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Free tax preperation 5. Free tax preperation   Personal Use of Dwelling Unit (Including Vacation Home) Table of Contents Dividing Expenses Dwelling Unit Used as a HomeMain home. Free tax preperation Shared equity financing agreement. Free tax preperation Donation of use of the property. Free tax preperation Examples. Free tax preperation Days used for repairs and maintenance. Free tax preperation Days used as a main home before or after renting. Free tax preperation Reporting Income and DeductionsNot used as a home. Free tax preperation Used as a home but rented less than 15 days. Free tax preperation Used as a home and rented 15 days or more. Free tax preperation If you have any personal use of a dwelling unit (including a vacation home) that you rent, you must divide your expenses between rental use and personal use. Free tax preperation In general, your rental expenses will be no more than your total expenses multiplied by a fraction; the denominator of which is the total number of days the dwelling unit is used and the numerator of which is the total number of days actually rented at a fair rental price. Free tax preperation Only your rental expenses may deducted on Schedule E (Form 1040). Free tax preperation Some of your personal expenses may be deductible if you itemize your deductions on Schedule A (Form 1040). Free tax preperation You must also determine if the dwelling unit is considered a home. Free tax preperation The amount of rental expenses that you can deduct may be limited if the dwelling unit is considered a home. Free tax preperation Whether a dwelling unit is considered a home depends on how many days during the year are considered to be days of personal use. Free tax preperation There is a special rule if you used the dwelling unit as a home and you rented it for less than 15 days during the year. Free tax preperation Dwelling unit. Free tax preperation   A dwelling unit includes a house, apartment, condominium, mobile home, boat, vacation home, or similar property. Free tax preperation It also includes all structures or other property belonging to the dwelling unit. Free tax preperation A dwelling unit has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. Free tax preperation   A dwelling unit does not include property (or part of the property) used solely as a hotel, motel, inn, or similar establishment. Free tax preperation Property is used solely as a hotel, motel, inn, or similar establishment if it is regularly available for occupancy by paying customers and is not used by an owner as a home during the year. Free tax preperation Example. Free tax preperation You rent a room in your home that is always available for short-term occupancy by paying customers. Free tax preperation You do not use the room yourself and you allow only paying customers to use the room. Free tax preperation This room is used solely as a hotel, motel, inn, or similar establishment and is not a dwelling unit. Free tax preperation Dividing Expenses If you use a dwelling unit for both rental and personal purposes, divide your expenses between the rental use and the personal use based on the number of days used for each purpose. Free tax preperation When dividing your expenses, follow these rules. Free tax preperation Any day that the unit is rented at a fair rental price is a day of rental use even if you used the unit for personal purposes that day. Free tax preperation (This rule does not apply when determining whether you used the unit as a home. Free tax preperation ) Any day that the unit is available for rent but not actually rented is not a day of rental use. Free tax preperation Fair rental price. Free tax preperation   A fair rental price for your property generally is the amount of rent that a person who is not related to you would be willing to pay. Free tax preperation The rent you charge is not a fair rental price if it is substantially less than the rents charged for other properties that are similar to your property in your area. Free tax preperation   Ask yourself the following questions when comparing another property with yours. Free tax preperation Is it used for the same purpose? Is it approximately the same size? Is it in approximately the same condition? Does it have similar furnishings? Is it in a similar location? If any of the answers are no, the properties probably are not similar. Free tax preperation Example. Free tax preperation Your beach cottage was available for rent from June 1 through August 31 (92 days). Free tax preperation Except for the first week in August (7 days), when you were unable to find a renter, you rented the cottage at a fair rental price during that time. Free tax preperation The person who rented the cottage for July allowed you to use it over the weekend (2 days) without any reduction in or refund of rent. Free tax preperation Your family also used the cottage during the last 2 weeks of May (14 days). Free tax preperation The cottage was not used at all before May 17 or after August 31. Free tax preperation You figure the part of the cottage expenses to treat as rental expenses as follows. Free tax preperation The cottage was used for rental a total of 85 days (92 − 7). Free tax preperation The days it was available for rent but not rented (7 days) are not days of rental use. Free tax preperation The July weekend (2 days) you used it is rental use because you received a fair rental price for the weekend. Free tax preperation You used the cottage for personal purposes for 14 days (the last 2 weeks in May). Free tax preperation The total use of the cottage was 99 days (14 days personal use + 85 days rental use). Free tax preperation Your rental expenses are 85/99 (86%) of the cottage expenses. Free tax preperation Note. Free tax preperation When determining whether you used the cottage as a home, the July weekend (2 days) you used it is considered personal use even though you received a fair rental price for the weekend. Free tax preperation Therefore, you had 16 days of personal use and 83 days of rental use for this purpose. Free tax preperation Because you used the cottage for personal purposes more than 14 days and more than 10% of the days of rental use (8 days), you used it as a home. Free tax preperation If you have a net loss, you may not be able to deduct all of the rental expenses. Free tax preperation See Dwelling Unit Used as a Home, next. Free tax preperation Dwelling Unit Used as a Home If you use a dwelling unit for both rental and personal purposes, the tax treatment of the rental expenses you figured earlier under Dividing Expenses and rental income depends on whether you are considered to be using the dwelling unit as a home. Free tax preperation You use a dwelling unit as a home during the tax year if you use it for personal purposes more than the greater of: 14 days, or 10% of the total days it is rented to others at a fair rental price. Free tax preperation See What is a day of personal use , later. Free tax preperation If a dwelling unit is used for personal purposes on a day it is rented at a fair rental price (discussed earlier), do not count that day as a day of rental use in applying (2) above. Free tax preperation Instead, count it as a day of personal use in applying both (1) and (2) above. Free tax preperation What is a day of personal use?   A day of personal use of a dwelling unit is any day that the unit is used by any of the following persons. Free tax preperation You or any other person who owns an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement (defined later). Free tax preperation However, see Days used as a main home before or after renting , later. Free tax preperation A member of your family or a member of the family of any other person who owns an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Free tax preperation Family includes only your spouse, brothers and sisters, half-brothers and half-sisters, ancestors (parents, grandparents, etc. Free tax preperation ), and lineal descendants (children, grandchildren, etc. Free tax preperation ). Free tax preperation Anyone under an arrangement that lets you use some other dwelling unit. Free tax preperation Anyone at less than a fair rental price. Free tax preperation Main home. Free tax preperation   If the other person or member of the family in (1) or (2) above has more than one home, his or her main home is ordinarily the one he or she lived in most of the time. Free tax preperation Shared equity financing agreement. Free tax preperation   This is an agreement under which two or more persons acquire undivided interests for more than 50 years in an entire dwelling unit, including the land, and one or more of the co-owners is entitled to occupy the unit as his or her main home upon payment of rent to the other co-owner or owners. Free tax preperation Donation of use of the property. Free tax preperation   You use a dwelling unit for personal purposes if: You donate the use of the unit to a charitable organization, The organization sells the use of the unit at a fund-raising event, and The “purchaser” uses the unit. Free tax preperation Examples. Free tax preperation   The following examples show how to determine if you have days of personal use. Free tax preperation Example 1. Free tax preperation You and your neighbor are co-owners of a condominium at the beach. Free tax preperation Last year, you rented the unit to vacationers whenever possible. Free tax preperation The unit was not used as a main home by anyone. Free tax preperation Your neighbor used the unit for 2 weeks last year; you did not use it at all. Free tax preperation Because your neighbor has an interest in the unit, both of you are considered to have used the unit for personal purposes during those 2 weeks. Free tax preperation Example 2. Free tax preperation You and your neighbors are co-owners of a house under a shared equity financing agreement. Free tax preperation Your neighbors live in the house and pay you a fair rental price. Free tax preperation Even though your neighbors have an interest in the house, the days your neighbors live there are not counted as days of personal use by you. Free tax preperation This is because your neighbors rent the house as their main home under a shared equity financing agreement. Free tax preperation Example 3. Free tax preperation You own a rental property that you rent to your son. Free tax preperation Your son does not own any interest in this property. Free tax preperation He uses it as his main home and pays you a fair rental price. Free tax preperation Your son's use of the property is not personal use by you because your son is using it as his main home, he owns no interest in the property, and he is paying you a fair rental price. Free tax preperation Example 4. Free tax preperation You rent your beach house to Rosa. Free tax preperation Rosa rents her cabin in the mountains to you. Free tax preperation You each pay a fair rental price. Free tax preperation You are using your beach house for personal purposes on the days that Rosa uses it because your house is used by Rosa under an arrangement that allows you to use her cabin. Free tax preperation Example 5. Free tax preperation You rent an apartment to your mother at less than a fair rental price. Free tax preperation You are using the apartment for personal purposes on the days that your mother rents it because you rent it for less than a fair rental price. Free tax preperation Days used for repairs and maintenance. Free tax preperation   Any day that you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Free tax preperation Do not count such a day as a day of personal use even if family members use the property for recreational purposes on the same day. Free tax preperation Example. Free tax preperation Corey owns a cabin in the mountains that he rents for most of the year. Free tax preperation He spends a week at the cabin with family members. Free tax preperation Corey works on maintenance of the cabin 3 or 4 hours each day during the week and spends the rest of the time fishing, hiking, and relaxing. Free tax preperation Corey's family members, however, work substantially full time on the cabin each day during the week. Free tax preperation The main purpose of being at the cabin that week is to do maintenance work. Free tax preperation Therefore, the use of the cabin during the week by Corey and his family will not be considered personal use by Corey. Free tax preperation Days used as a main home before or after renting. Free tax preperation   For purposes of determining whether a dwelling unit was used as a home, you may not have to count days you used the property as your main home before or after renting it or offering it for rent as days of personal use. Free tax preperation Do not count them as days of personal use if: You rented or tried to rent the property for 12 or more consecutive months. Free tax preperation You rented or tried to rent the property for a period of less than 12 consecutive months and the period ended because you sold or exchanged the property. Free tax preperation However, this special rule does not apply when dividing expenses between rental and personal use. Free tax preperation See Property Changed to Rental Use in chapter 4. Free tax preperation Example 1. Free tax preperation On February 29, 2012, you moved out of the house you had lived in for 6 years because you accepted a job in another town. Free tax preperation You rented your house at a fair rental price from March 15, 2012, to May 14, 2013 (14 months). Free tax preperation On June 1, 2013, you moved back into your old house. Free tax preperation The days you used the house as your main home from January 1 to February 29, 2012, and from June 1 to December 31, 2013, are not counted as days of personal use. Free tax preperation Therefore, you would use the rules in chapter 1 when figuring your rental income and expenses. Free tax preperation Example 2. Free tax preperation On January 31, you moved out of the condominium where you had lived for 3 years. Free tax preperation You offered it for rent at a fair rental price beginning on February 1. Free tax preperation You were unable to rent it until April. Free tax preperation On September 15, you sold the condominium. Free tax preperation The days you used the condominium as your main home from January 1 to January 31 are not counted as days of personal use when determining whether you used it as a home. Free tax preperation Examples. Free tax preperation   The following examples show how to determine whether you used your rental property as a home. Free tax preperation Example 1. Free tax preperation You converted the basement of your home into an apartment with a bedroom, a bathroom, and a small kitchen. Free tax preperation You rented the basement apartment at a fair rental price to college students during the regular school year. Free tax preperation You rented to them on a 9-month lease (273 days). Free tax preperation You figured 10% of the total days rented to others at a fair rental price is 27 days. Free tax preperation During June (30 days), your brothers stayed with you and lived in the basement apartment rent free. Free tax preperation Your basement apartment was used as a home because you used it for personal purposes for 30 days. Free tax preperation Rent-free use by your brothers is considered personal use. Free tax preperation Your personal use (30 days) is more than the greater of 14 days or 10% of the total days it was rented (27 days). Free tax preperation Example 2. Free tax preperation You rented the guest bedroom in your home at a fair rental price during the local college's homecoming, commencement, and football weekends (a total of 27 days). Free tax preperation Your sister-in-law stayed in the room, rent free, for the last 3 weeks (21 days) in July. Free tax preperation You figured 10% of the total days rented to others at a fair rental price is 3 days. Free tax preperation The room was used as a home because you used it for personal purposes for 21 days. Free tax preperation That is more than the greater of 14 days or 10% of the 27 days it was rented (3 days). Free tax preperation Example 3. Free tax preperation You own a condominium apartment in a resort area. Free tax preperation You rented it at a fair rental price for a total of 170 days during the year. Free tax preperation For 12 of these days, the tenant was not able to use the apartment and allowed you to use it even though you did not refund any of the rent. Free tax preperation Your family actually used the apartment for 10 of those days. Free tax preperation Therefore, the apartment is treated as having been rented for 160 (170 – 10) days. Free tax preperation You figured 10% of the total days rented to others at a fair rental price is 16 days. Free tax preperation Your family also used the apartment for 7 other days during the year. Free tax preperation You used the apartment as a home because you used it for personal purposes for 17 days. Free tax preperation That is more than the greater of 14 days or 10% of the 160 days it was rented (16 days). Free tax preperation Minimal rental use. Free tax preperation   If you use the dwelling unit as a home and you rent it less than 15 days during the year, that period is not treated as rental activity. Free tax preperation See Used as a home but rented less than 15 days, later, for more information. Free tax preperation Limit on deductions. Free tax preperation   Renting a dwelling unit that is considered a home is not a passive activity. Free tax preperation Instead, if your rental expenses are more than your rental income, some or all of the excess expenses cannot be used to offset income from other sources. Free tax preperation The excess expenses that cannot be used to offset income from other sources are carried forward to the next year and treated as rental expenses for the same property. Free tax preperation Any expenses carried forward to the next year will be subject to any limits that apply for that year. Free tax preperation This limitation will apply to expenses carried forward to another year even if you do not use the property as your home for that subsequent year. Free tax preperation   To figure your deductible rental expenses for this year and any carryover to next year, use Worksheet 5–1. Free tax preperation Reporting Income and Deductions Property not used for personal purposes. Free tax preperation   If you do not use a dwelling unit for personal purposes, see chapter 3 for how to report your rental income and expenses. Free tax preperation Property used for personal purposes. Free tax preperation   If you do use a dwelling unit for personal purposes, then how you report your rental income and expenses depends on whether you used the dwelling unit as a home. Free tax preperation Not used as a home. Free tax preperation   If you use a dwelling unit for personal purposes, but not as a home, report all the rental income in your income. Free tax preperation Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . Free tax preperation The expenses for personal use are not deductible as rental expenses. Free tax preperation   Your deductible rental expenses can be more than your gross rental income; however, see Limits on Rental Losses in chapter 3. Free tax preperation Used as a home but rented less than 15 days. Free tax preperation   If you use a dwelling unit as a home and you rent it less than 15 days during the year, its primary function is not considered to be rental and it should not be reported on Schedule E (Form 1040). Free tax preperation You are not required to report the rental income and rental expenses from this activity. Free tax preperation The expenses, including qualified mortgage interest, property taxes, and any qualified casualty loss will be reported as normally allowed on Schedule A (Form 1040). Free tax preperation See the Instructions for Schedule A (Form 1040) for more information on deducting these expenses. Free tax preperation Used as a home and rented 15 days or more. Free tax preperation   If you use a dwelling unit as a home and rent it 15 days or more during the year, include all your rental income in your income. Free tax preperation Since you used the dwelling unit for personal purposes, you must divide your expenses between the rental use and the personal use as described earlier in this chapter under Dividing Expenses . Free tax preperation The expenses for personal use are not deductible as rental expenses. Free tax preperation   If you had a net profit from renting the dwelling unit for the year (that is, if your rental income is more than the total of your rental expenses, including depreciation), deduct all of your rental expenses. Free tax preperation You do not need to use Worksheet 5-1. Free tax preperation   However, if you had a net loss from renting the dwelling unit for the year, your deduction for certain rental expenses is limited. Free tax preperation To figure your deductible rental expenses and any carryover to next year, use Worksheet 5–1. Free tax preperation Worksheet 5-1. Free tax preperation Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Use this worksheet only if you answer “yes” to all of the following questions. Free tax preperation Did you use the dwelling unit as a home this year? (See Dwelling Unit Used as a Home . Free tax preperation ) Did you rent the dwelling unit at a fair rental price 15 days or more this year? Is the total of your rental expenses and depreciation more than your rental income? PART I. Free tax preperation Rental Use Percentage A. Free tax preperation Total days available for rent at fair rental price A. Free tax preperation       B. Free tax preperation Total days available for rent (line A) but not rented B. Free tax preperation       C. Free tax preperation Total days of rental use. Free tax preperation Subtract line B from line A C. Free tax preperation       D. Free tax preperation Total days of personal use (including days rented at less than fair rental price) D. Free tax preperation       E. Free tax preperation Total days of rental and personal use. Free tax preperation Add lines C and D E. Free tax preperation       F. Free tax preperation Percentage of expenses allowed for rental. Free tax preperation Divide line C by line E     F. Free tax preperation . Free tax preperation PART II. Free tax preperation Allowable Rental Expenses 1. Free tax preperation Enter rents received 1. Free tax preperation   2a. Free tax preperation Enter the rental portion of deductible home mortgage interest and qualified mortgage insurance premiums (see instructions) 2a. Free tax preperation       b. Free tax preperation Enter the rental portion of real estate taxes b. Free tax preperation       c. Free tax preperation Enter the rental portion of deductible casualty and theft losses (see instructions) c. Free tax preperation       d. Free tax preperation Enter direct rental expenses (see instructions) d. Free tax preperation       e. Free tax preperation Fully deductible rental expenses. Free tax preperation Add lines 2a–2d. Free tax preperation Enter here and  on the appropriate lines on Schedule E (see instructions) 2e. Free tax preperation   3. Free tax preperation Subtract line 2e from line 1. Free tax preperation If zero or less, enter -0- 3. Free tax preperation   4a. Free tax preperation Enter the rental portion of expenses directly related to operating or maintaining  the dwelling unit (such as repairs, insurance, and utilities) 4a. Free tax preperation       b. Free tax preperation Enter the rental portion of excess mortgage interest and qualified mortgage insurance premiums (see instructions) b. Free tax preperation       c. Free tax preperation Carryover of operating expenses from 2012 worksheet c. Free tax preperation       d. Free tax preperation Add lines 4a–4c d. Free tax preperation       e. Free tax preperation Allowable expenses. Free tax preperation Enter the smaller of line 3 or line 4d (see instructions) 4e. Free tax preperation   5. Free tax preperation Subtract line 4e from line 3. Free tax preperation If zero or less, enter -0- 5. Free tax preperation   6a. Free tax preperation Enter the rental portion of excess casualty and theft losses (see instructions) 6a. Free tax preperation       b. Free tax preperation Enter the rental portion of depreciation of the dwelling unit b. Free tax preperation       c. Free tax preperation Carryover of excess casualty losses and depreciation from 2012 worksheet c. Free tax preperation       d. Free tax preperation Add lines 6a–6c d. Free tax preperation       e. Free tax preperation Allowable excess casualty and theft losses and depreciation. Free tax preperation Enter the smaller of  line 5 or line 6d (see instructions) 6e. Free tax preperation   PART III. Free tax preperation Carryover of Unallowed Expenses to Next Year 7a. Free tax preperation Operating expenses to be carried over to next year. Free tax preperation Subtract line 4e from line 4d 7a. Free tax preperation   b. Free tax preperation Excess casualty and theft losses and depreciation to be carried over to next year. Free tax preperation  Subtract line 6e from line 6d b. Free tax preperation   Worksheet 5-1 Instructions. Free tax preperation Worksheet for Figuring Rental Deductions for a Dwelling Unit Used as a Home Caution. Free tax preperation Use the percentage determined in Part I, line F, to figure the rental portions to enter on lines 2a–2c, 4a–4b, and 6a–6b of  Part II. Free tax preperation Line 2a. Free tax preperation Figure the mortgage interest on the dwelling unit that you could deduct on Schedule A as if you had not rented the unit. Free tax preperation Do not include interest on a loan that did not benefit the dwelling unit. Free tax preperation For example, do not include interest on a home equity loan used to pay off credit cards or other personal loans, buy a car, or pay college tuition. Free tax preperation Include interest on a loan used to buy, build, or improve the dwelling unit, or to refinance such a loan. Free tax preperation Include the rental portion of this interest in the total you enter on line 2a of the worksheet. Free tax preperation   Figure the qualified mortgage insurance premiums on the dwelling unit that you could deduct on line 13 of Schedule A as if you had not rented the unit. Free tax preperation See the Schedule A instructions. Free tax preperation However, figure your adjusted gross income (Form 1040, line 38) without your rental income and expenses from the dwelling unit. Free tax preperation See Line 4b to deduct the part of the qualified mortgage insurance premiums not allowed because of the adjusted gross income limit. Free tax preperation Include the rental portion of the amount from Schedule A, line 13, in the total you enter on line 2a of the worksheet. Free tax preperation   Note. Free tax preperation Do not file this Schedule A or use it to figure the amount to deduct on line 13 of that schedule. Free tax preperation Instead, figure the personal portion on a separate Schedule A. Free tax preperation If you have deducted mortgage interest or qualified mortgage insurance premiums on the dwelling unit on other forms, such as Schedule C or F, remember to reduce your Schedule A deduction by that amount. Free tax preperation           Line 2c. Free tax preperation Figure the casualty and theft losses related to the dwelling unit that you could deduct on Schedule A as if you had not rented the dwelling unit. Free tax preperation To do this, complete Section A of Form 4684, Casualties and Thefts, treating the losses as personal losses. Free tax preperation If any of the loss is due to a federally declared disaster, see the Instructions for Form 4684. Free tax preperation On Form 4684, line 17, enter 10% of your adjusted gross income figured without your rental income and expenses from the dwelling unit. Free tax preperation Enter the rental portion of the result from Form 4684, line 18, on line 2c of this worksheet. Free tax preperation   Note. Free tax preperation Do not file this Form 4684 or use it to figure your personal losses on Schedule A. Free tax preperation Instead, figure the personal portion on a separate Form 4684. Free tax preperation           Line 2d. Free tax preperation Enter the total of your rental expenses that are directly related only to the rental activity. Free tax preperation These include interest on loans used for rental activities other than to buy, build, or improve the dwelling unit. Free tax preperation Also include rental agency fees, advertising, office supplies, and depreciation on office equipment used in your rental activity. Free tax preperation           Line 2e. Free tax preperation You can deduct the amounts on lines 2a, 2b, 2c, and 2d as rental expenses on Schedule E even if your rental expenses are more than your rental income. Free tax preperation Enter the amounts on lines 2a, 2b, 2c, and 2d on the appropriate lines of Schedule E. Free tax preperation           Line 4b. Free tax preperation On line 2a, you entered the rental portion of the mortgage interest or qualified mortgage insurance premiums you could deduct on Schedule A if you had not rented the dwelling unit. Free tax preperation If you had additional mortgage interest and qualified mortgage insurance premiums that would not be deductible on Schedule A because of limits imposed on them, enter on line 4b of this worksheet the rental portion of those excess amounts. Free tax preperation Do not include interest on a loan that did not benefit the dwelling unit  (as explained in the line 2a instructions). Free tax preperation           Line 4e. Free tax preperation You can deduct the amounts on lines 4a, 4b, and 4c as rental expenses on Schedule E only to the extent they are not more than the amount on line 4e. Free tax preperation *           Line 6a. Free tax preperation To find the rental portion of excess casualty and theft losses, use the Form 4684 you prepared for line 2c of this worksheet. Free tax preperation   A. Free tax preperation Enter the amount from Form 4684, line 10       B. Free tax preperation Enter the rental portion of line A       C. Free tax preperation Enter the amount from line 2c of this worksheet       D. Free tax preperation Subtract line C from line B. Free tax preperation Enter the result here and on line 6a of this worksheet               Line 6e. Free tax preperation You can deduct the amounts on lines 6a, 6b, and 6c as rental expenses on Schedule E only to the extent they are not more than the amount on line 6e. Free tax preperation * *Allocating the limited deduction. Free tax preperation If you cannot deduct all of the amount on line 4d or 6d this year, you can allocate the allowable deduction in any way you wish among the expenses included on line 4d or 6d. Free tax preperation Enter the amount you allocate to each expense on the appropriate line of Schedule E, Part I. Free tax preperation Prev  Up  Next   Home   More Online Publications
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Free tax preperation Publication 575 - Introductory Material Table of Contents What's New Reminders IntroductionThe General Rule. Free tax preperation Individual retirement arrangements (IRAs). Free tax preperation Civil service retirement benefits. Free tax preperation Social security and equivalent tier 1 railroad retirement benefits. Free tax preperation Tax-sheltered annuity plans (403(b) plans). Free tax preperation Ordering forms and publications. Free tax preperation Tax questions. Free tax preperation Useful Items - You may want to see: What's New For purposes of the net investment income tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 408, 408A, or 457(b) plans). Free tax preperation However, these distributions are taken into account when determining the modified adjusted gross income threshold. Free tax preperation Distributions from a nonqualified retirement plan are included in net investment income. Free tax preperation See Form 8960, Net Investment Income Tax - Individuals, Estates, and Trusts, and its instructions for more information. Free tax preperation Reminders Future developments. Free tax preperation  For the latest information about developments related to Publication 575, such as legislation enacted after it was published, go to www. Free tax preperation irs. Free tax preperation gov/pub575. Free tax preperation In-plan Roth rollovers. Free tax preperation   Starting in 2013, the American Taxpayer Relief Act of 2012 expanded the rules for in-plan Roth rollovers to include more taxpayers. Free tax preperation For more information, see In-plan Roth rollovers under Rollovers, discussed later. Free tax preperation Photographs of missing children. Free tax preperation  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free tax preperation Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free tax preperation You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free tax preperation Introduction This publication discusses the tax treatment of distributions you receive from pension and annuity plans and also shows you how to report the income on your federal income tax return. Free tax preperation How these distributions are taxed depends on whether they are periodic payments (amounts received as an annuity) that are paid at regular intervals over several years or nonperiodic payments (amounts not received as an annuity). Free tax preperation What is covered in this publication?   This publication contains information that you need to understand the following topics. Free tax preperation How to figure the tax-free part of periodic payments under a pension or annuity plan, including using a simple worksheet for payments under a qualified plan. Free tax preperation How to figure the tax-free part of nonperiodic payments from qualified and nonqualified plans, and how to use the optional methods to figure the tax on lump-sum distributions from pension, stock bonus, and profit-sharing plans. Free tax preperation How to roll over certain distributions from a retirement plan into another retirement plan or IRA. Free tax preperation How to report disability payments, and how beneficiaries and survivors of employees and retirees must report benefits paid to them. Free tax preperation How to report railroad retirement benefits. Free tax preperation When additional taxes on certain distributions may apply (including the tax on early distributions and the tax on excess accumulation). Free tax preperation For additional information on how to report pension or annuity payments on your federal income tax return, be sure to review the instructions on the back of Copies B, C, and 2 of the Form 1099-R that you received and the instructions for Form 1040, lines 16a and 16b (Form 1040A, lines 12a and 12b or Form 1040NR, lines 17a and 17b). Free tax preperation A “corrected” Form 1099-R replaces the corresponding original Form 1099-R if the original Form 1099-R contained an error. Free tax preperation Make sure you use the amounts shown on the corrected Form 1099-R when reporting information on your tax return. Free tax preperation What is not covered in this publication?   The following topics are not discussed in this publication. Free tax preperation The General Rule. Free tax preperation   This is the method generally used to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities). Free tax preperation For a qualified plan, you generally cannot use the General Rule unless your annuity starting date is before November 19, 1996. Free tax preperation Although this publication will help you determine whether you can use the General Rule, it will not help you use it to determine the tax treatment of your pension or annuity income. Free tax preperation For that and other information on the General Rule, see Publication 939, General Rule for Pensions and Annuities. Free tax preperation Individual retirement arrangements (IRAs). Free tax preperation   Information on the tax treatment of amounts you receive from an IRA is in Publication 590, Individual Retirement Arrangements (IRAs). Free tax preperation Civil service retirement benefits. Free tax preperation   If you are retired from the federal government (regular, phased, or disability retirement) or are the survivor or beneficiary of a federal employee or retiree who died, get Publication 721, Tax Guide to U. Free tax preperation S. Free tax preperation Civil Service Retirement Benefits. Free tax preperation Publication 721 covers the tax treatment of federal retirement benefits, primarily those paid under the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS). Free tax preperation It also covers benefits paid from the Thrift Savings Plan (TSP). Free tax preperation Social security and equivalent tier 1 railroad retirement benefits. Free tax preperation   For information about the tax treatment of these benefits, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Free tax preperation However, this publication (575) covers the tax treatment of the non-social security equivalent benefit portion of tier 1 railroad retirement benefits, tier 2 benefits, vested dual benefits, and supplemental annuity benefits paid by the U. Free tax preperation S. Free tax preperation Railroad Retirement Board. Free tax preperation Tax-sheltered annuity plans (403(b) plans). Free tax preperation   If you work for a public school or certain tax-exempt organizations, you may be eligible to participate in a 403(b) retirement plan offered by your employer. Free tax preperation Although this publication covers the treatment of benefits under 403(b) plans and discusses in-plan Roth rollovers from 403(b) plans to designated Roth accounts, it does not cover other tax provisions that apply to these plans. Free tax preperation For that and other information on 403(b) plans, see Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations. Free tax preperation Comments and suggestions. Free tax preperation   We welcome your comments about this publication and your suggestions for future editions. Free tax preperation   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free tax preperation NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free tax preperation Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free tax preperation   You can send your comments from www. Free tax preperation irs. Free tax preperation gov/formspubs/. Free tax preperation Click on “More Information” and then on “Comment on Tax Forms and Publications. Free tax preperation ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Free tax preperation Ordering forms and publications. Free tax preperation   Visit www. Free tax preperation irs. Free tax preperation gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free tax preperation Internal Revenue Service 1201 N. Free tax preperation Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free tax preperation   If you have a tax question, check the information available on IRS. Free tax preperation gov or call 1-800-829-1040. Free tax preperation We cannot answer tax questions sent to either of the above addresses. Free tax preperation Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 525 Taxable and Nontaxable Income 560 Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) 571 Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt Organizations 590 Individual Retirement Arrangements (IRAs) 721 Tax Guide to U. Free tax preperation S. Free tax preperation Civil Service Retirement Benefits 915 Social Security and Equivalent Railroad Retirement Benefits 939 General Rule for Pensions and Annuities Form (and Instructions) W-4P Withholding Certificate for Pension or Annuity Payments 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Free tax preperation 4972 Tax on Lump-Sum Distributions 5329 Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts See How To Get Tax Help near the end of this publication for information about getting publications and forms. Free tax preperation Prev  Up  Next   Home   More Online Publications