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Irs 1040ez 2012

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Irs 1040ez 2012

Irs 1040ez 2012 Publication 525 - Main Content Table of Contents Employee CompensationBabysitting. Irs 1040ez 2012 Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Business and Investment IncomeRents From Personal Property Royalties Partnership Income S Corporation Income Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Miscellaneous IncomeBartering Canceled Debts Host or Hostess Life Insurance Proceeds Recoveries Survivor Benefits Unemployment Benefits Welfare and Other Public Assistance Benefits Other Income RepaymentsMethod 1. Irs 1040ez 2012 Method 2. Irs 1040ez 2012 How To Get Tax HelpLow Income Taxpayer Clinics Employee Compensation In most cases, you must include in gross income everything you receive in payment for personal services. Irs 1040ez 2012 In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. Irs 1040ez 2012 You should receive a Form W-2 from your employer or former employer showing the pay you received for your services. Irs 1040ez 2012 Include all your pay on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ, even if you do not receive Form W-2, or you receive a Form W-2 that does not include all pay that should be included on the Form W-2. Irs 1040ez 2012 If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. Irs 1040ez 2012 These wages must be included on line 7 of Form 1040. Irs 1040ez 2012 See Form 8919 for more information. Irs 1040ez 2012 Childcare providers. Irs 1040ez 2012   If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. Irs 1040ez 2012 If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Irs 1040ez 2012 You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. Irs 1040ez 2012 Babysitting. Irs 1040ez 2012   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. Irs 1040ez 2012 Bankruptcy. Irs 1040ez 2012   If you filed for bankruptcy under Chapter 11 of the Bankruptcy Code, you must allocate your wages and withheld income tax. Irs 1040ez 2012 Your W-2 will show your total wages and withheld income tax for the year. Irs 1040ez 2012 On your tax return, you report the wages and withheld income tax for the period before you filed for bankruptcy. Irs 1040ez 2012 Your bankruptcy estate reports the wages and withheld income tax for the period after you filed for bankruptcy. Irs 1040ez 2012 If you receive other information returns (such as Form 1099-DIV, Dividends and Distributions, or 1099-INT, Interest Income) that report gross income to you, rather than to the bankruptcy estate, you must allocate that income. Irs 1040ez 2012   The only exception is for purposes of figuring your self-employment tax, if you are self-employed. Irs 1040ez 2012 For that purpose, you must take into account all your self-employment income for the year from services performed both before and after the beginning of the case. Irs 1040ez 2012   You must file a statement with your income tax return stating you filed a Chapter 11 bankruptcy case. Irs 1040ez 2012 The statement must show the allocation and describe the method used to make the allocation. Irs 1040ez 2012 For a sample of this statement and other information, see Notice 2006-83, 2006-40 I. Irs 1040ez 2012 R. Irs 1040ez 2012 B. Irs 1040ez 2012 596, available at www. Irs 1040ez 2012 irs. Irs 1040ez 2012 gov/irb/2006-40_IRB/ar12. Irs 1040ez 2012 html. Irs 1040ez 2012 Miscellaneous Compensation This section discusses many types of employee compensation. Irs 1040ez 2012 The subjects are arranged in alphabetical order. Irs 1040ez 2012 Advance commissions and other earnings. Irs 1040ez 2012   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. Irs 1040ez 2012    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. Irs 1040ez 2012 If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), Itemized Deductions, or you may be able to take a credit for that year. Irs 1040ez 2012 See Repayments , later. Irs 1040ez 2012 Allowances and reimbursements. Irs 1040ez 2012    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Irs 1040ez 2012 If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Irs 1040ez 2012 Back pay awards. Irs 1040ez 2012   Include in income amounts you are awarded in a settlement or judgment for back pay. Irs 1040ez 2012 These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Irs 1040ez 2012 They should be reported to you by your employer on Form W-2. Irs 1040ez 2012 Bonuses and awards. Irs 1040ez 2012    Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Irs 1040ez 2012 These include prizes such as vacation trips for meeting sales goals. Irs 1040ez 2012 If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. Irs 1040ez 2012 However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. Irs 1040ez 2012 Employee achievement award. Irs 1040ez 2012   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. Irs 1040ez 2012 However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. Irs 1040ez 2012 Your employer can tell you whether your award is a qualified plan award. Irs 1040ez 2012 Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. Irs 1040ez 2012   However, the exclusion does not apply to the following awards. Irs 1040ez 2012 A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. Irs 1040ez 2012 A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. Irs 1040ez 2012 Example. Irs 1040ez 2012 Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. Irs 1040ez 2012 Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Irs 1040ez 2012 However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 − $1,600) in his income. Irs 1040ez 2012 Differential wage payments. Irs 1040ez 2012   This is any payment made by an employer to an individual for any period during which the individual is, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages the individual would have received from the employer for that period. Irs 1040ez 2012 These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Irs 1040ez 2012 The payments are reported as wages on Form W-2. Irs 1040ez 2012 Government cost-of-living allowances. Irs 1040ez 2012   Most payments received by U. Irs 1040ez 2012 S. Irs 1040ez 2012 Government civilian employees for working abroad are taxable. Irs 1040ez 2012 However, certain cost-of-living allowances are tax free. Irs 1040ez 2012 Publication 516, U. Irs 1040ez 2012 S. Irs 1040ez 2012 Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Irs 1040ez 2012 Nonqualified deferred compensation plans. Irs 1040ez 2012   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Irs 1040ez 2012 This amount is shown on Form W-2, box 12, using code Y. Irs 1040ez 2012 This amount is not included in your income. Irs 1040ez 2012   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. Irs 1040ez 2012 This amount is included in your wages shown on Form W-2, box 1. Irs 1040ez 2012 It is also shown on Form W-2, box 12, using code Z. Irs 1040ez 2012 Nonqualified deferred compensation plans of nonqualified entities. Irs 1040ez 2012   In most cases, any compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is included in gross income when there is no substantial risk of forfeiture of the rights to such compensation. Irs 1040ez 2012 For this purpose, a nonqualified entity is: A foreign corporation unless substantially all of its income is: Effectively connected with the conduct of a trade or business in the United States, or Subject to a comprehensive foreign income tax. Irs 1040ez 2012 A partnership unless substantially all of its income is allocated to persons other than: Foreign persons for whom the income is not subject to a comprehensive foreign income tax, and Tax-exempt organizations. Irs 1040ez 2012 Note received for services. Irs 1040ez 2012   If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. Irs 1040ez 2012 When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. Irs 1040ez 2012 Do not include that part again in your income. Irs 1040ez 2012 Include the rest of the payment in your income in the year of payment. Irs 1040ez 2012   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. Irs 1040ez 2012 Severance pay. Irs 1040ez 2012   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Irs 1040ez 2012 Accrued leave payment. Irs 1040ez 2012   If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. Irs 1040ez 2012   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. Irs 1040ez 2012 You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Irs 1040ez 2012 Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on your return and the wages on your Forms W-2. Irs 1040ez 2012 Outplacement services. Irs 1040ez 2012   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. Irs 1040ez 2012    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). Irs 1040ez 2012 Sick pay. Irs 1040ez 2012   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Irs 1040ez 2012 In addition, you must include in your income sick pay benefits received from any of the following payers. Irs 1040ez 2012 A welfare fund. Irs 1040ez 2012 A state sickness or disability fund. Irs 1040ez 2012 An association of employers or employees. Irs 1040ez 2012 An insurance company, if your employer paid for the plan. Irs 1040ez 2012 However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. Irs 1040ez 2012 For more information, see Other Sickness and Injury Benefits under Sickness and Injury Benefits, later. Irs 1040ez 2012 Social security and Medicare taxes paid by employer. Irs 1040ez 2012   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. Irs 1040ez 2012 The payment is also treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Irs 1040ez 2012 However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Irs 1040ez 2012 Stock appreciation rights. Irs 1040ez 2012   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Irs 1040ez 2012 When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. Irs 1040ez 2012 You include the cash payment in income in the year you use the right. Irs 1040ez 2012 Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. Irs 1040ez 2012 Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. Irs 1040ez 2012 See Valuation of Fringe Benefits , later in this discussion, for information on how to determine the amount to include in income. Irs 1040ez 2012 Recipient of fringe benefit. Irs 1040ez 2012   You are the recipient of a fringe benefit if you perform the services for which the fringe benefit is provided. Irs 1040ez 2012 You are considered to be the recipient even if it is given to another person, such as a member of your family. Irs 1040ez 2012 An example is a car your employer gives to your spouse for services you perform. Irs 1040ez 2012 The car is considered to have been provided to you and not to your spouse. Irs 1040ez 2012   You do not have to be an employee of the provider to be a recipient of a fringe benefit. Irs 1040ez 2012 If you are a partner, director, or independent contractor, you also can be the recipient of a fringe benefit. Irs 1040ez 2012 Provider of benefit. Irs 1040ez 2012   Your employer or another person for whom you perform services is the provider of a fringe benefit regardless of whether that person actually provides the fringe benefit to you. Irs 1040ez 2012 The provider can be a client or customer of an independent contractor. Irs 1040ez 2012 Accounting period. Irs 1040ez 2012   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Irs 1040ez 2012 Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Irs 1040ez 2012 The general rule: benefits are reported for a full calendar year (January 1–December 31). Irs 1040ez 2012 The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. Irs 1040ez 2012 For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. Irs 1040ez 2012 Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. Irs 1040ez 2012   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). Irs 1040ez 2012 Form W-2. Irs 1040ez 2012   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. Irs 1040ez 2012 Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Irs 1040ez 2012 However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). Irs 1040ez 2012 Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. Irs 1040ez 2012 Benefits you receive from the plan may be taxable, as explained, later, under Sickness and Injury Benefits . Irs 1040ez 2012 For information on the items covered in this section, other than Long-term care coverage , see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Irs 1040ez 2012 Long-term care coverage. Irs 1040ez 2012   Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Irs 1040ez 2012 However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Irs 1040ez 2012 This amount will be reported as wages in box 1 of your Form W-2. Irs 1040ez 2012 Archer MSA contributions. Irs 1040ez 2012    Contributions by your employer to your Archer MSA generally are not included in your income. Irs 1040ez 2012 Their total will be reported in box 12 of Form W-2, with code R. Irs 1040ez 2012 You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Irs 1040ez 2012 File the form with your return. Irs 1040ez 2012 Health flexible spending arrangement (health FSA). Irs 1040ez 2012   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. Irs 1040ez 2012   Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Irs 1040ez 2012 The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Irs 1040ez 2012 For more information, see Notice 2012-40, 2012-26 I. Irs 1040ez 2012 R. Irs 1040ez 2012 B. Irs 1040ez 2012 1046, available at www. Irs 1040ez 2012 irs. Irs 1040ez 2012 gov/irb/2012-26 IRB/ar09. Irs 1040ez 2012 html. Irs 1040ez 2012 Health reimbursement arrangement (HRA). Irs 1040ez 2012   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. Irs 1040ez 2012 Health savings accounts (HSA). Irs 1040ez 2012   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. Irs 1040ez 2012 Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Irs 1040ez 2012 Contributions made by your employer are not included in your income. Irs 1040ez 2012 Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Irs 1040ez 2012 Distributions not used for qualified medical expenses are included in your income. Irs 1040ez 2012 See Publication 969 for the requirements of an HSA. Irs 1040ez 2012   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Irs 1040ez 2012 The contributions are treated as a distribution of money and are not included in the partner's gross income. Irs 1040ez 2012 Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. Irs 1040ez 2012 In both situations, the partner can deduct the contribution made to the partner's HSA. Irs 1040ez 2012   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. Irs 1040ez 2012 The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Irs 1040ez 2012 Qualified HSA funding distribution. Irs 1040ez 2012   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. Irs 1040ez 2012 See Publication 590, Individual Retirement Arrangements (IRAs), for the requirements for these qualified HSA funding distributions. Irs 1040ez 2012 Failure to maintain eligibility. Irs 1040ez 2012   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. Irs 1040ez 2012 If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. Irs 1040ez 2012 This income is also subject to an additional 10% tax. Irs 1040ez 2012 Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. Irs 1040ez 2012 See Instructions for Form 8839, Qualified Adoption Expenses, for more information. Irs 1040ez 2012 Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Irs 1040ez 2012 They also are included as social security and Medicare wages in boxes 3 and 5. Irs 1040ez 2012 However, they are not included as wages in box 1. Irs 1040ez 2012 To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Irs 1040ez 2012 File the form with your return. Irs 1040ez 2012 Athletic Facilities If your employer provides you with the free or low-cost use of an employer-operated gym or other athletic club on your employer's premises, the value is not included in your compensation. Irs 1040ez 2012 The gym must be used primarily by employees, their spouses, and their dependent children. Irs 1040ez 2012 If your employer pays for a fitness program provided to you at an off-site resort hotel or athletic club, the value of the program is included in your compensation. Irs 1040ez 2012 De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. Irs 1040ez 2012 In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. Irs 1040ez 2012 Also see Employee Discounts , later. Irs 1040ez 2012 Holiday gifts. Irs 1040ez 2012   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. Irs 1040ez 2012 However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. Irs 1040ez 2012 Dependent Care Benefits If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Irs 1040ez 2012 Dependent care benefits include: Amounts your employer pays directly to either you or your care provider for the care of your qualifying person while you work, and The fair market value of care in a daycare facility provided or sponsored by your employer. Irs 1040ez 2012 The amount you can exclude is limited to the lesser of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). Irs 1040ez 2012 Your employer must show the total amount of dependent care benefits provided to you during the year under a qualified plan in box 10 of your Form W-2. Irs 1040ez 2012 Your employer also will include any dependent care benefits over $5,000 in your wages shown in box 1 of your Form W-2. Irs 1040ez 2012 To claim the exclusion, you must complete Part III of Form 2441, Child and Dependent Care Expenses. Irs 1040ez 2012 See the Instructions for Form 2441 for more information. Irs 1040ez 2012 Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Irs 1040ez 2012 For more information, see Publication 970. Irs 1040ez 2012 Employee Discounts If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. Irs 1040ez 2012 The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. Irs 1040ez 2012 However, it does not apply to discounts on real property or property commonly held for investment (such as stocks or bonds). Irs 1040ez 2012 The exclusion is limited to the price charged nonemployee customers multiplied by the following percentage. Irs 1040ez 2012 For a discount on property, your employer's gross profit percentage (gross profit divided by gross sales) on all property sold during the employer's previous tax year. Irs 1040ez 2012 (Ask your employer for this percentage. Irs 1040ez 2012 ) For a discount on services, 20%. Irs 1040ez 2012 Financial Counseling Fees Financial counseling fees paid for you by your employer are included in your income and must be reported as part of wages. Irs 1040ez 2012 If the fees are for tax or investment counseling, they can be deducted on Schedule A (Form 1040) as a miscellaneous deduction (subject to the 2%-of-AGI limit). Irs 1040ez 2012 Qualified retirement planning services paid for you by your employer may be excluded from your income. Irs 1040ez 2012 For more information, see Retirement Planning Services , later. Irs 1040ez 2012 Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. Irs 1040ez 2012 However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. Irs 1040ez 2012 For exceptions to this rule, see Entire cost excluded , and Entire cost taxed , later. Irs 1040ez 2012 If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. Irs 1040ez 2012 Also, it is shown separately in box 12 with code C. Irs 1040ez 2012 Group-term life insurance. Irs 1040ez 2012   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. Irs 1040ez 2012 Permanent benefits. Irs 1040ez 2012   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. Irs 1040ez 2012 Your employer should be able to tell you the amount to include in your income. Irs 1040ez 2012 Accidental death benefits. Irs 1040ez 2012   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. Irs 1040ez 2012 Former employer. Irs 1040ez 2012   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. Irs 1040ez 2012 Also, it is shown separately in box 12 with code C. Irs 1040ez 2012 Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. Irs 1040ez 2012 You must pay these taxes with your income tax return. Irs 1040ez 2012 Include them on line 60, Form 1040, and follow the instructions forline 60. Irs 1040ez 2012 For more information, see the Instructions for Form 1040. Irs 1040ez 2012 Two or more employers. Irs 1040ez 2012   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. Irs 1040ez 2012 If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. Irs 1040ez 2012 You must figure how much to include in your income. Irs 1040ez 2012 Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. Irs 1040ez 2012 Figuring the taxable cost. Irs 1040ez 2012    Use the following worksheet to figure the amount to include in your income. Irs 1040ez 2012   If you pay any part of the cost of the insurance, your entire payment reduces, dollar for dollar, the amount you otherwise would include in your income. Irs 1040ez 2012 However, you cannot reduce the amount to include in your income by: Payments for coverage in a different tax year, Payments for coverage through a cafeteria plan, unless the payments are after-tax contributions, or Payments for coverage not taxed to you because of the exceptions discussed later under Entire cost excluded . Irs 1040ez 2012 Worksheet 1. Irs 1040ez 2012 Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Irs 1040ez 2012 Enter the total amount of your insurance coverage from your employer(s) 1. Irs 1040ez 2012   2. Irs 1040ez 2012 Limit on exclusion for employer-provided group-term life insurance coverage 2. Irs 1040ez 2012 50,000 3. Irs 1040ez 2012 Subtract line 2 from line 1 3. Irs 1040ez 2012   4. Irs 1040ez 2012 Divide line 3 by $1,000. Irs 1040ez 2012 Figure to the nearest tenth 4. Irs 1040ez 2012   5. Irs 1040ez 2012 Go to Table 1. Irs 1040ez 2012 Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Irs 1040ez 2012   6. Irs 1040ez 2012 Multiply line 4 by line 5 6. Irs 1040ez 2012     7. Irs 1040ez 2012 Enter the number of full months of coverage at this cost 7. Irs 1040ez 2012   8. Irs 1040ez 2012 Multiply line 6 by line 7 8. Irs 1040ez 2012   9. Irs 1040ez 2012 Enter the premiums you paid per month 9. Irs 1040ez 2012       10. Irs 1040ez 2012 Enter the number of months you paid the  premiums 10. Irs 1040ez 2012       11. Irs 1040ez 2012 Multiply line 9 by line 10. Irs 1040ez 2012 11. Irs 1040ez 2012   12. Irs 1040ez 2012 Subtract line 11 from line 8. Irs 1040ez 2012 Include this amount in your income as wages 12. Irs 1040ez 2012   Table 1. Irs 1040ez 2012 Cost of $1,000 of Group-Term Life Insurance for One Month   Age Cost     Under 25 $ . Irs 1040ez 2012 05     25 through 29 . Irs 1040ez 2012 06     30 through 34 . Irs 1040ez 2012 08     35 through 39 . Irs 1040ez 2012 09     40 through 44 . Irs 1040ez 2012 10     45 through 49 . Irs 1040ez 2012 15     50 through 54 . Irs 1040ez 2012 23     55 through 59 . Irs 1040ez 2012 43     60 through 64 . Irs 1040ez 2012 66     65 through 69 1. Irs 1040ez 2012 27     70 and older 2. Irs 1040ez 2012 06   Example. Irs 1040ez 2012 You are 51 years old and work for employers A and B. Irs 1040ez 2012 Both employers provide group-term life insurance coverage for you for the entire year. Irs 1040ez 2012 Your coverage is $35,000 with employer A and $45,000 with employer B. Irs 1040ez 2012 You pay premiums of $4. Irs 1040ez 2012 15 a month under the employer B group plan. Irs 1040ez 2012 You figure the amount to include in your income as follows. Irs 1040ez 2012   Worksheet 1. Irs 1040ez 2012 Figuring the Cost of Group-Term Life Insurance To Include in Income—Illustrated 1. Irs 1040ez 2012 Enter the total amount of your insurance coverage from your employer(s) 1. Irs 1040ez 2012 80,000 2. Irs 1040ez 2012 Limit on exclusion for employer-provided group-term life insurance coverage 2. Irs 1040ez 2012 50,000 3. Irs 1040ez 2012 Subtract line 2 from line 1 3. Irs 1040ez 2012 30,000 4. Irs 1040ez 2012 Divide line 3 by $1,000. Irs 1040ez 2012 Figure to the nearest tenth 4. Irs 1040ez 2012 30. Irs 1040ez 2012 0 5. Irs 1040ez 2012 Go to Table 1. Irs 1040ez 2012 Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Irs 1040ez 2012 . Irs 1040ez 2012 23 6. Irs 1040ez 2012 Multiply line 4 by line 5 6. Irs 1040ez 2012 6. Irs 1040ez 2012 90 7. Irs 1040ez 2012 Enter the number of full months of coverage at this cost. Irs 1040ez 2012 7. Irs 1040ez 2012 12 8. Irs 1040ez 2012 Multiply line 6 by line 7 8. Irs 1040ez 2012 82. Irs 1040ez 2012 80 9. Irs 1040ez 2012 Enter the premiums you paid per month 9. Irs 1040ez 2012 4. Irs 1040ez 2012 15     10. Irs 1040ez 2012 Enter the number of months you paid the premiums 10. Irs 1040ez 2012 12     11. Irs 1040ez 2012 Multiply line 9 by line 10. Irs 1040ez 2012 11. Irs 1040ez 2012 49. Irs 1040ez 2012 80 12. Irs 1040ez 2012 Subtract line 11 from line 8. Irs 1040ez 2012 Include this amount in your income as wages 12. Irs 1040ez 2012 33. Irs 1040ez 2012 00 The total amount to include in income for the cost of excess group-term life insurance is $33. Irs 1040ez 2012 Neither employer provided over $50,000 insurance coverage, so the wages shown on your Forms W-2 do not include any part of that $33. Irs 1040ez 2012 You must add it to the wages shown on your Forms W-2 and include the total on your return. Irs 1040ez 2012 Entire cost excluded. Irs 1040ez 2012   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Irs 1040ez 2012 You are permanently and totally disabled and have ended your employment. Irs 1040ez 2012 Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Irs 1040ez 2012 A charitable organization to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. Irs 1040ez 2012 (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Irs 1040ez 2012 ) The plan existed on January 1, 1984, and: You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. Irs 1040ez 2012 Entire cost taxed. Irs 1040ez 2012   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply. Irs 1040ez 2012 The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. Irs 1040ez 2012 You are a key employee and your employer's plan discriminates in favor of key employees. Irs 1040ez 2012 Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. Irs 1040ez 2012 The meals are: Furnished on the business premises of your employer, and Furnished for the convenience of your employer. Irs 1040ez 2012 The lodging is: Furnished on the business premises of your employer, Furnished for the convenience of your employer, and A condition of your employment. Irs 1040ez 2012 (You must accept it in order to be able to properly perform your duties. Irs 1040ez 2012 ) You also do not include in your income the value of meals or meal money that qualifies as a de minimis fringe benefit. Irs 1040ez 2012 See De Minimis (Minimal) Benefits , earlier. Irs 1040ez 2012 Faculty lodging. Irs 1040ez 2012   If you are an employee of an educational institution or an academic health center and you are provided with lodging that does not meet the three conditions given earlier, you still may not have to include the value of the lodging in income. Irs 1040ez 2012 However, the lodging must be qualified campus lodging, and you must pay an adequate rent. Irs 1040ez 2012 Academic health center. Irs 1040ez 2012   This is an organization that meets the following conditions. Irs 1040ez 2012 Its principal purpose or function is to provide medical or hospital care or medical education or research. Irs 1040ez 2012 It receives payments for graduate medical education under the Social Security Act. Irs 1040ez 2012 One of its principal purposes or functions is to provide and teach basic and clinical medical science and research using its own faculty. Irs 1040ez 2012 Qualified campus lodging. Irs 1040ez 2012   Qualified campus lodging is lodging furnished to you, your spouse, or one of your dependents by, or on behalf of, the institution or center for use as a home. Irs 1040ez 2012 The lodging must be located on or near a campus of the educational institution or academic health center. Irs 1040ez 2012 Adequate rent. Irs 1040ez 2012   The amount of rent you pay for the year for qualified campus lodging is considered adequate if it is at least equal to the lesser of: 5% of the appraised value of the lodging, or The average of rentals paid by individuals (other than employees or students) for comparable lodging held for rent by the educational institution. Irs 1040ez 2012 If the amount you pay is less than the lesser of these amounts, you must include the difference in your income. Irs 1040ez 2012   The lodging must be appraised by an independent appraiser and the appraisal must be reviewed on an annual basis. Irs 1040ez 2012 Example. Irs 1040ez 2012 Carl Johnson, a sociology professor for State University, rents a home from the university that is qualified campus lodging. Irs 1040ez 2012 The house is appraised at $200,000. Irs 1040ez 2012 The average rent paid for comparable university lodging by persons other than employees or students is $14,000 a year. Irs 1040ez 2012 Carl pays an annual rent of $11,000. Irs 1040ez 2012 Carl does not include in his income any rental value because the rent he pays equals at least 5% of the appraised value of the house (5% × $200,000 = $10,000). Irs 1040ez 2012 If Carl paid annual rent of only $8,000, he would have to include $2,000 in his income ($10,000 − $8,000). Irs 1040ez 2012 Moving Expense Reimbursements In most cases, if your employer pays for your moving expenses (either directly or indirectly) and the expenses would have been deductible if you paid them yourself, the value is not included in your income. Irs 1040ez 2012 See Publication 521 for more information. Irs 1040ez 2012 No-Additional-Cost Services The value of services you receive from your employer for free, at cost, or for a reduced price is not included in your income if your employer: Offers the same service for sale to customers in the ordinary course of the line of business in which you work, and Does not have a substantial additional cost (including any sales income given up) to provide you with the service (regardless of what you paid for the service). Irs 1040ez 2012 In most cases, no-additional-cost services are excess capacity services, such as airline, bus, or train tickets, hotel rooms, and telephone services. Irs 1040ez 2012 Example. Irs 1040ez 2012 You are employed as a flight attendant for a company that owns both an airline and a hotel chain. Irs 1040ez 2012 Your employer allows you to take personal flights (if there is an unoccupied seat) and stay in any one of their hotels (if there is an unoccupied room) at no cost to you. Irs 1040ez 2012 The value of the personal flight is not included in your income. Irs 1040ez 2012 However, the value of the hotel room is included in your income because you do not work in the hotel business. Irs 1040ez 2012 Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. Irs 1040ez 2012 Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. Irs 1040ez 2012 You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Irs 1040ez 2012 Also, see Financial Counseling Fees , earlier. Irs 1040ez 2012 Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. Irs 1040ez 2012 A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. Irs 1040ez 2012 Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Irs 1040ez 2012 However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. Irs 1040ez 2012 Exclusion limit. Irs 1040ez 2012   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Irs 1040ez 2012   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Irs 1040ez 2012   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. Irs 1040ez 2012   If the benefits have a value that is more than these limits, the excess must be included in your income. Irs 1040ez 2012 You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Irs 1040ez 2012 Commuter highway vehicle. Irs 1040ez 2012   This is a highway vehicle that seats at least six adults (not including the driver). Irs 1040ez 2012 At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). Irs 1040ez 2012 Transit pass. Irs 1040ez 2012   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. Irs 1040ez 2012 Qualified parking. Irs 1040ez 2012   This is parking provided to an employee at or near the employer's place of business. Irs 1040ez 2012 It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. Irs 1040ez 2012 It does not include parking at or near the employee's home. Irs 1040ez 2012 Qualified bicycle commuting. Irs 1040ez 2012   This is reimbursement based on the number of qualified bicycle commuting months for the year. Irs 1040ez 2012 A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. Irs 1040ez 2012 The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. Irs 1040ez 2012 Tuition Reduction You can exclude a qualified tuition reduction from your income. Irs 1040ez 2012 This is the amount of a reduction in tuition: For education (below graduate level) furnished by an educational institution to an employee, former employee who retired or became disabled, or his or her spouse and dependent children. Irs 1040ez 2012 For education furnished to a graduate student at an educational institution if the graduate student is engaged in teaching or research activities for that institution. Irs 1040ez 2012 Representing payment for teaching, research, or other services if you receive the amount under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance program. Irs 1040ez 2012 For more information, see Publication 970. Irs 1040ez 2012 Working Condition Benefits If your employer provides you with a product or service and the cost of it would have been allowable as a business or depreciation deduction if you paid for it yourself, the cost is not included in your income. Irs 1040ez 2012 Example. Irs 1040ez 2012 You work as an engineer and your employer provides you with a subscription to an engineering trade magazine. Irs 1040ez 2012 The cost of the subscription is not included in your income because the cost would have been allowable to you as a business deduction if you had paid for the subscription yourself. Irs 1040ez 2012 Valuation of Fringe Benefits If a fringe benefit is included in your income, the amount included is generally its value determined under the general valuation rule or under the special valuation rules. Irs 1040ez 2012 For an exception, see Group-Term Life Insurance , earlier. Irs 1040ez 2012 General valuation rule. Irs 1040ez 2012   You must include in your income the amount by which the fair market value of the fringe benefit is more than the sum of: The amount, if any, you paid for the benefit, plus The amount, if any, specifically excluded from your income by law. Irs 1040ez 2012 If you pay fair market value for a fringe benefit, no amount is included in your income. Irs 1040ez 2012 Fair market value. Irs 1040ez 2012   The fair market value of a fringe benefit is determined by all the facts and circumstances. Irs 1040ez 2012 It is the amount you would have to pay a third party to buy or lease the benefit. Irs 1040ez 2012 This is determined without regard to: Your perceived value of the benefit, or The amount your employer paid for the benefit. Irs 1040ez 2012 Employer-provided vehicles. Irs 1040ez 2012   If your employer provides a car (or other highway motor vehicle) to you, your personal use of the car is usually a taxable noncash fringe benefit. Irs 1040ez 2012   Under the general valuation rules, the value of an employer-provided vehicle is the amount you would have to pay a third party to lease the same or a similar vehicle on the same or comparable terms in the same geographic area where you use the vehicle. Irs 1040ez 2012 An example of a comparable lease term is the amount of time the vehicle is available for your use, such as a 1-year period. Irs 1040ez 2012 The value cannot be determined by multiplying a cents-per-mile rate times the number of miles driven unless you prove the vehicle could have been leased on a cents-per-mile basis. Irs 1040ez 2012 Flights on employer-provided aircraft. Irs 1040ez 2012   Under the general valuation rules, if your flight on an employer-provided piloted aircraft is primarily personal and you control the use of the aircraft for the flight, the value is the amount it would cost to charter the flight from a third party. Irs 1040ez 2012   If there is more than one employee on the flight, the cost to charter the aircraft must be divided among those employees. Irs 1040ez 2012 The division must be based on all the facts, including which employee or employees control the use of the aircraft. Irs 1040ez 2012 Special valuation rules. Irs 1040ez 2012   You generally can use a special valuation rule for a fringe benefit only if your employer uses the rule. Irs 1040ez 2012 If your employer uses a special valuation rule, you cannot use a different special rule to value that benefit. Irs 1040ez 2012 You always can use the general valuation rule discussed earlier, based on facts and circumstances, even if your employer uses a special rule. Irs 1040ez 2012   If you and your employer use a special valuation rule, you must include in your income the amount your employer determines under the special rule minus the sum of: Any amount you repaid your employer, plus Any amount specifically excluded from income by law. Irs 1040ez 2012 The special valuation rules are the following. Irs 1040ez 2012 The automobile lease rule. Irs 1040ez 2012 The vehicle cents-per-mile rule. Irs 1040ez 2012 The commuting rule. Irs 1040ez 2012 The unsafe conditions commuting rule. Irs 1040ez 2012 The employer-operated eating-facility rule. Irs 1040ez 2012   For more information on these rules, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Irs 1040ez 2012    For information on the non-commercial flight and commercial flight valuation rules, see sections 1. Irs 1040ez 2012 61-21(g) and 1. Irs 1040ez 2012 61-21(h) of the regulations. Irs 1040ez 2012 Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. Irs 1040ez 2012 (Your employer can tell you whether your retirement plan is qualified. Irs 1040ez 2012 ) However, the cost of life insurance coverage included in the plan may have to be included. Irs 1040ez 2012 See Group-Term Life Insurance , earlier, under Fringe Benefits. Irs 1040ez 2012 If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. Irs 1040ez 2012 However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. Irs 1040ez 2012 For information on distributions from retirement plans, see Publication 575 (or Publication 721, Tax Guide to U. Irs 1040ez 2012 S. Irs 1040ez 2012 Civil Service Retirement Benefits, if you are a federal employee or retiree). Irs 1040ez 2012 Elective Deferrals If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. Irs 1040ez 2012 The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Irs 1040ez 2012 An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. Irs 1040ez 2012 However, it is included in wages subject to social security and Medicare taxes. Irs 1040ez 2012 Elective deferrals include elective contributions to the following retirement plans. Irs 1040ez 2012 Cash or deferred arrangements (section 401(k) plans). Irs 1040ez 2012 The Thrift Savings Plan for federal employees. Irs 1040ez 2012 Salary reduction simplified employee pension plans (SARSEP). Irs 1040ez 2012 Savings incentive match plans for employees (SIMPLE plans). Irs 1040ez 2012 Tax-sheltered annuity plans (403(b) plans). Irs 1040ez 2012 Section 501(c)(18)(D) plans. Irs 1040ez 2012 (But see Reporting by employer , later. Irs 1040ez 2012 ) Section 457 plans. Irs 1040ez 2012 Qualified automatic contribution arrangements. Irs 1040ez 2012   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. Irs 1040ez 2012 You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Irs 1040ez 2012 The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. Irs 1040ez 2012   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. Irs 1040ez 2012 Overall limit on deferrals. Irs 1040ez 2012   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3), earlier. Irs 1040ez 2012 The specific plan limits for the plans listed in (4) through (7), earlier, are discussed later. Irs 1040ez 2012 Amounts deferred under specific plan limits are part of the overall limit on deferrals. Irs 1040ez 2012   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Irs 1040ez 2012 However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Irs 1040ez 2012 Catch-up contributions. Irs 1040ez 2012   You may be allowed catch-up contributions (additional elective deferrals) if you are age 50 or older by the end of your tax year. Irs 1040ez 2012 For more information about catch-up contributions to 403(b) plans, see chapter 6 of Publication 571, Tax Sheltered Annuity Plans. Irs 1040ez 2012   For more information about additional elective deferrals to: SEPs (SARSEPs), see Salary Reduction Simplified Employee Pension in chapter 2 of Publication 560, Retirement Plans for Small Business. Irs 1040ez 2012 SIMPLE plans, see How Much Can Be Contributed on Your Behalf? in chapter 3 of Publication 590. Irs 1040ez 2012 Section 457 plans, see Limit for deferrals under section 457 plans , later. Irs 1040ez 2012 Limit for deferrals under SIMPLE plans. Irs 1040ez 2012   If you are a participant in a SIMPLE plan, you generally should not have deferred more than $12,000 in 2013. Irs 1040ez 2012 Amounts you defer under a SIMPLE plan count toward the overall limit ($17,500 for 2013) and may affect the amount you can defer under other elective deferral plans. Irs 1040ez 2012 Limit for tax-sheltered annuities. Irs 1040ez 2012   If you are a participant in a tax-sheltered annuity plan (403(b) plan), the limit on elective deferrals for 2013 generally is $17,500. Irs 1040ez 2012 However, if you have at least 15 years of service with a public school system, a hospital, a home health service agency, a health and welfare service agency, a church, or a convention or association of churches (or associated organization), the limit on elective deferrals is increased by the least of the following amounts. Irs 1040ez 2012 $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in earlier years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior tax years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. Irs 1040ez 2012   If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013. Irs 1040ez 2012   For more information, see Publication 571. Irs 1040ez 2012 Limit for deferral under section 501(c)(18) plans. Irs 1040ez 2012   If you are a participant in a section 501(c)(18) plan (a trust created before June 25, 1959, funded only by employee contributions), you should have deferred no more than the lesser of $7,000 or 25% of your compensation. Irs 1040ez 2012 Amounts you defer under a section 501(c)(18) plan count toward the overall limit ($17,500 in 2013) and may affect the amount you can defer under other elective deferral plans. Irs 1040ez 2012 Limit for deferrals under section 457 plans. Irs 1040ez 2012   If you are a participant in a section 457 plan (a deferred compensation plan for employees of state or local governments or tax-exempt organizations), you should have deferred no more than the lesser of your includible compensation or $17,500 in 2013. Irs 1040ez 2012 However, if you are within 3 years of normal retirement age, you may be allowed an increased limit if the plan allows it. Irs 1040ez 2012 See Increased limit , later. Irs 1040ez 2012 Includible compensation. Irs 1040ez 2012   This is the pay you received for the year from the employer who maintained the section 457 plan. Irs 1040ez 2012 In most cases, it includes all the following payments. Irs 1040ez 2012 Wages and salaries. Irs 1040ez 2012 Fees for professional services. Irs 1040ez 2012 The value of any employer-provided qualified transportation fringe benefit (defined under Transportation , earlier) that is not included in your income. Irs 1040ez 2012 Other amounts received (cash or noncash) for personal services you performed, including, but not limited to, the following items. Irs 1040ez 2012 Commissions and tips. Irs 1040ez 2012 Fringe benefits. Irs 1040ez 2012 Bonuses. Irs 1040ez 2012 Employer contributions (elective deferrals) to: The section 457 plan. Irs 1040ez 2012 Qualified cash or deferred arrangements (section 401(k) plans) that are not included in your income. Irs 1040ez 2012 A salary reduction simplified employee pension (SARSEP). Irs 1040ez 2012 A tax-sheltered annuity (section 403(b) plan). Irs 1040ez 2012 A savings incentive match plan for employees (SIMPLE plan). Irs 1040ez 2012 A section 125 cafeteria plan. Irs 1040ez 2012   Instead of using the amounts listed earlier to determine your includible compensation, your employer can use any of the following amounts. Irs 1040ez 2012 Your wages as defined for income tax withholding purposes. Irs 1040ez 2012 Your wages as reported in box 1 of Form W-2. Irs 1040ez 2012 Your wages that are subject to social security withholding (including elective deferrals). Irs 1040ez 2012 Increased limit. Irs 1040ez 2012   During any, or all, of the last 3 years ending before you reach normal retirement age under the plan, your plan may provide that your limit is the lesser of: Twice the annual limit ($35,000 for 2013), or The basic annual limit plus the amount of the basic limit not used in prior years (only allowed if not using age 50 or over catch-up contributions). Irs 1040ez 2012 Catch-up contributions. Irs 1040ez 2012   You generally can have additional elective deferrals made to your governmental section 457 plan if: You reached age 50 by the end of the year, and No other elective deferrals can be made for you to the plan for the year because of limits or restrictions. Irs 1040ez 2012 If you qualify, your limit can be the lesser of your includible compensation or $17,500, plus $5,500. Irs 1040ez 2012 However, if you are within 3 years of retirement age and your plan provides the increased limit, discussed earlier, that limit may be higher. Irs 1040ez 2012 Designated Roth contributions. Irs 1040ez 2012   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. Irs 1040ez 2012 Designated Roth contributions are treated as elective deferrals, except that they are included in income. Irs 1040ez 2012 Your retirement plan must maintain separate accounts and recordkeeping for the designated Roth contributions. Irs 1040ez 2012   Qualified distributions from a Roth plan are not included in income. Irs 1040ez 2012 In most cases, a distribution made before the end of the 5-tax-year period beginning with the first tax year for which you made a designated Roth contribution to the plan is not a qualified distribution. Irs 1040ez 2012 Reporting by employer. Irs 1040ez 2012   Your employer generally should not include elective deferrals in your wages in box 1 of Form W-2. Irs 1040ez 2012 Instead, your employer should mark the Retirement plan checkbox in box 13 and show the total amount deferred in box 12. Irs 1040ez 2012 Section 501(c)(18)(D) contributions. Irs 1040ez 2012   Wages shown in box 1 of your Form W-2 should not have been reduced for contributions you made to a section 501(c)(18)(D) retirement plan. Irs 1040ez 2012 The amount you contributed should be identified with code “H” in box 12. Irs 1040ez 2012 You may deduct the amount deferred subject to the limits that apply. Irs 1040ez 2012 Include your deduction in the total on Form 1040, line 36. Irs 1040ez 2012 Enter the amount and “501(c)(18)(D)” on the dotted line next to line 36. Irs 1040ez 2012 Designated Roth contributions. Irs 1040ez 2012    These contributions are elective deferrals but are included in your wages in box 1 of Form W-2. Irs 1040ez 2012 Designated Roth contributions to a section 401(k) plan are reported using code AA in box 12, or, for section 403(b) plans, code BB in box 12. Irs 1040ez 2012 Excess deferrals. Irs 1040ez 2012   If your deferrals exceed the limit, you must notify your plan by the date required by the plan. Irs 1040ez 2012 If the plan permits, the excess amount will be distributed to you. Irs 1040ez 2012 If you participate in more than one plan, you can have the excess paid out of any of the plans that permit these distributions. Irs 1040ez 2012 You must notify each plan by the date required by that plan of the amount to be paid from that particular plan. Irs 1040ez 2012 The plan then must pay you the amount of the excess, along with any income earned on that amount, by April 15 of the following year. Irs 1040ez 2012   You must include the excess deferral in your income for the year of the deferral unless you have an excess deferral of a designated Roth contribution. Irs 1040ez 2012 File Form 1040 to add the excess deferral amount to your wages on line 7. Irs 1040ez 2012 Do not use Form 1040A or Form 1040EZ to report excess deferral amounts. Irs 1040ez 2012 Excess not distributed. Irs 1040ez 2012   If you do not take out the excess amount, you cannot include it in the cost of the contract even though you included it in your income. Irs 1040ez 2012 Therefore, you are taxed twice on the excess deferral left in the plan—once when you contribute it, and again when you receive it as a distribution. Irs 1040ez 2012 Excess distributed to you. Irs 1040ez 2012   If you take out the excess after the year of the deferral and you receive the corrective distribution by April 15 of the following year, do not include it in income again in the year you receive it. Irs 1040ez 2012 If you receive it later, you must include it in income in both the year of the deferral and the year you receive it. Irs 1040ez 2012 Any income on the excess deferral taken out is taxable in the tax year in which you take it out. Irs 1040ez 2012 If you take out part of the excess deferral and the income on it, allocate the distribution proportionately between the excess deferral and the income. Irs 1040ez 2012    You should receive a Form 1099-R for the year in which the excess deferral is distributed to you. Irs 1040ez 2012 Use the following rules to report a corrective distribution shown on Form 1099-R for 2013. Irs 1040ez 2012 If the distribution was for a 2013 excess deferral, your Form 1099-R should have the code “8” in box 7. Irs 1040ez 2012 Add the excess deferral amount to your wages on your 2013 tax return. Irs 1040ez 2012 If the distribution was for a 2013 excess deferral to a designated Roth account, your Form 1099-R should have code “B” in box 7. Irs 1040ez 2012 Do not add this amount to your wages on your 2013 return. Irs 1040ez 2012 If the distribution was for a 2012 excess deferral, your Form 1099-R should have the code “P” in box 7. Irs 1040ez 2012 If you did not add the excess deferral amount to your wages on your 2012 tax return, you must file an amended return on Form 1040X, Amended U. Irs 1040ez 2012 S. Irs 1040ez 2012 Individual Income Tax Return. Irs 1040ez 2012 If you did not receive the distribution by April 15, 2013, you also must add it to your wages on your 2013 tax return. Irs 1040ez 2012 If the distribution was for the income earned on an excess deferral, your Form 1099-R should have the code “8” in box 7. Irs 1040ez 2012 Add the income amount to your wages on your 2013 income tax return, regardless of when the excess deferral was made. Irs 1040ez 2012 Report a loss on a corrective distribution of an excess deferral in the year the excess amount (reduced by the loss) is distributed to you. Irs 1040ez 2012 Include the loss as a negative amount on Form 1040, line 21 and identify it as “Loss on Excess Deferral Distribution. Irs 1040ez 2012 ”    Even though a corrective distribution of excess deferrals is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Irs 1040ez 2012 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Irs 1040ez 2012 Excess Contributions If you are a highly compensated employee, the total of your elective deferrals and other contributions made for you for any year under a section 401(k) plan or SARSEP can be, as a percentage of pay, no more than 125% of the average deferral percentage (ADP) of all eligible non-highly compensated employees. Irs 1040ez 2012 If the total contributed to the plan is more than the amount allowed under the ADP test, the excess contributions must be either distributed to you or recharacterized as after-tax employee contributions by treating them as distributed to you and then contributed by you to the plan. Irs 1040ez 2012 You must include the excess contributions in your income as wages on Form 1040, line 7. Irs 1040ez 2012 You cannot use Form 1040A or Form 1040EZ to report excess contribution amounts. Irs 1040ez 2012 If you receive a corrective distribution of excess contributions (and allocable income), it is included in your income in the year of the distribution. Irs 1040ez 2012 The allocable income is the amount of gain or loss through the end of the plan year for which the contribution was made that is allocable to the excess contributions. Irs 1040ez 2012 You should receive a Form 1099-R for the year the excess contributions are distributed to you. Irs 1040ez 2012 Add the distribution to your wages for that year. Irs 1040ez 2012 Even though a corrective distribution of excess contributions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Irs 1040ez 2012 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Irs 1040ez 2012 Excess Annual Additions The amount contributed in 2013 to a defined contribution plan is generally limited to the lesser of 100% of your compensation or $51,000. Irs 1040ez 2012 Under certain circumstances, contributions that exceed these limits (excess annual additions) may be corrected by a distribution of your elective deferrals or a return of your after-tax contributions and earnings from these contributions. Irs 1040ez 2012 A corrective payment of excess annual additions consisting of elective deferrals or earnings from your after-tax contributions is fully taxable in the year paid. Irs 1040ez 2012 A corrective payment consisting of your after-tax contributions is not taxable. Irs 1040ez 2012 If you received a corrective payment of excess annual additions, you should receive a separate Form 1099-R for the year of the payment with the code “E” in box 7. Irs 1040ez 2012 Report the total payment shown in box 1 of Form 1099-R on line 16a of Form 1040 or line 12a of Form 1040A. Irs 1040ez 2012 Report the taxable amount shown in box 2a of Form 1099-R on line 16b of Form 1040 or line 12b of Form 1040A. Irs 1040ez 2012 Even though a corrective distribution of excess annual additions is reported on Form 1099-R, it is not otherwise treated as a distribution from the plan. Irs 1040ez 2012 It cannot be rolled over into another plan, and it is not subject to the additional tax on early distributions. Irs 1040ez 2012 Stock Options If you receive an option to buy or sell stock or other property as payment for your services, you may have income when you receive the option (the grant), when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option or property acquired through exercise of the option. Irs 1040ez 2012 The timing, type, and amount of income inclusion depend on whether you receive a nonstatutory stock option or a statutory stock option. Irs 1040ez 2012 Your employer can tell you which kind of option you hold. Irs 1040ez 2012 Nonstatutory Stock Options Grant of option. Irs 1040ez 2012   If you are granted a nonstatutory stock option, you may have income when you receive the option. Irs 1040ez 2012 The amount of income to include and the time to include it depend on whether the fair market value of the option can be readily determined. Irs 1040ez 2012 The fair market value of an option can be readily determined if it is actively traded on an established market. Irs 1040ez 2012    The fair market value of an option that is not traded on an established market can be readily determined only if all of the following conditions exist. Irs 1040ez 2012 You can transfer the option. Irs 1040ez 2012 You can exercise the option immediately in full. Irs 1040ez 2012 The option or the property subject to the option is not subject to any condition or restriction (other than a condition to secure payment of the purchase price) that has a significant effect on the fair market value of the option. Irs 1040ez 2012 The fair market value of the option privilege can be readily determined. Irs 1040ez 2012 The option privilege for an option to buy is the opportunity to benefit during the option's exercise period from any increase in the value of property subject to the option without risking any capital. Irs 1040ez 2012 For example, if during the exercise period the fair market value of stock subject to an option is greater than the option's exercise price, a profit may be realized by exercising the option and immediately selling the stock at its higher value. Irs 1040ez 2012 The option privilege for an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of the property subject to the option. Irs 1040ez 2012 If you or a member of your family is an officer, director, or more-than-10% owner of an expatriated corporation, you may owe an excise tax on the value of nonstatutory options and other stock-based compensation from that corporation. Irs 1040ez 2012 For more information on the excise tax, see Internal Revenue Code section 4985. Irs 1040ez 2012 Option with readily determinable value. Irs 1040ez 2012   If you receive a nonstatutory stock option that has a readily determinable fair market value at the time it is granted to you, the option is treated like other property received as compensation. Irs 1040ez 2012 See Restricted Property , later, for rules on how much income to include and when to include it. Irs 1040ez 2012 However, the rule described in that discussion for choosing to include the value of property in your income for the year of the transfer does not apply to a nonstatutory option. Irs 1040ez 2012 Option without readily determinable value. Irs 1040ez 2012   If the fair market value of the option is not readily determinable at the time it is granted to you (even if it is determined later), you do not have income until you exercise or transfer the option. Irs 1040ez 2012    Exercise or transfer of option. Irs 1040ez 2012   When you exercise a nonstatutory stock option, the amount to include in your income depends on whether the option had a readily determinable value. Irs 1040ez 2012 Option with readily determinable value. Irs 1040ez 2012   When you exercise a nonstatutory stock option that had a readily determinable value at the time the option was granted, you do not have to include any amount in income. Irs 1040ez 2012 Option without readily determinable value. Irs 1040ez 2012   When you exercise a nonstatutory stock option that did not have a readily determinable value at the time the option was granted, the restricted prope
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Contact My Local Office in Iowa

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City Street Address Days/Hours of Service Telephone*
Cedar Rapids 425 Second St. SE
Cedar Rapids, IA 52401

Monday - Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

Services Provided

(319) 364-5327 
Davenport  101 W. 2nd St.
Davenport, IA 52801

Monday-Wednesday 8:30 a.m.-4:30 p.m.
(Closed for lunch from 12:00 noon - 1:00 p.m.)

 

**This office will be open 10:30 a.m. - 4:30 p.m. on Mondays**

 

**This office will be open normal hours on Tuesdays**

 

**This office will be open 8:30 a.m. - 2:00 p.m. on Wednesdays**

 

**This office will be closed Thursdays and Fridays until further notice**

 

Services Provided

(563) 326-6052 
Des Moines  210 Walnut St.
Des Moines, IA 50309 

Monday-Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch from 12:00 noon - 1:00 p.m.)

 

Services Provided

(515) 564-6618 
Fort Dodge**  1728 Central Ave.
Fort Dodge, IA 50501 

January - April: This office will be open the 1st and 3rd Monday of each month.

May - December: This office will be open only the 1st Monday of each month..

Monday 10:00 a.m.-3:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)

 

**Whenever a Federal Holiday falls on the Monday we are scheduled to be open, we will be open on Tuesday of that week.
 

Services Provided

(515) 576-1744 
Sioux City  3539 Southern Hills Drive
Sioux City, IA
51106 

Monday-Friday 8:30 a.m.-4:30 p.m.
(Closed for lunch 11:30 a.m. - 12:30 p.m.)

 

Services Provided

(712) 274-8019 
Waterloo  201 Tower Park Dr.
Suite 102
Waterloo, IA 50701 

Monday - Friday 8:30 a.m.- 4:30 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.) 

 

Services Provided

(319) 234-5719 
Waterloo/remote
Taxpayer Assistance
available at Eastside Ministerial Alliance
205 Adams Street,
Suite 1
Waterloo, IA 50703

Monday-Thursday-9:30 a.m.-4:00 p.m.; 
Friday-9:00 a.m.-2:00 p.m.
(Closed for lunch 12:00 noon - 1:00 p.m.)
 

Services Provided

 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (515) 564-6888 in Des Moines or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS. For further information, see  Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
210 Walnut St. Stop 4312
Des Moines, IA 50309

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Irs 1040ez 2012

Irs 1040ez 2012 Publication 523 - Main Content Table of Contents Main HomeVacant land. Irs 1040ez 2012 Factors used to determine main home. Irs 1040ez 2012 Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. Irs 1040ez 2012 Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. Irs 1040ez 2012 Individual taxpayer identification number (ITIN). Irs 1040ez 2012 More information. Irs 1040ez 2012 Comprehensive Examples Special SituationsException for sales to related persons. Irs 1040ez 2012 Deducting Taxes in the Year of SaleForm 1099-S. Irs 1040ez 2012 More information. Irs 1040ez 2012 Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. Irs 1040ez 2012 Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. Irs 1040ez 2012 ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Irs 1040ez 2012 To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Irs 1040ez 2012 Land. Irs 1040ez 2012   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Irs 1040ez 2012 Example. Irs 1040ez 2012 You buy a piece of land and move your main home to it. Irs 1040ez 2012 Then, you sell the land on which your main home was located. Irs 1040ez 2012 This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Irs 1040ez 2012 Vacant land. Irs 1040ez 2012   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. Irs 1040ez 2012 If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. Irs 1040ez 2012 See Excluding the Gain , later. Irs 1040ez 2012 The destruction of your home is treated as a sale of your home. Irs 1040ez 2012 As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. Irs 1040ez 2012 For information, see Publication 547. Irs 1040ez 2012 More than one home. Irs 1040ez 2012   If you have more than one home, you can exclude gain only from the sale of your main home. Irs 1040ez 2012 You must include in income the gain from the sale of any other home. Irs 1040ez 2012 If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. Irs 1040ez 2012 Example 1. Irs 1040ez 2012 You own two homes, one in New York and one in Florida. Irs 1040ez 2012 From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Irs 1040ez 2012 In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Irs 1040ez 2012 You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Irs 1040ez 2012 Example 2. Irs 1040ez 2012 You own a house, but you live in another house that you rent. Irs 1040ez 2012 The rented house is your main home. Irs 1040ez 2012 Example 3. Irs 1040ez 2012 You own two homes, one in Virginia and one in New Hampshire. Irs 1040ez 2012 In 2009 and 2010, you lived in the Virginia home. Irs 1040ez 2012 In 2011 and 2012, you lived in the New Hampshire home. Irs 1040ez 2012 In 2013, you lived again in the Virginia home. Irs 1040ez 2012 Your main home in 2009, 2010, and 2013 is the Virginia home. Irs 1040ez 2012 Your main home in 2011 and 2012 is the New Hampshire home. Irs 1040ez 2012 You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Irs 1040ez 2012 Factors used to determine main home. Irs 1040ez 2012   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Irs 1040ez 2012 Those factors include the following. Irs 1040ez 2012 Your place of employment. Irs 1040ez 2012 The location of your family members' main home. Irs 1040ez 2012 Your mailing address for bills and correspondence. Irs 1040ez 2012 The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. Irs 1040ez 2012 The location of the banks you use. Irs 1040ez 2012 The location of recreational clubs and religious organizations of which you are a member. Irs 1040ez 2012 Property used partly as your main home. Irs 1040ez 2012   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Irs 1040ez 2012 For details, see Business Use or Rental of Home , later. Irs 1040ez 2012 Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Irs 1040ez 2012 Subtract the adjusted basis from the amount realized to get your gain or loss. Irs 1040ez 2012     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. Irs 1040ez 2012   Gain is the excess of the amount realized over the adjusted basis of the property. Irs 1040ez 2012 Loss. Irs 1040ez 2012   Loss is the excess of the adjusted basis over the amount realized for the property. Irs 1040ez 2012 Selling Price The selling price is the total amount you receive for your home. Irs 1040ez 2012 It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Irs 1040ez 2012 Personal property. Irs 1040ez 2012   The selling price of your home does not include amounts you received for personal property sold with your home. Irs 1040ez 2012 Personal property is property that is not a permanent part of the home. Irs 1040ez 2012 Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Irs 1040ez 2012 Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Irs 1040ez 2012 Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. Irs 1040ez 2012 Payment by employer. Irs 1040ez 2012   You may have to sell your home because of a job transfer. Irs 1040ez 2012 If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Irs 1040ez 2012 Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. Irs 1040ez 2012 Option to buy. Irs 1040ez 2012   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Irs 1040ez 2012 If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Irs 1040ez 2012 Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. Irs 1040ez 2012 Form 1099-S. Irs 1040ez 2012   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. Irs 1040ez 2012   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Irs 1040ez 2012 Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Irs 1040ez 2012 Amount Realized The amount realized is the selling price minus selling expenses. Irs 1040ez 2012 Selling expenses. Irs 1040ez 2012   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Irs 1040ez 2012 ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Irs 1040ez 2012 This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Irs 1040ez 2012 For information on how to figure your home's adjusted basis, see Determining Basis , later. Irs 1040ez 2012 Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Irs 1040ez 2012 Gain on sale. Irs 1040ez 2012   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. Irs 1040ez 2012 Loss on sale. Irs 1040ez 2012   If the amount realized is less than the adjusted basis, the difference is a loss. Irs 1040ez 2012 Generally, a loss on the sale of your main home cannot be deducted. Irs 1040ez 2012 Jointly owned home. Irs 1040ez 2012   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Irs 1040ez 2012 Separate returns. Irs 1040ez 2012   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Irs 1040ez 2012 Your ownership interest is generally determined by state law. Irs 1040ez 2012 Joint owners not married. Irs 1040ez 2012   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Irs 1040ez 2012 Each of you applies the rules discussed in this publication on an individual basis. Irs 1040ez 2012 Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Irs 1040ez 2012 Foreclosure or repossession. Irs 1040ez 2012   If your home was foreclosed on or repossessed, you have a disposition. Irs 1040ez 2012 See Publication 4681 to determine if you have ordinary income, gain, or loss. Irs 1040ez 2012 More information. Irs 1040ez 2012   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. Irs 1040ez 2012 Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. Irs 1040ez 2012 Abandonment. Irs 1040ez 2012   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Irs 1040ez 2012 Trading (exchanging) homes. Irs 1040ez 2012   If you trade your home for another home, treat the trade as a sale and a purchase. Irs 1040ez 2012 Example. Irs 1040ez 2012 You owned and lived in a home with an adjusted basis of $41,000. Irs 1040ez 2012 A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Irs 1040ez 2012 This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). Irs 1040ez 2012 If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Irs 1040ez 2012 Transfer to spouse. Irs 1040ez 2012   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). Irs 1040ez 2012 This is true even if you receive cash or other consideration for the home. Irs 1040ez 2012 As a result, the rules explained in this publication do not apply. Irs 1040ez 2012   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. Irs 1040ez 2012 You have no gain or loss. Irs 1040ez 2012 Exception. Irs 1040ez 2012   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. Irs 1040ez 2012 In that case, you generally will have a gain or loss. Irs 1040ez 2012 More information. Irs 1040ez 2012    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. Irs 1040ez 2012 Involuntary conversion. Irs 1040ez 2012   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Irs 1040ez 2012 This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). Irs 1040ez 2012 Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Irs 1040ez 2012 Your basis in your home is determined by how you got the home. Irs 1040ez 2012 Generally, your basis is its cost if you bought it or built it. Irs 1040ez 2012 If you got it in some other way (inheritance, gift, etc. Irs 1040ez 2012 ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Irs 1040ez 2012 While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Irs 1040ez 2012 The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Irs 1040ez 2012 To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. Irs 1040ez 2012 Filled-in examples of that worksheet are included in the Comprehensive Examples , later. Irs 1040ez 2012 Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Irs 1040ez 2012 Purchase. Irs 1040ez 2012   If you bought your home, your basis is its cost to you. Irs 1040ez 2012 This includes the purchase price and certain settlement or closing costs. Irs 1040ez 2012 In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Irs 1040ez 2012 If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. Irs 1040ez 2012 Seller-paid points. Irs 1040ez 2012   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. Irs 1040ez 2012    IF you bought your home. Irs 1040ez 2012 . Irs 1040ez 2012 . Irs 1040ez 2012 THEN reduce your home's basis by the seller-paid points. Irs 1040ez 2012 . Irs 1040ez 2012 . Irs 1040ez 2012 after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. Irs 1040ez 2012 after April 3, 1994 even if you did not deduct them. Irs 1040ez 2012 Settlement fees or closing costs. Irs 1040ez 2012   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Irs 1040ez 2012 You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Irs 1040ez 2012 A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Irs 1040ez 2012   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Irs 1040ez 2012   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. Irs 1040ez 2012   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. Irs 1040ez 2012 Real estate taxes. Irs 1040ez 2012   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. Irs 1040ez 2012    IF. Irs 1040ez 2012 . Irs 1040ez 2012 . Irs 1040ez 2012 AND. Irs 1040ez 2012 . Irs 1040ez 2012 . Irs 1040ez 2012 THEN the taxes. Irs 1040ez 2012 . Irs 1040ez 2012 . Irs 1040ez 2012 you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. Irs 1040ez 2012 the seller reimburses you do not affect the basis of your home. Irs 1040ez 2012 the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. Irs 1040ez 2012 you reimburse the seller do not affect the basis of your home. Irs 1040ez 2012 Construction. Irs 1040ez 2012   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. Irs 1040ez 2012   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. Irs 1040ez 2012 It also includes certain settlement or closing costs. Irs 1040ez 2012 You may have to reduce your basis by points the seller paid for you. Irs 1040ez 2012 For more information, see Seller-paid points and Settlement fees or closing costs , earlier. Irs 1040ez 2012 Built by you. Irs 1040ez 2012   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Irs 1040ez 2012 Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. Irs 1040ez 2012 Temporary housing. Irs 1040ez 2012   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. Irs 1040ez 2012 To figure the amount of the reduction, multiply the contract price by a fraction. Irs 1040ez 2012 The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. Irs 1040ez 2012 Cooperative apartment. Irs 1040ez 2012   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. Irs 1040ez 2012 This may include your share of a mortgage on the apartment building. Irs 1040ez 2012 Condominium. Irs 1040ez 2012   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. Irs 1040ez 2012 Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. Irs 1040ez 2012 These situations are discussed in the following pages. Irs 1040ez 2012 Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. Irs 1040ez 2012 Other special rules may apply in certain situations. Irs 1040ez 2012 If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. Irs 1040ez 2012 Home received as gift. Irs 1040ez 2012   Use the following chart to find the basis of a home you received as a gift. Irs 1040ez 2012 IF the donor's adjusted basis at the time of the gift was. Irs 1040ez 2012 . Irs 1040ez 2012 . Irs 1040ez 2012 THEN your basis is. Irs 1040ez 2012 . Irs 1040ez 2012 . Irs 1040ez 2012 more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. Irs 1040ez 2012   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. Irs 1040ez 2012 If using the fair market value results in a gain, you have neither gain nor loss. Irs 1040ez 2012 equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. Irs 1040ez 2012 equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). Irs 1040ez 2012 Fair market value. Irs 1040ez 2012   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. Irs 1040ez 2012 If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. Irs 1040ez 2012 Part of federal gift tax due to net increase in value. Irs 1040ez 2012   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Irs 1040ez 2012 The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Irs 1040ez 2012 The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. Irs 1040ez 2012 Home acquired from a decedent who died before or after 2010. Irs 1040ez 2012   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). Irs 1040ez 2012 If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. Irs 1040ez 2012 If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. Irs 1040ez 2012 Surviving spouse. Irs 1040ez 2012   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. Irs 1040ez 2012 The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). Irs 1040ez 2012 The basis in your interest will remain the same. Irs 1040ez 2012 Your new basis in the home is the total of these two amounts. Irs 1040ez 2012   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. Irs 1040ez 2012 Example. Irs 1040ez 2012 Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. Irs 1040ez 2012 Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). Irs 1040ez 2012 Community property. Irs 1040ez 2012   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. Irs 1040ez 2012 When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. Irs 1040ez 2012 For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Irs 1040ez 2012   For more information about community property, see Publication 555, Community Property. Irs 1040ez 2012    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. Irs 1040ez 2012 Home received as trade. Irs 1040ez 2012   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. Irs 1040ez 2012 If you traded one home for another, you have made a sale and purchase. Irs 1040ez 2012 In that case, you may have a gain. Irs 1040ez 2012 See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. Irs 1040ez 2012 Home received from spouse. Irs 1040ez 2012   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. Irs 1040ez 2012 Transfers after July 18, 1984. Irs 1040ez 2012   If you received the home after July 18, 1984, there was no gain or loss on the transfer. Irs 1040ez 2012 In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. Irs 1040ez 2012 This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. Irs 1040ez 2012   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. Irs 1040ez 2012 This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Irs 1040ez 2012 Your basis in the half interest you already owned does not change. Irs 1040ez 2012 Your new basis in the home is the total of these two amounts. Irs 1040ez 2012 Transfers before July 19, 1984. Irs 1040ez 2012   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. Irs 1040ez 2012 More information. Irs 1040ez 2012   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. Irs 1040ez 2012 Involuntary conversion. Irs 1040ez 2012   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. Irs 1040ez 2012 If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. Irs 1040ez 2012 Example. Irs 1040ez 2012 A fire destroyed your home that you owned and used for only 6 months. Irs 1040ez 2012 The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. Irs 1040ez 2012 Your gain is $50,000 ($130,000 − $80,000). Irs 1040ez 2012 You bought a replacement home for $100,000. Irs 1040ez 2012 The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. Irs 1040ez 2012 The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. Irs 1040ez 2012 The basis of the new home is figured as follows. Irs 1040ez 2012 Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. Irs 1040ez 2012   For more information about basis, see Publication 551. Irs 1040ez 2012 Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Irs 1040ez 2012 To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. Irs 1040ez 2012 Filled-in examples of that worksheet are included in Comprehensive Examples , later. Irs 1040ez 2012 Recordkeeping. Irs 1040ez 2012 You should keep records to prove your home's adjusted basis. Irs 1040ez 2012 Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Irs 1040ez 2012 But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Irs 1040ez 2012 Keep records proving the basis of both homes as long as they are needed for tax purposes. Irs 1040ez 2012 The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Irs 1040ez 2012 Increases to Basis These include the following. Irs 1040ez 2012 Additions and other improvements that have a useful life of more than 1 year. Irs 1040ez 2012 Special assessments for local improvements. Irs 1040ez 2012 Amounts you spent after a casualty to restore damaged property. Irs 1040ez 2012 Improvements. Irs 1040ez 2012   These add to the value of your home, prolong its useful life, or adapt it to new uses. Irs 1040ez 2012 You add the cost of additions and other improvements to the basis of your property. Irs 1040ez 2012   The following chart lists some other examples of improvements. Irs 1040ez 2012 Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. Irs 1040ez 2012   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Irs 1040ez 2012 Example. Irs 1040ez 2012 You put wall-to-wall carpeting in your home 15 years ago. Irs 1040ez 2012 Later, you replaced that carpeting with new wall-to-wall carpeting. Irs 1040ez 2012 The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Irs 1040ez 2012 Repairs. Irs 1040ez 2012   These maintain your home in good condition but do not add to its value or prolong its life. Irs 1040ez 2012 You do not add their cost to the basis of your property. Irs 1040ez 2012 Examples. Irs 1040ez 2012 Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. Irs 1040ez 2012 Exception. Irs 1040ez 2012   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. Irs 1040ez 2012 For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. Irs 1040ez 2012 Decreases to Basis These include the following. Irs 1040ez 2012 Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). Irs 1040ez 2012 For details, see Publication 4681. Irs 1040ez 2012 Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Irs 1040ez 2012 For details, see Publication 4681. Irs 1040ez 2012 Gain you postponed from the sale of a previous home before May 7, 1997. Irs 1040ez 2012 Deductible casualty losses. Irs 1040ez 2012 Insurance payments you received or expect to receive for casualty losses. Irs 1040ez 2012 Payments you received for granting an easement or right-of-way. Irs 1040ez 2012 Depreciation allowed or allowable if you used your home for business or rental purposes. Irs 1040ez 2012 Energy-related credits allowed for expenditures made on the residence. Irs 1040ez 2012 (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Irs 1040ez 2012 ) Adoption credit you claimed for improvements added to the basis of your home. Irs 1040ez 2012 Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Irs 1040ez 2012 Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Irs 1040ez 2012 An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Irs 1040ez 2012 District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. Irs 1040ez 2012 General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Irs 1040ez 2012 Discharges of qualified principal residence indebtedness. Irs 1040ez 2012   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Irs 1040ez 2012 This exclusion applies to discharges made after 2006 and before 2014. Irs 1040ez 2012 If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. Irs 1040ez 2012   File Form 982 with your tax return. Irs 1040ez 2012 See the form's instructions for detailed information. Irs 1040ez 2012    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. Irs 1040ez 2012 In most cases, this would occur in a refinancing or a restructuring of the mortgage. Irs 1040ez 2012 Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Irs 1040ez 2012 This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Irs 1040ez 2012 To qualify, you must meet the ownership and use tests described later. Irs 1040ez 2012 You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Irs 1040ez 2012 This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. Irs 1040ez 2012 You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. Irs 1040ez 2012 If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Irs 1040ez 2012 See Publication 505, Tax Withholding and Estimated Tax. Irs 1040ez 2012 Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Irs 1040ez 2012 You meet the ownership test. Irs 1040ez 2012 You meet the use test. Irs 1040ez 2012 During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Irs 1040ez 2012 For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. Irs 1040ez 2012 If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. Irs 1040ez 2012 You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Irs 1040ez 2012 Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Irs 1040ez 2012 This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Irs 1040ez 2012 Exception. Irs 1040ez 2012   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Irs 1040ez 2012 However, the maximum amount you may be able to exclude will be reduced. Irs 1040ez 2012 See Reduced Maximum Exclusion , later. Irs 1040ez 2012 Example 1—home owned and occupied for at least 2 years. Irs 1040ez 2012 Mya bought and moved into her main home in September 2011. Irs 1040ez 2012 She sold the home at a gain in October 2013. Irs 1040ez 2012 During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Irs 1040ez 2012 She meets the ownership and use tests. Irs 1040ez 2012 Example 2—ownership test met but use test not met. Irs 1040ez 2012 Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Irs 1040ez 2012 He later sold the home for a gain in June 2013. Irs 1040ez 2012 He owned the home during the entire 5-year period ending on the date of sale. Irs 1040ez 2012 He meets the ownership test but not the use test. Irs 1040ez 2012 He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Irs 1040ez 2012 Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Irs 1040ez 2012 You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Irs 1040ez 2012 Example. Irs 1040ez 2012 Naomi bought and moved into a house in July 2009. Irs 1040ez 2012 She lived there for 13 months and then moved in with a friend. Irs 1040ez 2012 She later moved back into her house and lived there for 12 months until she sold it in August 2013. Irs 1040ez 2012 Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. Irs 1040ez 2012 Temporary absence. Irs 1040ez 2012   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Irs 1040ez 2012 The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Irs 1040ez 2012 Example 1. Irs 1040ez 2012 David Johnson, who is single, bought and moved into his home on February 1, 2011. Irs 1040ez 2012 Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Irs 1040ez 2012 David sold the house on March 1, 2013. Irs 1040ez 2012 Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. Irs 1040ez 2012 The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Irs 1040ez 2012 Example 2. Irs 1040ez 2012 Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. Irs 1040ez 2012 Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Irs 1040ez 2012 He cannot exclude any part of his gain because he did not use the residence for the required 2 years. Irs 1040ez 2012 Ownership and use tests met at different times. Irs 1040ez 2012   You can meet the ownership and use tests during different 2-year periods. Irs 1040ez 2012 However, you must meet both tests during the 5-year period ending on the date of the sale. Irs 1040ez 2012 Example. Irs 1040ez 2012 Beginning in 2002, Helen Jones lived in a rented apartment. Irs 1040ez 2012 The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Irs 1040ez 2012 In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Irs 1040ez 2012 On July 12, 2013, while still living in her daughter's home, she sold her condominium. Irs 1040ez 2012 Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Irs 1040ez 2012 She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Irs 1040ez 2012 She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Irs 1040ez 2012 The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Irs 1040ez 2012 Cooperative apartment. Irs 1040ez 2012   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. Irs 1040ez 2012 Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Irs 1040ez 2012 Exception for individuals with a disability. Irs 1040ez 2012   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Irs 1040ez 2012 Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Irs 1040ez 2012   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Irs 1040ez 2012 Previous home destroyed or condemned. Irs 1040ez 2012   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Irs 1040ez 2012 This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). Irs 1040ez 2012 Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Irs 1040ez 2012 Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Irs 1040ez 2012   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Irs 1040ez 2012 You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. Irs 1040ez 2012 This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Irs 1040ez 2012   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Irs 1040ez 2012 Example. Irs 1040ez 2012 John bought and moved into a home in 2005. Irs 1040ez 2012 He lived in it as his main home for 2½ years. Irs 1040ez 2012 For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Irs 1040ez 2012 He then sold the home at a gain in 2013. Irs 1040ez 2012 To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. Irs 1040ez 2012 This means he can disregard those 6 years. Irs 1040ez 2012 Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. Irs 1040ez 2012 He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Irs 1040ez 2012 Period of suspension. Irs 1040ez 2012   The period of suspension cannot last more than 10 years. Irs 1040ez 2012 Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. Irs 1040ez 2012 You cannot suspend the 5-year period for more than one property at a time. Irs 1040ez 2012 You can revoke your choice to suspend the 5-year period at any time. Irs 1040ez 2012 Example. Irs 1040ez 2012 Mary bought a home on April 1, 1997. Irs 1040ez 2012 She used it as her main home until August 31, 2000. Irs 1040ez 2012 On September 1, 2000, she went on qualified official extended duty with the Navy. Irs 1040ez 2012 She did not live in the house again before selling it on July 31, 2013. Irs 1040ez 2012 Mary chooses to use the entire 10-year suspension period. Irs 1040ez 2012 Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. Irs 1040ez 2012 During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. Irs 1040ez 2012 She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. Irs 1040ez 2012 Uniformed services. Irs 1040ez 2012   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. Irs 1040ez 2012 Foreign Service member. Irs 1040ez 2012   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. Irs 1040ez 2012 A Chief of mission. Irs 1040ez 2012 An Ambassador at large. Irs 1040ez 2012 A member of the Senior Foreign Service. Irs 1040ez 2012 A Foreign Service officer. Irs 1040ez 2012 Part of the Foreign Service personnel. Irs 1040ez 2012 Employee of the intelligence community. Irs 1040ez 2012   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. Irs 1040ez 2012 The Office of the Director of National Intelligence. Irs 1040ez 2012 The Central Intelligence Agency. Irs 1040ez 2012 The National Security Agency. Irs 1040ez 2012 The Defense Intelligence Agency. Irs 1040ez 2012 The National Geospatial-Intelligence Agency. Irs 1040ez 2012 The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. Irs 1040ez 2012 Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. Irs 1040ez 2012 The Bureau of Intelligence and Research of the Department of State. Irs 1040ez 2012 Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. Irs 1040ez 2012 Qualified official extended duty. Irs 1040ez 2012   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. Irs 1040ez 2012   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Irs 1040ez 2012 Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Irs 1040ez 2012 (But see Special rules for joint returns, next. Irs 1040ez 2012 ) Special rules for joint returns. Irs 1040ez 2012   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Irs 1040ez 2012 You are married and file a joint return for the year. Irs 1040ez 2012 Either you or your spouse meets the ownership test. Irs 1040ez 2012 Both you and your spouse meet the use test. Irs 1040ez 2012 During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Irs 1040ez 2012 If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Irs 1040ez 2012 For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Irs 1040ez 2012 Example 1—one spouse sells a home. Irs 1040ez 2012 Emily sells her home in June 2013 for a gain of $300,000. Irs 1040ez 2012 She marries Jamie later in the year. Irs 1040ez 2012 She meets the ownership and use tests, but Jamie does not. Irs 1040ez 2012 Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Irs 1040ez 2012 The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Irs 1040ez 2012 Example 2—each spouse sells a home. Irs 1040ez 2012 The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Irs 1040ez 2012 He meets the ownership and use tests on his home, but Emily does not. Irs 1040ez 2012 Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Irs 1040ez 2012 However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Irs 1040ez 2012 Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Irs 1040ez 2012 The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Irs 1040ez 2012 Sale of main home by surviving spouse. Irs 1040ez 2012   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Irs 1040ez 2012   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Irs 1040ez 2012 The sale or exchange took place after 2008. Irs 1040ez 2012 The sale or exchange took place no more than 2 years after the date of death of your spouse. Irs 1040ez 2012 You have not remarried. Irs 1040ez 2012 You and your spouse met the use test at the time of your spouse's death. Irs 1040ez 2012 You or your spouse met the ownership test at the time of your spouse's death. Irs 1040ez 2012 Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. Irs 1040ez 2012 The ownership and use tests were described earlier. Irs 1040ez 2012 Example. Irs 1040ez 2012 Harry owned and used a house as his main home since 2009. Irs 1040ez 2012 Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. Irs 1040ez 2012 Harry died on August 15, 2013, and Wilma inherited the property. Irs 1040ez 2012 Wilma sold the property on September 1, 2013, at which time she had not remarried. Irs 1040ez 2012 Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Irs 1040ez 2012 Home transferred from spouse. Irs 1040ez 2012   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Irs 1040ez 2012 Use of home after divorce. Irs 1040ez 2012   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Irs 1040ez 2012 Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Irs 1040ez 2012 This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Irs 1040ez 2012 In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Irs 1040ez 2012 A change in place of employment. Irs 1040ez 2012 Health. Irs 1040ez 2012 Unforeseen circumstances. Irs 1040ez 2012 Qualified individual. Irs 1040ez 2012   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. Irs 1040ez 2012 You. Irs 1040ez 2012 Your spouse. Irs 1040ez 2012 A co-owner of the home. Irs 1040ez 2012 A person whose main home is the same as yours. Irs 1040ez 2012 Primary reason for sale. Irs 1040ez 2012   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. Irs 1040ez 2012 You qualify under a “safe harbor. Irs 1040ez 2012 ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. Irs 1040ez 2012 Safe harbors corresponding to the reasons listed above are described later. Irs 1040ez 2012 A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. Irs 1040ez 2012  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. Irs 1040ez 2012 Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. Irs 1040ez 2012 Employment. Irs 1040ez 2012   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. Irs 1040ez 2012 It also includes the start or continuation of self-employment. Irs 1040ez 2012 Distance safe harbor. Irs 1040ez 2012   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). Irs 1040ez 2012 Example. Irs 1040ez 2012 Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. Irs 1040ez 2012 He got a job in North Carolina and sold his townhouse in 2013. Irs 1040ez 2012 Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. Irs 1040ez 2012 Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. Irs 1040ez 2012 Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. Irs 1040ez 2012 The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. Irs 1040ez 2012 For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. Irs 1040ez 2012 Parent, grandparent, stepmother, stepfather. Irs 1040ez 2012 Child, grandchild, stepchild, adopted child, eligible foster child. Irs 1040ez 2012 Brother, sister, stepbrother, stepsister, half-brother, half-sister. Irs 1040ez 2012 Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. Irs 1040ez 2012 Uncle, aunt, nephew, niece, or cousin. Irs 1040ez 2012 Example. Irs 1040ez 2012 In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. Irs 1040ez 2012 Lauren's father has a chronic disease and is unable to care for himself. Irs 1040ez 2012 In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Irs 1040ez 2012 Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. Irs 1040ez 2012 Doctor's recommendation safe harbor. Irs 1040ez 2012   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. Irs 1040ez 2012 Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. Irs 1040ez 2012 You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. Irs 1040ez 2012 Specific event safe harbors. Irs 1040ez 2012   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. Irs 1040ez 2012 An involuntary conversion of your home, such as when your home is destroyed or condemned. Irs 1040ez 2012 Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. Irs 1040ez 2012 In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. Irs 1040ez 2012 An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. Irs 1040ez 2012 For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. Irs 1040ez 2012 Reasonable basic living expenses. Irs 1040ez 2012   Reasonable basic living expenses for your household include the following. Irs 1040ez 2012 Amounts spent for food. Irs 1040ez 2012 Amounts spent for clothing. Irs 1040ez 2012 Housing and related expenses. Irs 1040ez 2012 Medical expenses. Irs 1040ez 2012 Transportation expenses. Irs 1040ez 2012 Tax payments. Irs 1040ez 2012 Court-ordered payments. Irs 1040ez 2012 Expenses reasonably necessary to produce income. Irs 1040ez 2012   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. Irs 1040ez 2012 Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. Irs 1040ez 2012 Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). Irs 1040ez 2012 Exceptions. Irs 1040ez 2012   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Irs 1040ez 2012 Calculation. Irs 1040ez 2012   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. Irs 1040ez 2012   For examples of this calculation, see Business Use or Rental of Home , next. Irs 1040ez 2012 Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. Irs 1040ez 2012 Example 1. Irs 1040ez 2012 On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Irs 1040ez 2012 She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Irs 1040ez 2012 The house was rented from June 1, 2009, to March 31, 2011. Irs 1040ez 2012 Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Irs 1040ez 2012 Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Irs 1040ez 2012 During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Irs 1040ez 2012 Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Irs 1040ez 2012 Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. Irs 1040ez 2012 Example 2. Irs 1040ez 2012 William owned and used a house as his main home from 2007 through 2010. Irs 1040ez 2012 On January 1, 2011, he moved to another state. Irs 1040ez 2012 He rented his house from that date until April 30, 2013, when he sold it. Irs 1040ez 2012 During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Irs 1040ez 2012 Because it was rental property at the time of the sale, he must report the sale on Form 4797. Irs 1040ez 2012 Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Irs 1040ez 2012 Because he met the ownership and use tests, he can exclude gain up to $250,000. Irs 1040ez 2012 However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Irs 1040ez 2012 Depreciation after May 6, 1997. Irs 1040ez 2012   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Irs 1040ez 2012 If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Irs 1040ez 2012 Unrecaptured section 1250 gain. Irs 1040ez 2012   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. Irs 1040ez 2012 To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. Irs 1040ez 2012 Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. Irs 1040ez 2012 Worksheet 2. Irs 1040ez 2012 Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. Irs 1040ez 2012 Gain or (Loss) on Sale       1. Irs 1040ez 2012   Selling price of home 1. Irs 1040ez 2012     2. Irs 1040ez 2012   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. Irs 1040ez 2012     3. Irs 1040ez 2012   Subtract line 2 from line 1. Irs 1040ez 2012 This is the amount realized 3. Irs 1040ez 2012     4. Irs 1040ez 2012   Adjusted basis of home sold (from Worksheet 1, line 13) 4. Irs 1040ez 2012     5. Irs 1040ez 2012   Gain or (loss) on the sale. Irs 1040ez 2012 Subtract line 4 from line 3. Irs 1040ez 2012 If this is a loss, stop here 5. Irs 1040ez 2012 200,000   Part 2. Irs 1040ez 2012 Exclusion and Taxable Gain       6. Irs 1040ez 2012   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. Irs 1040ez 2012 If none, enter -0- 6. Irs 1040ez 2012 10,000   7. Irs 1040ez 2012   Subtract line 6 from line 5. Irs 1040ez 2012 If the result is less than zero, enter -0- 7. Irs 1040ez 2012 190,000   8. Irs 1040ez 2012   Aggregate number of days of nonqualified use after 2008. Irs 1040ez 2012 If none, enter -0-. Irs 1040ez 2012  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. Irs 1040ez 2012 668   9. Irs 1040ez 2012   Number of days taxpayer owned the property 9. Irs 1040ez 2012 2,080   10. Irs 1040ez 2012   Divide the amount on line 8 by the amount on line 9. Irs 1040ez 2012 Enter the result as a decimal (rounded to at least 3 places). Irs 1040ez 2012 But do not enter an amount greater than 1. Irs 1040ez 2012 00 10. Irs 1040ez 2012 0. Irs 1040ez 2012 321   11. Irs 1040ez 2012   Gain allocated to nonqualified use. Irs 1040ez 2012 (Line 7 multiplied by line 10) 11. Irs 1040ez 2012 60,990   12. Irs 1040ez 2012   Gain eligible for exclusion. Irs 1040ez 2012 Subtract line 11 from line 7 12. Irs 1040ez 2012 129,010   13. Irs 1040ez 2012   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). Irs 1040ez 2012  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. Irs 1040ez 2012 If you do  not qualify to exclude gain, enter -0- 13. Irs 1040ez 2012 250,000   14. Irs 1040ez 2012   Exclusion. Irs 1040ez 2012 Enter the smaller of line 12 or line 13 14. Irs 1040ez 2012 129,010   15. Irs 1040ez 2012   Taxable gain. Irs 1040ez 2012 Subtract line 14 from line 5. Irs 1040ez 2012 Report your taxable gain as described under Reporting the Sale . Irs 1040ez 2012 If the amount on line 6 is more than zero, complete line 16 15. Irs 1040ez 2012 70,990   16. Irs 1040ez 2012   Enter the smaller of line 6 or line 15. Irs 1040ez 2012 Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. Irs 1040ez 2012 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Irs 1040ez 2012 Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. Irs 1040ez 2012 In addition, you do not need to report the sale of the business or rental part on Form 4797. Irs 1040ez 2012 This is true whether or not you were entitled to claim any depreciation. Irs 1040ez 2012 However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. Irs 1040ez 2012 See Depreciation after May 6, 1997, earlier. Irs 1040ez 2012 Example 1. Irs 1040ez 2012 Ray sold his main home in 2013 at a $30,000 gain. Irs 1040ez 2012 He has no gains or losses from the sale of property other than the gain from the sale of his home. Irs 1040ez 2012 He meets the ownership and use tests to exclude the gain from his income. Irs 1040ez 2012 However, he used part of the home as a business office in 2012 and claimed $500 depreciation. Irs 1040ez 2012 Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. Irs 1040ez 2012 In addition, he does not have to report any part of the gain on Form 4797. Irs 1040ez 2012 Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. Irs 1040ez 2012 He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). Irs 1040ez 2012 Example 2. Irs 1040ez 2012 The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. Irs 1040ez 2012 Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. Irs 1040ez 2012 Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. Irs 1040ez 2012 Examples are: A working farm on which your house was located, A duplex in w