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Myfreetaxes com Publication 538 - Introductory Material Table of Contents IntroductionOrdering forms and publications. Myfreetaxes com Tax Questions. Myfreetaxes com Reminders Useful Items - You may want to see: Introduction Every taxpayer (individuals, business entities, etc. Myfreetaxes com ) must figure taxable income on the basis of an annual accounting period called a tax year. Myfreetaxes com The calendar year is the most common tax year. Myfreetaxes com Other tax years include a fiscal year and a short tax year. Myfreetaxes com Each taxpayer must use a consistent accounting method, which is a set of rules for determining when to report income and expenses. Myfreetaxes com The most commonly used accounting methods are the cash method and the accrual method. Myfreetaxes com Under the cash method, you generally report income in the tax year you receive it, and deduct expenses in the tax year in which you pay them. Myfreetaxes com Under the accrual method, you generally report income in the tax year you earn it, regardless of when payment is received. Myfreetaxes com You deduct expenses in the tax year you incur them, regardless of when payment is made. Myfreetaxes com This publication explains some of the rules for accounting periods and accounting methods. Myfreetaxes com In some cases, you may have to refer to other sources for a more in-depth explanation of the topic. Myfreetaxes com Comments and suggestions. Myfreetaxes com   We welcome your comments about this publication and your suggestions for future editions. Myfreetaxes com   You can write to us at the following address: Internal Revenue Service Business, Exempt Organization and International Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Myfreetaxes com NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Myfreetaxes com Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Myfreetaxes com   You can email us at taxforms@irs. Myfreetaxes com gov. Myfreetaxes com Please put “Publications Comment” on the subject line. Myfreetaxes com You can also send us comments from www. Myfreetaxes com irs. Myfreetaxes com gov/formspubs. Myfreetaxes com Select “Comment on Tax Forms and Publications” under “More information. Myfreetaxes com ”   Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. Myfreetaxes com Ordering forms and publications. Myfreetaxes com   Visit www. Myfreetaxes com irs. Myfreetaxes com gov/formspubs to download forms and publications, call 1-800–829–3676, or write to the address below and receive a response within 10 days after your request is received. Myfreetaxes com Internal Revenue Service 1201 N. Myfreetaxes com Mitsubishi Motorway Bloomington, IL 61705-6613 Tax Questions. Myfreetaxes com   If you have a tax question, check the information available on IRS. Myfreetaxes com gov or call 1-800-829-1040. Myfreetaxes com We cannot answer tax questions sent to the above address. Myfreetaxes com Reminders Photographs of missing children. Myfreetaxes com  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Myfreetaxes com Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Myfreetaxes com You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Myfreetaxes com Useful Items - You may want to see: Publication 537 Installment Sales 541 Partnerships 542 Corporations Form (and Instructions) 1128 Application To Adopt, Change, or Retain a Tax Year 2553 Election by a Small Business Corporation 3115 Application for Change in Accounting Method 8716 Election To Have a Tax Year Other Than a Required Tax Year See Ordering forms and publications, earlier for information about getting these publications and forms. Myfreetaxes com Prev  Up  Next   Home   More Online Publications
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Home Office Deduction

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If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes. 

Simplified Option

For taxable years starting on, or after, January 1, 2013 (filed beginning in 2014), you now have a simpler option for computing the business use of your home (IRS Revenue Procedure 2013-13, January 15, 2013). The standard method has some calculation, allocation, and substantiation requirements that are complex and burdensome for small business owners. This new simplified option can significantly reduce recordkeeping burden by allowing a qualified taxpayer to multiply a prescribed rate by the allowable square footage of the office in lieu of determining actual expenses.

Regular Method

Taxpayers using the regular method (required for tax years 2012 and prior), instead of the optional method, must determine the actual expenses of their home office. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Generally, when using the regular method, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.

Requirements to Claim the Deduction

Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction:

1. Regular and Exclusive Use.

You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.

2. Principal Place of Your Business.

You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.

Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.

Additional tests for employee use. If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus:

  • Your business use must be for the convenience of your employer, and
  • You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.

If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.

For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home. In this publication you will find:

  • Requirements for qualifying to deduct expenses (including special rules for storing inventory or product samples).
  • Types of expenses you can deduct.
  • How to figure the deduction (including depreciation of your home).
  • Special rules for daycare providers.
  • Tax implications of selling a home that was used partly for business.
  • Records you should keep
  • Where to deduct your expenses (including Form 8829, Expenses for Business Use of Your Home (PDF), required if you are self-employed and claiming this deduction using the regular method).

The rules in the publication apply to individuals.

Page Last Reviewed or Updated: 03-Feb-2014

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Myfreetaxes com 37. Myfreetaxes com   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. Myfreetaxes com  The maximum adoption credit is $12,970 for 2013. Myfreetaxes com See Adoption Credit . Myfreetaxes com Plug-in electric vehicle credit. Myfreetaxes com  This credit has expired. Myfreetaxes com Credit for prior year minimum tax. Myfreetaxes com  The refundable portion of the credit for prior year minimum tax has expired. Myfreetaxes com Excess withholding of social security and railroad retirement tax. Myfreetaxes com  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. Myfreetaxes com 2% of wages up to $113,700. Myfreetaxes com If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. Myfreetaxes com See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . Myfreetaxes com Introduction This chapter discusses the following nonrefundable credits. Myfreetaxes com Adoption credit. Myfreetaxes com Alternative motor vehicle credit. Myfreetaxes com Alternative fuel vehicle refueling property credit. Myfreetaxes com Credit to holders of tax credit bonds. Myfreetaxes com Foreign tax credit. Myfreetaxes com Mortgage interest credit. Myfreetaxes com Nonrefundable credit for prior year minimum tax. Myfreetaxes com Plug-in electric drive motor vehicle credit. Myfreetaxes com Residential energy credits. Myfreetaxes com Retirement savings contributions credit. Myfreetaxes com This chapter also discusses the following refundable credits. Myfreetaxes com Credit for tax on undistributed capital gain. Myfreetaxes com Health coverage tax credit. Myfreetaxes com Credit for excess social security tax or railroad retirement tax withheld. Myfreetaxes com Several other credits are discussed in other chapters in this publication. Myfreetaxes com Child and dependent care credit (chapter 32). Myfreetaxes com Credit for the elderly or the disabled (chapter 33). Myfreetaxes com Child tax credit (chapter 34). Myfreetaxes com Education credits (chapter 35). Myfreetaxes com Earned income credit (chapter 36). Myfreetaxes com Nonrefundable credits. Myfreetaxes com   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. Myfreetaxes com These credits may reduce your tax to zero. Myfreetaxes com If these credits are more than your tax, the excess is not refunded to you. Myfreetaxes com Refundable credits. Myfreetaxes com   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. Myfreetaxes com These credits are added to the federal income tax withheld and any estimated tax payments you made. Myfreetaxes com If this total is more than your total tax, the excess will be refunded to you. Myfreetaxes com Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. Myfreetaxes com However, if the total of these credits is more than your tax, the excess is not refunded to you. Myfreetaxes com Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. Myfreetaxes com The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. Myfreetaxes com If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. Myfreetaxes com If your modified AGI is $234,580 or more, you cannot take the credit. Myfreetaxes com Qualified adoption expenses. Myfreetaxes com   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. Myfreetaxes com These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. Myfreetaxes com Nonqualified expenses. Myfreetaxes com   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. Myfreetaxes com Eligible child. Myfreetaxes com   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. Myfreetaxes com Child with special needs. Myfreetaxes com   An eligible child is a child with special needs if all three of the following apply. Myfreetaxes com The child was a citizen or resident of the United States (including U. Myfreetaxes com S. Myfreetaxes com possessions) at the time the adoption process began. Myfreetaxes com A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. Myfreetaxes com The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Myfreetaxes com Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. Myfreetaxes com When to take the credit. Myfreetaxes com   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. Myfreetaxes com If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. Myfreetaxes com See the Instructions for Form 8839 for more specific information on when to take the credit. Myfreetaxes com Foreign child. Myfreetaxes com   If the child is not a U. Myfreetaxes com S. Myfreetaxes com citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. Myfreetaxes com You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. Myfreetaxes com How to take the credit. Myfreetaxes com   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. Myfreetaxes com Include the credit in your total for Form 1040, line 53. Myfreetaxes com Check box c and enter “8839” on the line next to that box. Myfreetaxes com More information. Myfreetaxes com   For more information, see the Instructions for Form 8839. Myfreetaxes com Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. Myfreetaxes com Amount of credit. Myfreetaxes com   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. Myfreetaxes com In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. Myfreetaxes com   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. Myfreetaxes com How to take the credit. Myfreetaxes com   To take the credit, you must complete Form 8910 and attach it to your Form 1040. Myfreetaxes com Include the credit in your total for Form 1040, line 53. Myfreetaxes com Check box c and enter “8910” on the line next to that box. Myfreetaxes com More information. Myfreetaxes com   For more information on the credit, see the Instructions for Form 8910. Myfreetaxes com Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. Myfreetaxes com Qualified alternative fuel vehicle refueling property. Myfreetaxes com   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. Myfreetaxes com To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. Myfreetaxes com To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. Myfreetaxes com   The following are alternative fuels. Myfreetaxes com Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. Myfreetaxes com Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. Myfreetaxes com Electricity. Myfreetaxes com Amount of the credit. Myfreetaxes com   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. Myfreetaxes com For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Myfreetaxes com How to take the credit. Myfreetaxes com   To take the credit, you must complete Form 8911 and attach it to your Form 1040. Myfreetaxes com Include the credit in your total for Form 1040, line 53. Myfreetaxes com Check box c and enter “8911” on the line next to that box. Myfreetaxes com More information. Myfreetaxes com   For more information on the credit, see the Form 8911 instructions. Myfreetaxes com Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. Myfreetaxes com You may be able to take a credit if you are a holder of one of the following bonds. Myfreetaxes com Clean renewable energy bonds (issued before 2010). Myfreetaxes com New clean renewable energy bonds. Myfreetaxes com Qualified energy conservation bonds. Myfreetaxes com Qualified school construction bonds. Myfreetaxes com Qualified zone academy bonds. Myfreetaxes com Build America bonds. Myfreetaxes com In some instances, an issuer may elect to receive a credit for interest paid on the bond. Myfreetaxes com If the issuer makes this election, you cannot also claim a credit. Myfreetaxes com Interest income. Myfreetaxes com   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. Myfreetaxes com How to take the credit. Myfreetaxes com   Complete Form 8912 and attach it to your Form 1040. Myfreetaxes com Include the credit in your total for Form 1040, line 53. Myfreetaxes com Check box c and enter “8912” on the line next to that box. Myfreetaxes com More information. Myfreetaxes com   For more information, see the Instructions for Form 8912. Myfreetaxes com Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. Myfreetaxes com S. Myfreetaxes com possession as a credit against your U. Myfreetaxes com S. Myfreetaxes com income tax. Myfreetaxes com Or, you can deduct them as an itemized deduction (see chapter 22). Myfreetaxes com You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. Myfreetaxes com S. Myfreetaxes com tax under any of the following. Myfreetaxes com Foreign earned income exclusion. Myfreetaxes com Foreign housing exclusion. Myfreetaxes com Income from Puerto Rico exempt from U. Myfreetaxes com S. Myfreetaxes com tax. Myfreetaxes com Possession exclusion. Myfreetaxes com Limit on the credit. Myfreetaxes com   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. Myfreetaxes com S. Myfreetaxes com tax liability (Form 1040, line 44), multiplied by a fraction. Myfreetaxes com The numerator of the fraction is your taxable income from sources outside the United States. Myfreetaxes com The denominator is your total taxable income from U. Myfreetaxes com S. Myfreetaxes com and foreign sources. Myfreetaxes com See Publication 514 for more information. Myfreetaxes com How to take the credit. Myfreetaxes com   Complete Form 1116 and attach it to your Form 1040. Myfreetaxes com Enter the credit on Form 1040, line 47. Myfreetaxes com Exception. Myfreetaxes com   You do not have to complete Form 1116 to take the credit if all of the following apply. Myfreetaxes com All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). Myfreetaxes com If you had dividend income from shares of stock, you held those shares for at least 16 days. Myfreetaxes com You are not filing Form 4563 or excluding income from sources within Puerto Rico. Myfreetaxes com The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). Myfreetaxes com All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. Myfreetaxes com More information. Myfreetaxes com   For more information on the credit and these requirements, see the Instructions for Form 1116. Myfreetaxes com Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. Myfreetaxes com If you qualify, you can take the credit each year for part of the home mortgage interest you pay. Myfreetaxes com Who qualifies. Myfreetaxes com   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Myfreetaxes com Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Myfreetaxes com Amount of credit. Myfreetaxes com   Figure your credit on Form 8396. Myfreetaxes com If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Myfreetaxes com   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Myfreetaxes com To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Myfreetaxes com      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. Myfreetaxes com   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. Myfreetaxes com If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. Myfreetaxes com See Publication 530 for more information. Myfreetaxes com Carryforward. Myfreetaxes com   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. Myfreetaxes com If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Myfreetaxes com   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Myfreetaxes com How to take the credit. Myfreetaxes com    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. Myfreetaxes com Be sure to include any credit carryforward from 2010, 2011, and 2012. Myfreetaxes com   Include the credit in your total for Form 1040, line 53. Myfreetaxes com Check box c and enter “8396” on the line next to that box. Myfreetaxes com Reduced home mortgage interest deduction. Myfreetaxes com   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Myfreetaxes com You must do this even if part of that amount is to be carried forward to 2014. Myfreetaxes com For more information about the home mortgage interest deduction, see chapter 23. Myfreetaxes com Recapture of federal mortgage subsidy. Myfreetaxes com   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. Myfreetaxes com The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. Myfreetaxes com See the Instructions for Form 8828 and chapter 15 for more information. Myfreetaxes com More information. Myfreetaxes com   For more information on the credit, see the Form 8396 instructions. Myfreetaxes com Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. Myfreetaxes com If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. Myfreetaxes com This is called the alternative minimum tax. Myfreetaxes com The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. Myfreetaxes com If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. Myfreetaxes com You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. Myfreetaxes com How to take the credit. Myfreetaxes com    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. Myfreetaxes com Include the credit in your total for Form 1040, line 53, and check box b. Myfreetaxes com You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. Myfreetaxes com More information. Myfreetaxes com   For more information on the credit, see the Instructions for Form 8801. Myfreetaxes com Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. Myfreetaxes com Qualified plug-in electric drive motor vehicle. Myfreetaxes com   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Myfreetaxes com Qualified two- or three-wheeled plug-in electric vehicle. Myfreetaxes com   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. Myfreetaxes com 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Myfreetaxes com Certification and other requirements. Myfreetaxes com   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. Myfreetaxes com However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. Myfreetaxes com   The following requirements must also be met to qualify for the credit. Myfreetaxes com You are the owner of the vehicle. Myfreetaxes com If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. Myfreetaxes com You placed the vehicle in service during 2013. Myfreetaxes com The vehicle is manufactured primarily for use on public streets, roads, and highways. Myfreetaxes com The original use of the vehicle began with you. Myfreetaxes com You acquired the vehicle for your use or to lease to others, and not for resale. Myfreetaxes com In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. Myfreetaxes com You use the vehicle primarily in the United States. Myfreetaxes com How to take the credit. Myfreetaxes com   To take the credit, you must complete Form 8936 and attach it to your Form 1040. Myfreetaxes com Include the credit in your total for Form 1040, line 53. Myfreetaxes com Check box c and enter “8936” on the line next to that box. Myfreetaxes com More information. Myfreetaxes com   For more information on the credit, see the Form 8936 instructions. Myfreetaxes com Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. Myfreetaxes com Nonbusiness energy property credit. Myfreetaxes com Residential energy efficient property credit. Myfreetaxes com If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. Myfreetaxes com Nonbusiness energy property credit. Myfreetaxes com   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. Myfreetaxes com   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. Myfreetaxes com    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. Myfreetaxes com   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. Myfreetaxes com Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. Myfreetaxes com Exterior window (including skylights). Myfreetaxes com Exterior doors. Myfreetaxes com Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. Myfreetaxes com   Residential energy property is any of the following. Myfreetaxes com Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. Myfreetaxes com Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. Myfreetaxes com Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. Myfreetaxes com Residential energy efficient property credit. Myfreetaxes com   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. Myfreetaxes com The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. Myfreetaxes com Basis reduction. Myfreetaxes com   You must reduce the basis of your home by the amount of any credit allowed. Myfreetaxes com How to take the credit. Myfreetaxes com   Complete Form 5695 and attach it to your Form 1040. Myfreetaxes com Enter the credit on Form 1040, line 52. Myfreetaxes com More information. Myfreetaxes com   For more information on these credits, see the Form 5695 instructions. Myfreetaxes com Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. Myfreetaxes com However, you cannot take the credit if either of the following applies. Myfreetaxes com The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). Myfreetaxes com The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). Myfreetaxes com Student. Myfreetaxes com   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. Myfreetaxes com School. Myfreetaxes com   A school includes a technical, trade, or mechanical school. Myfreetaxes com It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Myfreetaxes com How to take the credit. Myfreetaxes com   Figure the credit on Form 8880. Myfreetaxes com Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. Myfreetaxes com More information. Myfreetaxes com   For more information on the credit, see the Form 8880 instructions. Myfreetaxes com Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. Myfreetaxes com If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. Myfreetaxes com Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. Myfreetaxes com If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. Myfreetaxes com The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. Myfreetaxes com How to take the credit. Myfreetaxes com   To take the credit, attach Copy B of Form 2439 to your Form 1040. Myfreetaxes com Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. Myfreetaxes com More information. Myfreetaxes com   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. Myfreetaxes com Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. Myfreetaxes com You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. Myfreetaxes com You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. Myfreetaxes com S. Myfreetaxes com Treasury–HCTC. Myfreetaxes com ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. Myfreetaxes com You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). Myfreetaxes com You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. Myfreetaxes com S. Myfreetaxes com military health system (TRICARE). Myfreetaxes com You were not imprisoned under federal, state, or local authority. Myfreetaxes com Your employer did not pay 50% or more of the cost of coverage. Myfreetaxes com You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. Myfreetaxes com But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. Myfreetaxes com If you meet all of these conditions, you may be able to take a credit of up to 72. Myfreetaxes com 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. Myfreetaxes com You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. Myfreetaxes com The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. Myfreetaxes com You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Myfreetaxes com If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. Myfreetaxes com TAA recipient. Myfreetaxes com   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). Myfreetaxes com Example. Myfreetaxes com You received a trade adjustment allowance for January 2013. Myfreetaxes com You were an eligible TAA recipient on the first day of January and February. Myfreetaxes com Alternative TAA recipient. Myfreetaxes com   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. Myfreetaxes com Example. Myfreetaxes com You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. Myfreetaxes com The program was established by the Department of Labor. Myfreetaxes com You were an eligible alternative TAA recipient on the first day of October and November. Myfreetaxes com RTAA recipient. Myfreetaxes com   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. Myfreetaxes com PBGC pension recipient. Myfreetaxes com   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. Myfreetaxes com You were age 55 or older on the first day of the month. Myfreetaxes com You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Myfreetaxes com If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. Myfreetaxes com How to take the credit. Myfreetaxes com   To take the credit, complete Form 8885 and attach it to your Form 1040. Myfreetaxes com Include your credit in the total for Form 1040, line 71, and check box c. Myfreetaxes com   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. Myfreetaxes com For details, see Publication 502 or Form 8885. Myfreetaxes com More information. Myfreetaxes com   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. Myfreetaxes com Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. Myfreetaxes com If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Myfreetaxes com If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. Myfreetaxes com If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. Myfreetaxes com 2% rate. Myfreetaxes com You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. Myfreetaxes com For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. Myfreetaxes com 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. Myfreetaxes com 45%) or the Additional Medicare Tax rate (. Myfreetaxes com 9%). Myfreetaxes com The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. Myfreetaxes com Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. Myfreetaxes com 40 RRTA tier 2 $84,300 $3,709. Myfreetaxes com 20 All wages are subject to Medicare tax withholding. Myfreetaxes com   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Myfreetaxes com Be sure to attach a copy of all of your W-2 forms. Myfreetaxes com Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. Myfreetaxes com Employer's error. Myfreetaxes com   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. Myfreetaxes com The employer should adjust the tax for you. Myfreetaxes com If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. Myfreetaxes com Joint return. Myfreetaxes com   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. Myfreetaxes com Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. Myfreetaxes com How to figure the credit if you did not work for a railroad. Myfreetaxes com   If you did not work for a railroad during 2013, figure the credit as follows: 1. Myfreetaxes com Add all social security tax withheld (but not more than $7,049. Myfreetaxes com 40 for each employer). Myfreetaxes com Enter the total here   2. Myfreetaxes com Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Myfreetaxes com Add lines 1 and 2. Myfreetaxes com If $7,049. Myfreetaxes com 40 or less, stop here. Myfreetaxes com You cannot take  the credit   4. Myfreetaxes com Social security tax limit 7,049. Myfreetaxes com 40 5. Myfreetaxes com Credit. Myfreetaxes com Subtract line 4 from line 3. Myfreetaxes com Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. Myfreetaxes com You are married and file a joint return with your spouse who had no gross income in 2013. Myfreetaxes com During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. Myfreetaxes com Social security tax of $3,720 was withheld. Myfreetaxes com You also worked for another employer in 2013 and earned $55,000 in wages. Myfreetaxes com $3,410 of social security tax was withheld from these wages. Myfreetaxes com Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. Myfreetaxes com 60 for the excess social security tax withheld. Myfreetaxes com 1. Myfreetaxes com Add all social security tax withheld (but not more than $7,049. Myfreetaxes com 40 for each employer). Myfreetaxes com Enter the total here $7,130. Myfreetaxes com 00 2. Myfreetaxes com Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. Myfreetaxes com Add lines 1 and 2. Myfreetaxes com If $7,049. Myfreetaxes com 40 or less, stop here. Myfreetaxes com You cannot take the credit 7,130. Myfreetaxes com 00 4. Myfreetaxes com Social security tax limit 7,049. Myfreetaxes com 40 5. Myfreetaxes com Credit. Myfreetaxes com Subtract line 4 from line 3. Myfreetaxes com Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. Myfreetaxes com 60 How to figure the credit if you worked for a railroad. Myfreetaxes com   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. Myfreetaxes com Add all social security and tier 1 RRTA tax withheld at the 6. Myfreetaxes com 2% rate (but not more than $7,049. Myfreetaxes com 40 for each employer). Myfreetaxes com Enter the total here   2. Myfreetaxes com Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Myfreetaxes com Add lines 1 and 2. Myfreetaxes com If $7,049. Myfreetaxes com 40 or less, stop here. Myfreetaxes com You cannot take  the credit   4. Myfreetaxes com Social security and tier 1 RRTA  tax limit 7,049. Myfreetaxes com 40 5. Myfreetaxes com Credit. Myfreetaxes com Subtract line 4 from line 3. Myfreetaxes com Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. Myfreetaxes com   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. Myfreetaxes com More information. Myfreetaxes com   For more information on the credit, see Publication 505. Myfreetaxes com Prev  Up  Next   Home   More Online Publications