Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Print 1040ez Federal Tax Form

Free Tax Filing1040 Tax Forms PrintableH&r Block Online FilingH&r Block Free State FileWhere To File Amended 1040xHttps Mypay Dfas MilMilitary Star CardFederal Income Tax Ez Form 2011Military H & R BlockFiling For Tax ExtensionTax Act 2011 Free DownloadSenior TaxesWhen Can I File An Amended Tax Return For 2012Need File Back TaxesFile 2010 Tax1040ez Form And Instructions1040nr EfileFree File 2010 Taxes2013 Form 1040ez InstructionsSelf Employed Tax ReturnHow To File 2012 Tax ReturnTurbotax 2011 Deluxe140xCan Ie File 2011 TaxesHr Block Free Tax FilingAmendment ReturnFile 2010 Taxes Online FreeCan A Tax Return Be AmendedFile Free State Taxes OnlineAmend A Tax ReturnFiling 2012 Taxes Late OnlineFree Tax Efile1040ez Com2010 Form 1040Aarp Tax HelpFile 2010 Tax ReturnIrs Easy FormStudents Exempt From Income TaxEfileFree Tax Returns

Print 1040ez Federal Tax Form

Print 1040ez federal tax form 32. Print 1040ez federal tax form   Child and Dependent Care Credit Table of Contents Reminders Introduction Useful Items - You may want to see: Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. Print 1040ez federal tax form Employment Taxes for Household Employers Reminders Taxpayer identification number needed for each qualifying person. Print 1040ez federal tax form  You must include on line 2 of Form 2441 the name and taxpayer identification number (generally the social security number) of each qualifying person. Print 1040ez federal tax form See Taxpayer identification number under Qualifying Person Test, later. Print 1040ez federal tax form You may have to pay employment taxes. Print 1040ez federal tax form  If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer who has to pay employment taxes. Print 1040ez federal tax form Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. Print 1040ez federal tax form See Employment Taxes for Household Employers , later. Print 1040ez federal tax form Introduction This chapter discusses the credit for child and dependent care expenses and covers the following topics. Print 1040ez federal tax form Tests you must meet to claim the credit. Print 1040ez federal tax form How to figure the credit. Print 1040ez federal tax form How to claim the credit. Print 1040ez federal tax form Employment taxes you may have to pay as a household employer. Print 1040ez federal tax form You may be able to claim the credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. Print 1040ez federal tax form The credit can be up to 35% of your expenses. Print 1040ez federal tax form To qualify, you must pay these expenses so you can work or look for work. Print 1040ez federal tax form This credit should not be confused with the child tax credit discussed in chapter 34. Print 1040ez federal tax form Dependent care benefits. Print 1040ez federal tax form   If you received any dependent care benefits from your employer during the year, you may be able to exclude from your income all or part of them. Print 1040ez federal tax form You must complete Form 2441, Part III, before you can figure the amount of your credit. Print 1040ez federal tax form See Dependent Care Benefits under How To Figure the Credit, later. Print 1040ez federal tax form Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 503 Child and Dependent Care Expenses 926 Household Employer's Tax Guide Form (and Instructions) 2441 Child and Dependent Care Expenses Schedule H (Form 1040) Household Employment Taxes W-7 Application for IRS Individual Taxpayer Identification Number W-10 Dependent Care Provider's Identification and Certification Tests To Claim the Credit To be able to claim the credit for child and dependent care expenses, you must file Form 1040 or Form 1040A, not Form 1040EZ, and meet all the following tests. Print 1040ez federal tax form The care must be for one or more qualifying persons who are identified on Form 2441. Print 1040ez federal tax form (See Qualifying Person Test . Print 1040ez federal tax form ) You (and your spouse if filing jointly) must have earned income during the year. Print 1040ez federal tax form (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. Print 1040ez federal tax form ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. Print 1040ez federal tax form (See Work-Related Expense Test , later. Print 1040ez federal tax form ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. Print 1040ez federal tax form If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. Print 1040ez federal tax form You cannot make payments to: Your spouse, or The parent of your qualifying person if your qualifying person is your child and under age 13. Print 1040ez federal tax form (See Payments to Relatives or Dependents under Work-Related Expense Test, later. Print 1040ez federal tax form ) Your filing status may be single, head of household, or qualifying widow(er) with dependent child. Print 1040ez federal tax form If you are married, you must file a joint return, unless an exception applies to you. Print 1040ez federal tax form (See Joint Return Test , later. Print 1040ez federal tax form ) You must identify the care provider on your tax return. Print 1040ez federal tax form (See Provider Identification Test , later. Print 1040ez federal tax form ) If you exclude or deduct dependent care benefits provided by a dependent care benefits plan, the total amount you exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person was cared for or $6,000 if two or more qualifying persons were cared for). Print 1040ez federal tax form (If two or more qualifying persons were cared for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or deduct is limited to $5,000. Print 1040ez federal tax form See Reduced Dollar Limit under How To Figure the Credit, later. Print 1040ez federal tax form ) These tests are presented in Figure 32-A and are also explained in detail in this chapter. Print 1040ez federal tax form Figure 32-A. Print 1040ez federal tax form Can You Claim the Credit? Please click here for the text description of the image. Print 1040ez federal tax form Figure 32-A Can You Claim the Credit? Qualifying Person Test Your child and dependent care expenses must be for the care of one or more qualifying persons. Print 1040ez federal tax form A qualifying person is: Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents living apart, later), Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Print 1040ez federal tax form Dependent defined. Print 1040ez federal tax form   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. Print 1040ez federal tax form To be your dependent, a person must be your qualifying child (or your qualifying relative). Print 1040ez federal tax form Qualifying child. Print 1040ez federal tax form   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. Print 1040ez federal tax form More information. Print 1040ez federal tax form   For more information about who is a dependent or a qualifying child, see chapter 3. Print 1040ez federal tax form Physically or mentally not able to care for oneself. Print 1040ez federal tax form   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. Print 1040ez federal tax form Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. Print 1040ez federal tax form Person qualifying for part of year. Print 1040ez federal tax form   You determine a person's qualifying status each day. Print 1040ez federal tax form For example, if the person for whom you pay child and dependent care expenses no longer qualifies on September 16, count only those expenses through September 15. Print 1040ez federal tax form Also see Yearly limit under Dollar Limit, later. Print 1040ez federal tax form Birth or death of otherwise qualifying person. Print 1040ez federal tax form   In determining whether a person is a qualifying person, a person who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the person's home for more than half the time he or she was alive in 2013. Print 1040ez federal tax form Taxpayer identification number. Print 1040ez federal tax form   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). Print 1040ez federal tax form If the correct information is not shown, the credit may be reduced or disallowed. Print 1040ez federal tax form Individual taxpayer identification number (ITIN) for aliens. Print 1040ez federal tax form   If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), use that person's ITIN. Print 1040ez federal tax form The ITIN is entered wherever an SSN is requested on a tax return. Print 1040ez federal tax form To apply for an ITIN, see Form W-7. Print 1040ez federal tax form   An ITIN is for tax use only. Print 1040ez federal tax form It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. Print 1040ez federal tax form S. Print 1040ez federal tax form law. Print 1040ez federal tax form Adoption taxpayer identification number (ATIN). Print 1040ez federal tax form   If your qualifying person is a child who was placed in your home for adoption and for whom you do not have an SSN, you must get an ATIN for the child. Print 1040ez federal tax form File Form W-7A, Application for Taxpayer Identification Number for Pending U. Print 1040ez federal tax form S. Print 1040ez federal tax form Adoptions. Print 1040ez federal tax form Child of divorced or separated parents or parents living apart. Print 1040ez federal tax form   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if: The child was under age 13 or was not physically or mentally able to care for himself or herself, The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the calendar year, The child was in the custody of one or both parents for more than half the year, and You were the child's custodial parent. Print 1040ez federal tax form   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. Print 1040ez federal tax form If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. Print 1040ez federal tax form For details and an exception for a parent who works at night, see Pub. Print 1040ez federal tax form 501. Print 1040ez federal tax form   The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents. Print 1040ez federal tax form Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. Print 1040ez federal tax form Earned income. Print 1040ez federal tax form   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. Print 1040ez federal tax form A net loss from self-employment reduces earned income. Print 1040ez federal tax form Earned income also includes strike benefits and any disability pay you report as wages. Print 1040ez federal tax form   Generally, only taxable compensation is included. Print 1040ez federal tax form However, you can elect to include nontaxable combat pay in earned income. Print 1040ez federal tax form If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. Print 1040ez federal tax form (In other words, if one of you makes the election, the other one can also make it but does not have to. Print 1040ez federal tax form ) You should figure your credit both ways and make the election if it gives you a greater tax benefit. Print 1040ez federal tax form Members of certain religious faiths opposed to social security. Print 1040ez federal tax form   Certain income earned by persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes may not be considered earned income for this purpose. Print 1040ez federal tax form See Earned Income Test in Publication 503. Print 1040ez federal tax form Not earned income. Print 1040ez federal tax form   Earned income does not include: Pensions and annuities, Social security and railroad retirement benefits, Workers' compensation, Interest and dividends, Unemployment compensation, Scholarship or fellowship grants, except for those reported on a Form W-2 and paid to you for teaching or other services, Nontaxable workfare payments, Child support payments received by you, Income of nonresident aliens that is not effectively connected with a U. Print 1040ez federal tax form S. Print 1040ez federal tax form trade or business, or Any amount received for work while an inmate in a penal institution. Print 1040ez federal tax form Rule for student-spouse or spouse not able to care for self. Print 1040ez federal tax form   Your spouse is treated as having earned income for any month that he or she is: A full-time student, or Physically or mentally not able to care for himself or herself. Print 1040ez federal tax form (Your spouse also must live with you for more than half the year. Print 1040ez federal tax form )   If you are filing a joint return, this rule also applies to you. Print 1040ez federal tax form You can be treated as having earned income for any month you are a full-time student or not able to care for yourself. Print 1040ez federal tax form   Figure the earned income of the nonworking spouse described under (1) or (2) above as explained under Earned Income Limit , later. Print 1040ez federal tax form   This rule applies to only one spouse for any one month. Print 1040ez federal tax form If, in the same month, both you and your spouse do not work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month. Print 1040ez federal tax form Full-time student. Print 1040ez federal tax form   You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full time. Print 1040ez federal tax form You must have been a full-time student for some part of each of 5 calendar months during the year. Print 1040ez federal tax form (The months need not be consecutive. Print 1040ez federal tax form ) School. Print 1040ez federal tax form   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. Print 1040ez federal tax form A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Print 1040ez federal tax form Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. Print 1040ez federal tax form Expenses are considered work-related only if both of the following are true. Print 1040ez federal tax form They allow you (and your spouse if filing jointly) to work or look for work. Print 1040ez federal tax form They are for a qualifying person's care. Print 1040ez federal tax form Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. Print 1040ez federal tax form If you are married, generally both you and your spouse must work or look for work. Print 1040ez federal tax form One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. Print 1040ez federal tax form Your work can be for others or in your own business or partnership. Print 1040ez federal tax form It can be either full time or part time. Print 1040ez federal tax form Work also includes actively looking for work. Print 1040ez federal tax form However, if you do not find a job and have no earned income for the year, you cannot take this credit. Print 1040ez federal tax form See Earned Income Test , earlier. Print 1040ez federal tax form An expense is not considered work-related merely because you had it while you were working. Print 1040ez federal tax form The purpose of the expense must be to allow you to work. Print 1040ez federal tax form Whether your expenses allow you to work or look for work depends on the facts. Print 1040ez federal tax form Example 1. Print 1040ez federal tax form The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. Print 1040ez federal tax form Example 2. Print 1040ez federal tax form You work during the day. Print 1040ez federal tax form Your spouse works at night and sleeps during the day. Print 1040ez federal tax form You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. Print 1040ez federal tax form Your expenses are considered work-related. Print 1040ez federal tax form Volunteer work. Print 1040ez federal tax form    For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. Print 1040ez federal tax form Work for part of year. Print 1040ez federal tax form   If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. Print 1040ez federal tax form For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work-related. Print 1040ez federal tax form However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (2½ months × $250). Print 1040ez federal tax form Temporary absence from work. Print 1040ez federal tax form   You do not have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. Print 1040ez federal tax form Instead, you can figure your credit including the expenses you paid for the period of absence. Print 1040ez federal tax form   An absence of 2 weeks or less is a short, temporary absence. Print 1040ez federal tax form An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. Print 1040ez federal tax form Example. Print 1040ez federal tax form You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. Print 1040ez federal tax form You become ill and miss 4 months of work but receive sick pay. Print 1040ez federal tax form You continue to pay the nanny to care for the children while you are ill. Print 1040ez federal tax form Your absence is not a short, temporary absence, and your expenses are not considered work-related. Print 1040ez federal tax form Part-time work. Print 1040ez federal tax form   If you work part-time, you generally must figure your expenses for each day. Print 1040ez federal tax form However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. Print 1040ez federal tax form Any day when you work at least 1 hour is a day of work. Print 1040ez federal tax form Example 1. Print 1040ez federal tax form You work 3 days a week. Print 1040ez federal tax form While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. Print 1040ez federal tax form You can pay the center $150 for any 3 days a week or $250 for 5 days a week. Print 1040ez federal tax form Your child attends the center 5 days a week. Print 1040ez federal tax form Your work-related expenses are limited to $150 a week. Print 1040ez federal tax form Example 2. Print 1040ez federal tax form The facts are the same as in Example 1 except the center does not offer a 3-day option. Print 1040ez federal tax form The entire $250 weekly fee may be a work-related expense. Print 1040ez federal tax form Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. Print 1040ez federal tax form You do not have to choose the least expensive way of providing care. Print 1040ez federal tax form The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost. Print 1040ez federal tax form Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. Print 1040ez federal tax form Expenses for household services qualify if part of the services is for the care of qualifying persons. Print 1040ez federal tax form See Household services , later. Print 1040ez federal tax form Expenses not for care. Print 1040ez federal tax form   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. Print 1040ez federal tax form However, you can include small amounts paid for these items if they are incidental to and cannot be separated from the cost of caring for the qualifying person. Print 1040ez federal tax form   Child support payments are not for care and do not qualify for the credit. Print 1040ez federal tax form Education. Print 1040ez federal tax form   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. Print 1040ez federal tax form Expenses to attend kindergarten or a higher grade are not expenses for care. Print 1040ez federal tax form Do not use these expenses to figure your credit. Print 1040ez federal tax form   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. Print 1040ez federal tax form   Summer school and tutoring programs are not for care. Print 1040ez federal tax form Example 1. Print 1040ez federal tax form You take your 3-year-old child to a nursery school that provides lunch and educational activities as a part of its preschool childcare service. Print 1040ez federal tax form The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. Print 1040ez federal tax form You can count the total cost when you figure the credit. Print 1040ez federal tax form Example 2. Print 1040ez federal tax form You place your 10-year-old child in a boarding school so you can work full time. Print 1040ez federal tax form Only the part of the boarding school expense that is for the care of your child is a work-related expense. Print 1040ez federal tax form You can count that part of the expense in figuring your credit if it can be separated from the cost of education. Print 1040ez federal tax form You cannot count any part of the amount you pay the school for your child's education. Print 1040ez federal tax form Care outside your home. Print 1040ez federal tax form   You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home. Print 1040ez federal tax form Dependent care center. Print 1040ez federal tax form   You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers. Print 1040ez federal tax form   A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit. Print 1040ez federal tax form Camp. Print 1040ez federal tax form   The cost of sending your child to an overnight camp is not considered a work-related expense. Print 1040ez federal tax form The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. Print 1040ez federal tax form Transportation. Print 1040ez federal tax form   If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. Print 1040ez federal tax form This includes transportation by bus, subway, taxi, or private car. Print 1040ez federal tax form However, transportation not provided by a care provider is not for the care of a qualifying person. Print 1040ez federal tax form Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for care of a qualifying person. Print 1040ez federal tax form Fees and deposits. Print 1040ez federal tax form   Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they are not directly for care. Print 1040ez federal tax form However, a forfeited deposit is not for the care of a qualifying person if care is not provided. Print 1040ez federal tax form Example 1. Print 1040ez federal tax form You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. Print 1040ez federal tax form The fee you paid is a work-related expense. Print 1040ez federal tax form Example 2. Print 1040ez federal tax form You placed a deposit with a preschool to reserve a place for your 3-year-old child. Print 1040ez federal tax form You later sent your child to a different preschool and forfeited the deposit. Print 1040ez federal tax form The forfeited deposit is not for care and so is not a work-related expense. Print 1040ez federal tax form Household services. Print 1040ez federal tax form   Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person. Print 1040ez federal tax form   Household services are ordinary and usual services done in and around your home that are necessary to run your home. Print 1040ez federal tax form They include the services of a housekeeper, maid, or cook. Print 1040ez federal tax form However, they do not include the services of a chauffeur, bartender, or gardener. Print 1040ez federal tax form See Household Services in Publication 503 for more information. Print 1040ez federal tax form   In this chapter, the term housekeeper refers to any household employee whose services include the care of a qualifying person. Print 1040ez federal tax form Taxes paid on wages. Print 1040ez federal tax form   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. Print 1040ez federal tax form See Employment Taxes for Household Employers , later. Print 1040ez federal tax form Payments to Relatives or Dependents You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. Print 1040ez federal tax form However, do not count any amounts you pay to: A dependent for whom you (or your spouse if filing jointly) can claim an exemption, Your child who was under age 19 at the end of the year, even if he or she is not your dependent, A person who was your spouse any time during the year, or The parent of your qualifying person if your qualifying person is your child and under age 13. Print 1040ez federal tax form Joint Return Test Generally, married couples must file a joint return to take the credit. Print 1040ez federal tax form However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. Print 1040ez federal tax form Legally separated. Print 1040ez federal tax form   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. Print 1040ez federal tax form You may be eligible to take the credit on your return using head of household filing status. Print 1040ez federal tax form Married and living apart. Print 1040ez federal tax form   You are not considered married and are eligible to take the credit if all the following apply. Print 1040ez federal tax form You file a return apart from your spouse. Print 1040ez federal tax form Your home is the home of a qualifying person for more than half the year. Print 1040ez federal tax form You pay more than half the cost of keeping up your home for the year. Print 1040ez federal tax form Your spouse does not live in your home for the last 6 months of the year. Print 1040ez federal tax form Costs of keeping up a home. Print 1040ez federal tax form   The costs of keeping up a home normally include property taxes, mortgage interest, rent, utility charges, home repairs, insurance on the home, and food eaten at home. Print 1040ez federal tax form   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. Print 1040ez federal tax form   They also do not include the purchase, permanent improvement, or replacement of property. Print 1040ez federal tax form For example, you cannot include the cost of replacing a water heater. Print 1040ez federal tax form However, you can include the cost of repairing a water heater. Print 1040ez federal tax form Death of spouse. Print 1040ez federal tax form   If your spouse died during the year and you do not remarry before the end of the year, you generally must file a joint return to take the credit. Print 1040ez federal tax form If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's return. Print 1040ez federal tax form Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. Print 1040ez federal tax form Use Form 2441, Part I, to show the information. Print 1040ez federal tax form If you do not have any care providers and you are filing Form 2441 only to report taxable income in Part III, enter “none” in line 1, column (a). Print 1040ez federal tax form Information needed. Print 1040ez federal tax form   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. Print 1040ez federal tax form   If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. Print 1040ez federal tax form If the care provider is an organization, then it is the employer identification number (EIN). Print 1040ez federal tax form   You do not have to show the taxpayer identification number if the care provider is a tax-exempt organization (such as a church or school). Print 1040ez federal tax form In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. Print 1040ez federal tax form   If you cannot provide all of the information or if the information is incorrect, you must be able to show that you used due diligence (discussed later) in trying to furnish the necessary information. Print 1040ez federal tax form Getting the information. Print 1040ez federal tax form   You can use Form W-10 to request the required information from the care provider. Print 1040ez federal tax form If you do not use Form W-10, you can get the information from one of the other sources listed in the instructions for Form W-10 including: A copy of the provider's social security card, A copy of the provider's completed Form W-4 if he or she is your household employee, A copy of the statement furnished by your employer if the provider is your employer's dependent care plan, or A letter or invoice from the provider if it shows the information. Print 1040ez federal tax form    You should keep this information with your tax records. Print 1040ez federal tax form Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. Print 1040ez federal tax form Due diligence. Print 1040ez federal tax form   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. Print 1040ez federal tax form However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. Print 1040ez federal tax form   You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information just listed. Print 1040ez federal tax form Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. Print 1040ez federal tax form Provider refusal. Print 1040ez federal tax form   If the provider refuses to give you their identifying information, you should report on Form 2441 whatever information you have (such as the name and address). Print 1040ez federal tax form Enter “See Attached Statement” in the columns calling for the information you do not have. Print 1040ez federal tax form Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. Print 1040ez federal tax form Be sure to write your name and social security number on this statement. Print 1040ez federal tax form The statement will show that you used due diligence in trying to furnish the necessary information. Print 1040ez federal tax form U. Print 1040ez federal tax form S. Print 1040ez federal tax form citizens and resident aliens living abroad. Print 1040ez federal tax form   If you are living abroad, your care provider may not have, and may not be required to get, a U. Print 1040ez federal tax form S. Print 1040ez federal tax form taxpayer identification number (for example, an SSN or EIN). Print 1040ez federal tax form If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. Print 1040ez federal tax form How To Figure the Credit Your credit is a percentage of your work-related expenses. Print 1040ez federal tax form Your expenses are subject to the earned income limit and the dollar limit. Print 1040ez federal tax form The percentage is based on your adjusted gross income. Print 1040ez federal tax form Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. Print 1040ez federal tax form Expenses prepaid in an earlier year. Print 1040ez federal tax form   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. Print 1040ez federal tax form Claim the expenses for the later year as if they were actually paid in that later year. Print 1040ez federal tax form Expenses not paid until the following year. Print 1040ez federal tax form   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. Print 1040ez federal tax form You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. Print 1040ez federal tax form See Payments for prior year's expenses under Amount of Credit in Publication 503. Print 1040ez federal tax form    If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. Print 1040ez federal tax form You may be able to claim a credit for them on your 2014 return. Print 1040ez federal tax form Expenses reimbursed. Print 1040ez federal tax form   If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses. Print 1040ez federal tax form Example. Print 1040ez federal tax form You paid work-related expenses of $3,000. Print 1040ez federal tax form You are reimbursed $2,000 by a state social services agency. Print 1040ez federal tax form You can use only $1,000 to figure your credit. Print 1040ez federal tax form Medical expenses. Print 1040ez federal tax form   Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. Print 1040ez federal tax form You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. Print 1040ez federal tax form   If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. Print 1040ez federal tax form However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. Print 1040ez federal tax form    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. Print 1040ez federal tax form Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. Print 1040ez federal tax form See Reduced Dollar Limit , later. Print 1040ez federal tax form But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. Print 1040ez federal tax form Dependent care benefits. Print 1040ez federal tax form   Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. Print 1040ez federal tax form Your salary may have been reduced to pay for these benefits. Print 1040ez federal tax form If you received benefits as an employee, they should be shown in box 10 of your Form W-2. Print 1040ez federal tax form See Statement for employee , later. Print 1040ez federal tax form Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. Print 1040ez federal tax form Enter the amount of these benefits on Form 2441, Part III, line 12. Print 1040ez federal tax form Exclusion or deduction. Print 1040ez federal tax form   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. Print 1040ez federal tax form Your employer can tell you whether your benefit plan qualifies. Print 1040ez federal tax form To claim the exclusion, you must complete Part III of Form 2441. Print 1040ez federal tax form You cannot use Form 1040EZ. Print 1040ez federal tax form   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. Print 1040ez federal tax form Therefore, you would not get an exclusion from wages. Print 1040ez federal tax form Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. Print 1040ez federal tax form To claim the deduction, you must use Form 2441. Print 1040ez federal tax form   The amount you can exclude or deduct is limited to the smallest 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). Print 1040ez federal tax form The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. Print 1040ez federal tax form See Earned Income Limit, later. Print 1040ez federal tax form    You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses. Print 1040ez federal tax form Statement for employee. Print 1040ez federal tax form   Your employer must give you a Form W-2 (or similar statement) showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. Print 1040ez federal tax form Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. Print 1040ez federal tax form Effect of exclusion on credit. Print 1040ez federal tax form   If you exclude dependent care benefits from your income, the amount of the excluded benefits: Is not included in your work-related expenses, and Reduces the dollar limit, discussed later. Print 1040ez federal tax form Earned Income Limit The amount of work-related expenses you use to figure your credit cannot be more than: Your earned income for the year if you are single at the end of the year, or The smaller of your or your spouse's earned income for the year if you are married at the end of the year. Print 1040ez federal tax form Earned income is defined under Earned Income Test , earlier. Print 1040ez federal tax form For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year. Print 1040ez federal tax form Separated spouse. Print 1040ez federal tax form   If you are legally separated or married and living apart from your spouse (as described under Joint Return Test , earlier), you are not considered married for purposes of the earned income limit. Print 1040ez federal tax form Use only your income in figuring the earned income limit. Print 1040ez federal tax form Surviving spouse. Print 1040ez federal tax form   If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year. Print 1040ez federal tax form Community property laws. Print 1040ez federal tax form   You should disregard community property laws when you figure earned income for this credit. Print 1040ez federal tax form You or your spouse is a student or not able to care for self. Print 1040ez federal tax form   Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. Print 1040ez federal tax form His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. Print 1040ez federal tax form Spouse works. Print 1040ez federal tax form   If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. Print 1040ez federal tax form Spouse qualifies for part of month. Print 1040ez federal tax form    If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. Print 1040ez federal tax form You are a student or not able to care for self. Print 1040ez federal tax form   These rules also apply if you are a student or not able to care for yourself and you are filing a joint return. Print 1040ez federal tax form For each month or part of a month you are a student or not able to care for yourself, your earned income is considered to be at least $250 (or $500). Print 1040ez federal tax form If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. Print 1040ez federal tax form Both spouses qualify. Print 1040ez federal tax form   If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. Print 1040ez federal tax form Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. Print 1040ez federal tax form This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. Print 1040ez federal tax form If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. Print 1040ez federal tax form This $6,000 limit does not need to be divided equally among them. Print 1040ez federal tax form For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit. Print 1040ez federal tax form Yearly limit. Print 1040ez federal tax form   The dollar limit is a yearly limit. Print 1040ez federal tax form The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. Print 1040ez federal tax form Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. Print 1040ez federal tax form Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. Print 1040ez federal tax form Reduced Dollar Limit If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. Print 1040ez federal tax form Your reduced dollar limit is figured on Form 2441, Part III. Print 1040ez federal tax form See Dependent Care Benefits , earlier, for information on excluding or deducting these benefits. Print 1040ez federal tax form Example 1. Print 1040ez federal tax form George is a widower with one child and earns $24,000 a year. Print 1040ez federal tax form He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. Print 1040ez federal tax form His employer pays an additional $1,000 under a dependent care benefit plan. Print 1040ez federal tax form This $1,000 is excluded from George's income. Print 1040ez federal tax form Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. Print 1040ez federal tax form This is because his dollar limit is reduced as shown next. Print 1040ez federal tax form   George's Reduced Dollar Limit 1) Maximum allowable expenses for one qualifying person $3,000 2) Minus: Dependent care benefits George excludes from income −1,000 3) Reduced dollar limit on expenses George can use for the credit $2,000 Example 2. Print 1040ez federal tax form Randall is married and both he and his wife are employed. Print 1040ez federal tax form Each has earned income in excess of $6,000. Print 1040ez federal tax form They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. Print 1040ez federal tax form Randall's work-related expenses are $6,000 for the year. Print 1040ez federal tax form Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. Print 1040ez federal tax form Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. Print 1040ez federal tax form Although the dollar limit for his work- related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. Print 1040ez federal tax form This is because his dollar limit is reduced as shown next. Print 1040ez federal tax form   Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits Randall selects from employer's cafeteria plan and excludes from income −5,000 3) Reduced dollar limit on expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. Print 1040ez federal tax form This percentage depends on your adjusted gross income shown on Form 1040, line 38, or Form 1040A, line 22. Print 1040ez federal tax form The following table shows the percentage to use based on adjusted gross income. Print 1040ez federal tax form   IF your adjusted gross income is: THEN the percentage is:       Over   But not over         $0   $15,000   35%       15,000   17,000   34%       17,000   19,000   33%       19,000   21,000   32%       21,000   23,000   31%       23,000   25,000   30%       25,000   27,000   29%       27,000   29,000   28%       29,000   31,000   27%       31,000   33,000   26%       33,000   35,000   25%       35,000   37,000   24%       37,000   39,000   23%       39,000   41,000   22%       41,000   43,000   21%       43,000   No limit   20%   How To Claim the Credit To claim the credit, you can file Form 1040 or Form 1040A. Print 1040ez federal tax form You cannot claim the credit on Form 1040EZ. Print 1040ez federal tax form Form 1040 or 1040A. Print 1040ez federal tax form   You must complete Form 2441 and attach it to your Form 1040 or 1040A. Print 1040ez federal tax form Enter the credit on Form 1040, line 48, or Form 1040A, line 29. Print 1040ez federal tax form Limit on credit. Print 1040ez federal tax form   The amount of credit you can claim is generally limited to the amount of your tax. Print 1040ez federal tax form For more information, see the Instructions for Form 2441. Print 1040ez federal tax form Tax credit not refundable. Print 1040ez federal tax form   You cannot get a refund for any part of the credit that is more than this limit. Print 1040ez federal tax form Recordkeeping. Print 1040ez federal tax form You should keep records of your work-related expenses. Print 1040ez federal tax form Also, if your dependent or spouse is not able to care for himself or herself, your records should show both the nature and the length of the disability. Print 1040ez federal tax form Other records you should keep to support your claim for the credit are described earlier under Provider Identification Test . Print 1040ez federal tax form Employment Taxes for Household Employers If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. Print 1040ez federal tax form If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. Print 1040ez federal tax form If the individuals who work in your home are self-employed, you are not liable for any of the taxes discussed in this section. Print 1040ez federal tax form Self-employed persons who are in business for themselves are not household employees. Print 1040ez federal tax form Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. Print 1040ez federal tax form If you use a placement agency that exercises control over what work is done and how it will be done by a babysitter or companion who works in your home, the worker is not your employee. Print 1040ez federal tax form This control could include providing rules of conduct and appearance and requiring regular reports. Print 1040ez federal tax form In this case, you do not have to pay employment taxes. Print 1040ez federal tax form But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee. Print 1040ez federal tax form If you have a household employee, you may be subject to: Social security and Medicare taxes, Federal unemployment tax, and Federal income tax withholding. Print 1040ez federal tax form Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. Print 1040ez federal tax form Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. Print 1040ez federal tax form Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. Print 1040ez federal tax form For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. Print 1040ez federal tax form State employment tax. Print 1040ez federal tax form   You may also have to pay state unemployment tax. Print 1040ez federal tax form Contact your state unemployment tax office for information. Print 1040ez federal tax form You should also find out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance. Print 1040ez federal tax form For a list of state unemployment tax agencies, visit the U. Print 1040ez federal tax form S. Print 1040ez federal tax form Department of Labor's website. Print 1040ez federal tax form A link to that website is in Publication 926, or you can find it with an online search. Print 1040ez federal tax form Prev  Up  Next   Home   More Online Publications
 
Print - Click this link to Print this page

Contact Your Local IRS Office

Click before you call … for further information about these topics:

 

Taxpayer Assistance Centers

IRS Taxpayer Assistance Centers (TAC) are your source for personal tax help when you believe your tax issue cannot be handled online or by phone, and you want face-to-face tax assistance. Taxpayer Assistance Centers are closed for all Federal Holidays. Please be advised that you may be asked to provide valid photo identification and a Taxpayer Identification Number, such as a Social Security Number, to receive services.

Tax return preparation services are not available at TAC offices. You can take advantage of free tax preparation using Free File or Free File Fillable Forms or through a Volunteer Income Tax Assistance/Tax Counseling for the Elderly site in your community. For detailed information on services offered at each TAC location, click on the state below and then click on the Services Provided link for the TAC you plan to visit.

In-person Document Review Provided for Form W-7 Applicants

Participating TAC locations will review passports and national ID cards for those who submit Form W-7, Application for IRS Individual Taxpayer Identification Number in person

Locate a Taxpayer Assistance Center

To view a list of all Taxpayer Assistance Centers in your state, click on the map or state links below.

  • To search for the Taxpayer Assistance Center closest to you, enter your 5-digit ZIP Code into the Office Locator

Office Locator

NOTE: The maximum search distance available in the Office Locator is 100 miles. If a Taxpayer Assistance Center is not within 100 miles of the ZIP Code you entered, use the map or state links below to locate the office closest to you.

Click on your state or the international link below.

Washington Oregon California Montana Idaho Nevada Utah Arizona Colorado Wyoming New Mexico Texas Hawaii Alaska Oklahoma Kansas Nebraska South Dakota North Dakota Minnesota Iowa Wisconsin Illinois Missouri Arkansas Louisiana Michigan Indiana Ohio Kentucky Tennessee Mississippi Alabama Florida Georgia South Carolina North Carolina Virginia West Virginia Pennsylvania Maryland Washington, D.C. Delaware New Jersey New York Connecticut Rhode Island Massachusetts Maine Vermont New Hampshire

International Filing

 


List of States (including Washington, DC and Puerto Rico)

Alabama Illinois Montana Puerto Rico
Alaska Indiana Nebraska Rhode Island
Arizona Iowa Nevada South Carolina
Arkansas Kansas New Hampshire South Dakota
California Kentucky New Jersey Tennessee
Colorado Louisiana New Mexico Texas
Connecticut Maine New York Utah
Delaware Maryland North Carolina Vermont
District of Columbia Massachusetts North Dakota Virginia
Florida Michigan Ohio Washington
Georgia Minnesota Oklahoma West Virginia
Hawaii Mississippi Oregon Wisconsin
Idaho Missouri Pennsylvania Wyoming

For information on where to file your tax return please see Where to File Addresses

Stakeholder Liaison (SL) Phone Numbers
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.

Questions concerning charities and other non-profit organizations should contact our Tax Exempt and Government Entities Customer Account Services.

Page Last Reviewed or Updated: 19-Mar-2014

The Print 1040ez Federal Tax Form

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