. Free state tax e-filing Annulled marriages. Free state tax e-filing    If you obtain a court decree of annulment, which holds that no valid marriage ever existed, you are considered unmarried even if you filed joint returns for earlier years. Free state tax e-filing You must file Form 1040X, Amended U. Free state tax e-filing S. Free state tax e-filing Individual Income Tax Return, claiming single or head of household status for all tax years that are affected by the annulment and are not closed by the statute of limitations for filing a tax return. Free state tax e-filing Generally, for a credit or refund, you must file Form 1040X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. Free state tax e-filing If you filed your original return early (for example, March 1), your return is considered filed on the due date (generally April 15). Free state tax e-filing However, if you had an extension to file (for example, until October 15) but you filed earlier and we received it on July 1, your return is considered filed on July 1. Free state tax e-filing Head of household or qualifying widow(er) with dependent child. Free state tax e-filing   If you are considered unmarried, you may be able to file as a head of household or as a qualifying widow(er) with a dependent child. Free state tax e-filing See Head of Household and Qualifying Widow(er) With Dependent Child to see if you qualify. Free state tax e-filing Married persons. Free state tax e-filing   If you are considered married, you and your spouse can file a joint return or separate returns. Free state tax e-filing Considered married. Free state tax e-filing   You are considered married for the whole year if, on the last day of your tax year, you and your spouse meet any one of the following tests. Free state tax e-filing You are married and living together as a married couple. Free state tax e-filing You are living together in a common law marriage recognized in the state where you now live or in the state where the common law marriage began. Free state tax e-filing You are married and living apart, but not legally separated under a decree of divorce or separate maintenance. Free state tax e-filing You are separated under an interlocutory (not final) decree of divorce. Free state tax e-filing Same-sex marriage. Free state tax e-filing   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Free state tax e-filing The term “spouse” includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. Free state tax e-filing However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state (or foreign) law are not considered married for federal tax purposes. Free state tax e-filing For more details, see Publication 501. Free state tax e-filing Spouse died during the year. Free state tax e-filing   If your spouse died during the year, you are considered married for the whole year for filing status purposes. Free state tax e-filing   If you did not remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. Free state tax e-filing For the next 2 years, you may be entitled to the special benefits described later under Qualifying Widow(er) With Dependent Child . Free state tax e-filing   If you remarried before the end of the tax year, you can file a joint return with your new spouse. Free state tax e-filing Your deceased spouse's filing status is married filing separately for that year. Free state tax e-filing Married persons living apart. Free state tax e-filing   If you live apart from your spouse and meet certain tests, you may be able to file as head of household even if you are not divorced or legally separated. Free state tax e-filing If you qualify to file as head of household instead of married filing separately, your standard deduction will be higher. Free state tax e-filing Also, your tax may be lower, and you may be able to claim the earned income credit. Free state tax e-filing See Head of Household , later. Free state tax e-filing Single Your filing status is single if you are considered unmarried and you do not qualify for another filing status. Free state tax e-filing To determine your marital status, see Marital Status , earlier. Free state tax e-filing Widow(er). Free state tax e-filing   Your filing status may be single if you were widowed before January 1, 2013, and did not remarry before the end of 2013. Free state tax e-filing You may, however, be able to use another filing status that will give you a lower tax. Free state tax e-filing See Head of Household and Qualifying Widow(er) With Dependent Child , later, to see if you qualify. Free state tax e-filing How to file. Free state tax e-filing   You can file Form 1040. Free state tax e-filing If you have taxable income of less than $100,000, you may be able to file Form 1040A. Free state tax e-filing If, in addition, you have no dependents, and are under 65 and not blind, and meet other requirements, you can file Form 1040EZ. Free state tax e-filing If you file Form 1040A or Form 1040, show your filing status as single by checking the box on line 1. Free state tax e-filing Use the Single column of the Tax Table or Section A of the Tax Computation Worksheet to figure your tax. Free state tax e-filing Married Filing Jointly You can choose married filing jointly as your filing status if you are considered married and both you and your spouse agree to file a joint return. Free state tax e-filing On a joint return, you and your spouse report your combined income and deduct your combined allowable expenses. Free state tax e-filing You can file a joint return even if one of you had no income or deductions. Free state tax e-filing If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Free state tax e-filing Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses. Free state tax e-filing If you and your spouse each have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). Free state tax e-filing You can choose the method that gives the two of you the lower combined tax. Free state tax e-filing How to file. Free state tax e-filing   If you file as married filing jointly, you can use Form 1040. Free state tax e-filing If you and your spouse have taxable income of less than $100,000, you may be able to file Form 1040A. Free state tax e-filing If, in addition, you and your spouse have no dependents, are both under 65 and not blind, and meet other requirements, you can file Form 1040EZ. Free state tax e-filing If you file Form 1040 or Form 1040A, show this filing status by checking the box on line 2. Free state tax e-filing Use the Married filing jointly column of the Tax Table or Section B of the Tax Computation Worksheet to figure your tax. Free state tax e-filing Spouse died. Free state tax e-filing   If your spouse died during the year, you are considered married for the whole year and can choose married filing jointly as your filing status. Free state tax e-filing See Spouse died during the year under Marital Status, earlier, for more information. Free state tax e-filing   If your spouse died in 2014 before filing a 2013 return, you can choose married filing jointly as your filing status on your 2013 return. Free state tax e-filing Divorced persons. Free state tax e-filing   If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you cannot choose married filing jointly as your filing status. Free state tax e-filing Filing a Joint Return Both you and your spouse must include all of your income, exemptions, and deductions on your joint return. Free state tax e-filing Accounting period. Free state tax e-filing   Both of you must use the same accounting period, but you can use different accounting methods. Free state tax e-filing See Accounting Periods and Accounting Methods in chapter 1. Free state tax e-filing Joint responsibility. Free state tax e-filing   Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. Free state tax e-filing This means that if one spouse does not pay the tax due, the other may have to. Free state tax e-filing Or, if one spouse does not report the correct tax, both spouses may be responsible for any additional taxes assessed by the IRS. Free state tax e-filing One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse. Free state tax e-filing You may want to file separately if: You believe your spouse is not reporting all of his or her income, or You do not want to be responsible for any taxes due if your spouse does not have enough tax withheld or does not pay enough estimated tax. Free state tax e-filing Divorced taxpayer. Free state tax e-filing   You may be held jointly and individually responsible for any tax, interest, and penalties due on a joint return filed before your divorce. Free state tax e-filing This responsibility may apply even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. Free state tax e-filing Relief from joint responsibility. Free state tax e-filing   In some cases, one spouse may be relieved of joint responsibility for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. Free state tax e-filing You can ask for relief no matter how small the liability. Free state tax e-filing   There are three types of relief available. Free state tax e-filing Innocent spouse relief. Free state tax e-filing Separation of liability (available only to joint filers who are divorced, widowed, legally separated, or have not lived together for the 12 months ending on the date the election for this relief is filed). Free state tax e-filing Equitable relief. Free state tax e-filing    You must file Form 8857, Request for Innocent Spouse Relief, to request relief from joint responsibility. Free state tax e-filing Publication 971, Innocent Spouse Relief, explains these kinds of relief and who may qualify for them. Free state tax e-filing Signing a joint return. Free state tax e-filing   For a return to be considered a joint return, both spouses generally must sign the return. Free state tax e-filing Spouse died before signing. Free state tax e-filing   If your spouse died before signing the return, the executor or administrator must sign the return for your spouse. Free state tax e-filing If neither you nor anyone else has yet been appointed as executor or administrator, you can sign the return for your spouse and enter “Filing as surviving spouse” in the area where you sign the return. Free state tax e-filing Spouse away from home. Free state tax e-filing   If your spouse is away from home, you should prepare the return, sign it, and send it to your spouse to sign so that it can be filed on time. Free state tax e-filing Injury or disease prevents signing. Free state tax e-filing   If your spouse cannot sign because of disease or injury and tells you to sign for him or her, you can sign your spouse's name in the proper space on the return followed by the words “By (your name), Husband (or Wife). Free state tax e-filing ” Be sure to also sign in the space provided for your signature. Free state tax e-filing Attach a dated statement, signed by you, to the return. Free state tax e-filing The statement should include the form number of the return you are filing, the tax year, and the reason your spouse cannot sign, and should state that your spouse has agreed to your signing for him or her. Free state tax e-filing Signing as guardian of spouse. Free state tax e-filing   If you are the guardian of your spouse who is mentally incompetent, you can sign the return for your spouse as guardian. Free state tax e-filing Spouse in combat zone. Free state tax e-filing   You can sign a joint return for your spouse if your spouse cannot sign because he or she is serving in a combat zone (such as the Persian Gulf Area, Serbia, Montenegro, Albania, or Afghanistan), even if you do not have a power of attorney or other statement. Free state tax e-filing Attach a signed statement to your return explaining that your spouse is serving in a combat zone. Free state tax e-filing For more information on special tax rules for persons who are serving in a combat zone, or who are in missing status as a result of serving in a combat zone, see Publication 3, Armed Forces' Tax Guide. Free state tax e-filing Other reasons spouse cannot sign. Free state tax e-filing    If your spouse cannot sign the joint return for any other reason, you can sign for your spouse only if you are given a valid power of attorney (a legal document giving you permission to act for your spouse). Free state tax e-filing Attach the power of attorney (or a copy of it) to your tax return. Free state tax e-filing You can use Form 2848, Power of Attorney and Declaration of Representative. Free state tax e-filing Nonresident alien or dual-status alien. Free state tax e-filing   Generally, a married couple cannot file a joint return if either one is a nonresident alien at any time during the tax year. Free state tax e-filing However, if one spouse was a nonresident alien or dual-status alien who was married to a U. Free state tax e-filing S. Free state tax e-filing citizen or resident alien at the end of the year, the spouses can choose to file a joint return. Free state tax e-filing If you do file a joint return, you and your spouse are both treated as U. Free state tax e-filing S. Free state tax e-filing residents for the entire tax year. Free state tax e-filing See chapter 1 of Publication 519. Free state tax e-filing Married Filing Separately You can choose married filing separately as your filing status if you are married. Free state tax e-filing This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return. Free state tax e-filing If you and your spouse do not agree to file a joint return, you must use this filing status unless you qualify for head of household status, discussed later. Free state tax e-filing You may be able to choose head of household filing status if you are considered unmarried because you live apart from your spouse and meet certain tests (explained later, under Head of Household ). Free state tax e-filing This can apply to you even if you are not divorced or legally separated. Free state tax e-filing If you qualify to file as head of household, instead of as married filing separately, your tax may be lower, you may be able to claim the earned income credit and certain other credits, and your standard deduction will be higher. Free state tax e-filing The head of household filing status allows you to choose the standard deduction even if your spouse chooses to itemize deductions. Free state tax e-filing See Head of Household , later, for more information. Free state tax e-filing You will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under Special Rules, later. Free state tax e-filing However, unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns). Free state tax e-filing This way you can make sure you are using the filing status that results in the lowest combined tax. Free state tax e-filing When figuring the combined tax of a married couple, you may want to consider state taxes as well as federal taxes. Free state tax e-filing How to file. Free state tax e-filing   If you file a separate return, you generally report only your own income, exemptions, credits, and deductions. Free state tax e-filing You can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another person. Free state tax e-filing You can file Form 1040. Free state tax e-filing If your taxable income is less than $100,000, you may be able to file Form 1040A. Free state tax e-filing Select this filing status by checking the box on line 3 of either form. Free state tax e-filing Enter your spouse's full name and SSN or ITIN in the spaces provided. Free state tax e-filing If your spouse does not have and is not required to have an SSN or ITIN, enter “NRA” in the space for your spouse's SSN. Free state tax e-filing Use the Married filing separately column of the Tax Table or Section C of the Tax Computation Worksheet to figure your tax. Free state tax e-filing Special Rules If you choose married filing separately as your filing status, the following special rules apply. Free state tax e-filing Because of these special rules, you usually pay more tax on a separate return than if you use another filing status you qualify for. Free state tax e-filing   Your tax rate generally is higher than on a joint return. Free state tax e-filing Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return. Free state tax e-filing You cannot take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000). Free state tax e-filing If you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. Free state tax e-filing For more information about these expenses, the credit, and the exclusion, see chapter 32. Free state tax e-filing You cannot take the earned income credit. Free state tax e-filing You cannot take the exclusion or credit for adoption expenses in most cases. Free state tax e-filing You cannot take the education credits (the American opportunity credit and lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction. Free state tax e-filing You cannot exclude any interest income from qualified U. Free state tax e-filing S. Free state tax e-filing savings bonds you used for higher education expenses. Free state tax e-filing If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received. Free state tax e-filing The following credits and deductions are reduced at income levels half those for a joint return: The child tax credit, The retirement savings contributions credit, The deduction for personal exemptions, and Itemized deductions. Free state tax e-filing Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). Free state tax e-filing If your spouse itemizes deductions, you cannot claim the standard deduction. Free state tax e-filing If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return. Free state tax e-filing Adjusted gross income (AGI) limits. Free state tax e-filing   If your AGI on a separate return is lower than it would have been on a joint return, you may be able to deduct a larger amount for certain deductions that are limited by AGI, such as medical expenses. Free state tax e-filing Individual retirement arrangements (IRAs). Free state tax e-filing   You may not be able to deduct all or part of your contributions to a traditional IRA if you or your spouse were covered by an employee retirement plan at work during the year. Free state tax e-filing Your deduction is reduced or eliminated if your income is more than a certain amount. Free state tax e-filing This amount is much lower for married individuals who file separately and lived together at any time during the year. Free state tax e-filing For more information, see How Much Can You Deduct in chapter 17. Free state tax e-filing Rental activity losses. Free state tax e-filing   If you actively participated in a passive rental real estate activity that produced a loss, you generally can deduct the loss from your nonpassive income, up to $25,000. Free state tax e-filing This is called a special allowance. Free state tax e-filing However, married persons filing separate returns who lived together at any time during the year cannot claim this special allowance. Free state tax e-filing Married persons filing separate returns who lived apart at all times during the year are each allowed a $12,500 maximum special allowance for losses from passive real estate activities. Free state tax e-filing See Limits on Rental Losses in chapter 9. Free state tax e-filing Community property states. Free state tax e-filing   If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. Free state tax e-filing See Publication 555. Free state tax e-filing Joint Return After Separate Returns You can change your filing status from a separate return to a joint return by filing an amended return using Form 1040X. Free state tax e-filing You generally can change to a joint return any time within 3 years from the due date of the separate return or returns. Free state tax e-filing This does not include any extensions. Free state tax e-filing A separate return includes a return filed by you or your spouse claiming married filing separately, single, or head of household filing status. Free state tax e-filing Separate Returns After Joint Return Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return. Free state tax e-filing Exception. Free state tax e-filing   A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. Free state tax e-filing The personal representative has 1 year from the due date of the return (including extensions) to make the change. Free state tax e-filing See Publication 559, Survivors, Executors, and Administrators, for more information on filing a return for a decedent. Free state tax e-filing Head of Household You may be able to file as head of household if you meet all the following requirements. Free state tax e-filing You are unmarried or “considered unmarried” on the last day of the year. Free state tax e-filing See Marital Status , earlier, and Considered Unmarried , later. Free state tax e-filing You paid more than half the cost of keeping up a home for the year. Free state tax e-filing A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). Free state tax e-filing However, if the qualifying person is your dependent parent, he or she does not have to live with you. Free state tax e-filing See Special rule for parent , later, under Qualifying Person. Free state tax e-filing If you qualify to file as head of household, your tax rate usually will be lower than the rates for single or married filing separately. Free state tax e-filing You will also receive a higher standard deduction than if you file as single or married filing separately. Free state tax e-filing Kidnapped child. Free state tax e-filing   A child may qualify you to file as head of household even if the child has been kidnapped. Free state tax e-filing For more information, see Publication 501. Free state tax e-filing How to file. Free state tax e-filing   If you file as head of household, you can use Form 1040. Free state tax e-filing If your taxable income is less than $100,000, you may be able to file Form 1040A. Free state tax e-filing Indicate your choice of this filing status by checking the box on line 4 of either form. Free state tax e-filing Use the Head of a household column of the Tax Table or Section D of the Tax Computation Worksheet to figure your tax. Free state tax e-filing Considered Unmarried To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. Free state tax e-filing You are considered unmarried on the last day of the tax year if you meet all the following tests. Free state tax e-filing You file a separate return (defined earlier under Joint Return After Separate Returns ). Free state tax e-filing You paid more than half the cost of keeping up your home for the tax year. Free state tax e-filing Your spouse did not live in your home during the last 6 months of the tax year. Free state tax e-filing Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. Free state tax e-filing See Temporary absences , under Qualifying Person, later. Free state tax e-filing Your home was the main home of your child, stepchild, or foster child for more than half the year. Free state tax e-filing (See Home of qualifying person , under Qualifying Person, later, for rules applying to a child's birth, death, or temporary absence during the year. Free state tax e-filing ) You must be able to claim an exemption for the child. Free state tax e-filing However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rules described in Children of divorced or separated parents (or parents who live apart) under Qualifying Child in chapter 3, or in Support Test for Children of Divorced or Separated Parents (or Parents Who Live Apart) under Qualifying Relative in chapter 3. Free state tax e-filing The general rules for claiming an exemption for a dependent are explained under Exemptions for Dependents in chapter 3. Free state tax e-filing If you were considered married for part of the year and lived in a community property state (listed earlier under Married Filing Separately), special rules may apply in determining your income and expenses. Free state tax e-filing See Publication 555 for more information. Free state tax e-filing Nonresident alien spouse. Free state tax e-filing   You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. Free state tax e-filing However, your spouse is not a qualifying person for head of household purposes. Free state tax e-filing You must have another qualifying person and meet the other tests to be eligible to file as a head of household. Free state tax e-filing Choice to treat spouse as resident. Free state tax e-filing   You are considered married if you choose to treat your spouse as a resident alien. Free state tax e-filing See Publication 519. Free state tax e-filing Keeping Up a Home To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year. Free state tax e-filing You can determine whether you paid more than half of the cost of keeping up a home by using Worksheet 2–1. Free state tax e-filing Worksheet 2-1. Free state tax e-filing Cost of Keeping Up a Home   Amount You Paid Total Cost Property taxes $ $ Mortgage interest expense     Rent     Utility charges     Repairs/maintenance     Property insurance     Food consumed on the premises     Other household expenses     Totals $ $ Minus total amount you paid   () Amount others paid   $ If the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home. Free state tax e-filing Costs you include. Free state tax e-filing   Include in the cost of keeping up a home expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. Free state tax e-filing   If you used payments you received under Temporary Assistance for Needy Families (TANF) or other public assistance programs to pay part of the cost of keeping up your home, you cannot count them as money you paid. Free state tax e-filing However, you must include them in the total cost of keeping up your home to figure if you paid over half the cost. Free state tax e-filing Costs you do not include. Free state tax e-filing   Do not include the costs of clothing, education, medical treatment, vacations, life insurance, or transportation. Free state tax e-filing Also, do not include the rental value of a home you own or the value of your services or those of a member of your household. Free state tax e-filing Qualifying Person See Table 2-1 to see who is a qualifying person. Free state tax e-filing Any person not described in Table 2-1 is not a qualifying person. Free state tax e-filing Table 2-1. Free state tax e-filing Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Caution. Free state tax e-filing See the text of this chapter for the other requirements you must meet to claim head of household filing status. Free state tax e-filing IF the person is your . Free state tax e-filing . Free state tax e-filing . Free state tax e-filing   AND . Free state tax e-filing . Free state tax e-filing . Free state tax e-filing   THEN that person is . Free state tax e-filing . Free state tax e-filing . Free state tax e-filing qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2   he or she is single   a qualifying person, whether or not you can claim an exemption for the person. Free state tax e-filing   he or she is married and you can claim an exemption for him or her   a qualifying person. Free state tax e-filing   he or she is married and you cannot claim an exemption for him or her   not a qualifying person. Free state tax e-filing 3 qualifying relative4 who is your father or mother   you can claim an exemption for him or her5   a qualifying person. Free state tax e-filing 6   you cannot claim an exemption for him or her   not a qualifying person. Free state tax e-filing qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests)   he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in chapter 3 and you can claim an exemption for him or her5   a qualifying person. Free state tax e-filing   he or she did not live with you more than half the year   not a qualifying person. Free state tax e-filing   he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in chapter 3 and is your qualifying relative only because he or she lived with you all year as a member of your household   not a qualifying person. Free state tax e-filing   you cannot claim an exemption for him or her   not a qualifying person. Free state tax e-filing 1A person cannot qualify more than one taxpayer to use the head of household filing status for the year. Free state tax e-filing 2The term “qualifying child” is defined in chapter 3. Free state tax e-filing Note. Free state tax e-filing If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of divorced or separated parents (or parents who live apart) under Qualifying Child in chapter 3. Free state tax e-filing If you are the custodial parent and those rules apply, the child generally is your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. Free state tax e-filing 3This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. Free state tax e-filing 4The term “ qualifying relative ” is defined in chapter 3. Free state tax e-filing 5If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. Free state tax e-filing See Multiple Support Agreement in chapter 3. Free state tax e-filing 6See Special rule for parent . Free state tax e-filing Example 1—child. Free state tax e-filing Your unmarried son lived with you all year and was 18 years old at the end of the year. Free state tax e-filing He did not provide more than half of his own support and does not meet the tests to be a qualifying child of anyone else. Free state tax e-filing As a result, he is your qualifying child (see Qualifying Child in chapter 3) and, because he is single, your qualifying person for you to claim head of household filing status. Free state tax e-filing Example 2—child who is not qualifying person. Free state tax e-filing The facts are the same as in Example 1 except your son was 25 years old at the end of the year and his gross income was $5,000. Free state tax e-filing Because he does not meet the age test (explained under Qualifying Child in chapter 3), your son is not your qualifying child. Free state tax e-filing Because he does not meet the gross income test (explained later under Qualifying Relative in chapter 3), he is not your qualifying relative. Free state tax e-filing As a result, he is not your qualifying person for head of household purposes. Free state tax e-filing Example 3—girlfriend. Free state tax e-filing Your girlfriend lived with you all year. Free state tax e-filing Even though she may be your qualifying relative if the gross income and support tests (explained in chapter 3) are met, she is not your qualifying person for head of household purposes because she is not related to you in one of the ways listed under Relatives who do not have to live with you in chapter 3. Free state tax e-filing See Table 2-1. Free state tax e-filing Example 4—girlfriend's child. Free state tax e-filing The facts are the same as in Example 3 except your girlfriend's 10-year-old son also lived with you all year. Free state tax e-filing He is not your qualifying child and, because he is your girlfriend's qualifying child, he is not your qualifying relative (see Not a Qualifying Child Test in chapter 3). Free state tax e-filing As a result, he is not your qualifying person for head of household purposes. Free state tax e-filing Home of qualifying person. Free state tax e-filing   Generally, the qualifying person must live with you for more than half of the year. Free state tax e-filing Special rule for parent. Free state tax e-filing   If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. Free state tax e-filing However, you must be able to claim an exemption for your father or mother. Free state tax e-filing Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. Free state tax e-filing   You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. Free state tax e-filing Death or birth. Free state tax e-filing   You may be eligible to file as head of household even if the individual who qualifies you for this filing status is born or dies during the year. Free state tax e-filing If the individual is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. Free state tax e-filing If the individual is anyone else, see Publication 501. Free state tax e-filing Temporary absences. Free state tax e-filing   You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. Free state tax e-filing It must be reasonable to assume the absent person will return to the home after the temporary absence. Free state tax e-filing You must continue to keep up the home during the absence. Free state tax e-filing Qualifying Widow(er) With Dependent Child If your spouse died in 2013, you can use married filing jointly as your filing status for 2013 if you otherwise qualify to use that status. Free state tax e-filing The year of death is the last year for which you can file jointly with your deceased spouse. Free state tax e-filing See Married Filing Jointly , earlier. Free state tax e-filing You may be eligible to use qualifying widow(er) with dependent child as your filing status for 2 years following the year your spouse died. Free state tax e-filing For example, if your spouse died in 2012, and you have not remarried, you may be able to use this filing status for 2013 and 2014. Free state tax e-filing This filing status entitles you to use joint return tax rates and the highest standard deduction amount (if you do not itemize deductions). Free state tax e-filing It does not entitle you to file a joint return. Free state tax e-filing How to file. Free state tax e-filing   If you file as qualifying widow(er) with dependent child, you can use Form 1040. Free state tax e-filing If you also have taxable income of less than $100,000 and meet certain other conditions, you may be able to file Form 1040A. Free state tax e-filing Check the box on line 5 of either form. Free state tax e-filing Use the Married filing jointly column of the Tax Table or Section B of the Tax Computation Worksheet to figure your tax. Free state tax e-filing Eligibility rules. Free state tax e-filing   You are eligible to file your 2013 return as a qualifying widow(er) with dependent child if you meet all of the following tests. Free state tax e-filing You were entitled to file a joint return with your spouse for the year your spouse died. Free state tax e-filing It does not matter whether you actually filed a joint return. Free state tax e-filing Your spouse died in 2011 or 2012 and you did not remarry before the end of 2013. Free state tax e-filing You have a child or stepchild for whom you can claim an exemption. Free state tax e-filing This does not include a foster child. Free state tax e-filing This child lived in your home all year, except for temporary absences. Free state tax e-filing See Temporary absences , earlier, under Head of Household. Free state tax e-filing There are also exceptions, described later, for a child who was born or died during the year and for a kidnapped child. Free state tax e-filing You paid more than half the cost of keeping up a home for the year. Free state tax e-filing See Keeping Up a Home , earlier, under Head of Household. Free state tax e-filing Example. Free state tax e-filing John's wife died in 2011. Free state tax e-filing John has not remarried. Free state tax e-filing During 2012 and 2013, he continued to keep up a home for himself and his child, who lives with him and for whom he can claim an exemption. Free state tax e-filing For 2011 he was entitled to file a joint return for himself and his deceased wife. Free state tax e-filing For 2012 and 2013, he can file as qualifying widower with a dependent child. Free state tax e-filing After 2013 he can file as head of household if he qualifies. Free state tax e-filing Death or birth. Free state tax e-filing    You may be eligible to file as a qualifying widow(er) with dependent child if the child who qualifies you for this filing status is born or dies during the year. Free state tax e-filing You must have provided more than half of the cost of keeping up a home that was the child's main home during the entire part of the year he or she was alive. Free state tax e-filing Kidnapped child. Free state tax e-filing   A child may qualify you for qualifying widow(er) with dependent child, even if the child has been kidnapped. Free state tax e-filing See Publication 501. Free state tax e-filing    As mentioned earlier, this filing status is available for only 2 years following the year your spouse died. 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