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Schedule C Ez Form

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Schedule C Ez Form

Schedule c ez form 9. Schedule c ez form   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. Schedule c ez form Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. Schedule c ez form Amount to report as ordinary income. Schedule c ez form Applicable percentage. Schedule c ez form Amount to report as ordinary income. Schedule c ez form Applicable percentage. Schedule c ez form Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. Schedule c ez form When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. Schedule c ez form Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. Schedule c ez form Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. Schedule c ez form Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. Schedule c ez form Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. Schedule c ez form Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). Schedule c ez form Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. Schedule c ez form Table 9-1. Schedule c ez form Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. Schedule c ez form Held 24 mos. Schedule c ez form  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. Schedule c ez form Held 12 mos. Schedule c ez form   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). Schedule c ez form Do not take that gain into account as section 1231 gain. Schedule c ez form Section 1231 transactions. Schedule c ez form   Gain or loss on the following transactions is subject to section 1231 treatment. Schedule c ez form Sale or exchange of cattle and horses. Schedule c ez form The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. Schedule c ez form Sale or exchange of other livestock. Schedule c ez form This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. Schedule c ez form Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. Schedule c ez form Other livestock does not include poultry. Schedule c ez form Sale or exchange of depreciable personal property. Schedule c ez form This property must be used in your business and held longer than 1 year. Schedule c ez form Generally, property held for the production of rents or royalties is considered to be used in a trade or business. Schedule c ez form Examples of depreciable personal property include farm machinery and trucks. Schedule c ez form It also includes amortizable section 197 intangibles. Schedule c ez form Sale or exchange of real estate. Schedule c ez form This property must be used in your business and held longer than 1 year. Schedule c ez form Examples are your farm or ranch (including barns and sheds). Schedule c ez form Sale or exchange of unharvested crops. Schedule c ez form The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. Schedule c ez form You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). Schedule c ez form Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. Schedule c ez form Distributive share of partnership gains and losses. Schedule c ez form Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). Schedule c ez form Cutting or disposal of timber. Schedule c ez form Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . Schedule c ez form Condemnation. Schedule c ez form The condemned property (defined in chapter 11) must have been held longer than 1 year. Schedule c ez form It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. Schedule c ez form It cannot be property held for personal use. Schedule c ez form Casualty or theft. Schedule c ez form The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). Schedule c ez form You must have held the property longer than 1 year. Schedule c ez form However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. Schedule c ez form Section 1231 does not apply to personal casualty gains and losses. Schedule c ez form See chapter 11 for information on how to treat those gains and losses. Schedule c ez form If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. Schedule c ez form See Table 9-1. Schedule c ez form Property for sale to customers. Schedule c ez form   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. Schedule c ez form If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. Schedule c ez form Treatment as ordinary or capital. Schedule c ez form   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. Schedule c ez form If you have a net section 1231 loss, it is an ordinary loss. Schedule c ez form If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. Schedule c ez form The rest, if any, is long-term capital gain. Schedule c ez form Nonrecaptured section 1231 losses. Schedule c ez form   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. Schedule c ez form These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. Schedule c ez form Example. Schedule c ez form In 2013, Ben has a $2,000 net section 1231 gain. Schedule c ez form To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. Schedule c ez form From 2008 through 2012 he had the following section 1231 gains and losses. Schedule c ez form Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. Schedule c ez form 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. Schedule c ez form Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. Schedule c ez form To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. Schedule c ez form For more information, see chapter 3 of Publication 544. Schedule c ez form Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. Schedule c ez form Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. Schedule c ez form See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. Schedule c ez form Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. Schedule c ez form Personal property (either tangible or intangible). Schedule c ez form Other tangible property (except buildings and their structural components) used as any of the following. Schedule c ez form See Buildings and structural components below. Schedule c ez form An integral part of manufacturing, production, or extraction, or of furnishing certain services. Schedule c ez form A research facility in any of the activities in (a). Schedule c ez form A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). Schedule c ez form That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. Schedule c ez form Amortization of certified pollution control facilities. Schedule c ez form The section 179 expense deduction. Schedule c ez form Deduction for clean-fuel vehicles and certain refueling property. Schedule c ez form Expenditures to remove architectural and transportation barriers to the handicapped and elderly. Schedule c ez form Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. Schedule c ez form Single purpose agricultural (livestock) or horticultural structures. Schedule c ez form Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. Schedule c ez form Buildings and structural components. Schedule c ez form   Section 1245 property does not include buildings and structural components. Schedule c ez form The term building includes a house, barn, warehouse, or garage. Schedule c ez form The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. Schedule c ez form   Do not treat a structure that is essentially machinery or equipment as a building or structural component. Schedule c ez form Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. Schedule c ez form   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. Schedule c ez form Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. Schedule c ez form Facility for bulk storage of fungible commodities. Schedule c ez form   This is a facility used mainly for the bulk storage of fungible commodities. Schedule c ez form Bulk storage means storage of a commodity in a large mass before it is used. Schedule c ez form For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. Schedule c ez form To be fungible, a commodity must be such that one part may be used in place of another. Schedule c ez form Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. Schedule c ez form The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. Schedule c ez form The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). Schedule c ez form For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. Schedule c ez form For details, see chapter 3 of Publication 544. Schedule c ez form Use Part III of Form 4797 to figure the ordinary income part of the gain. Schedule c ez form Depreciation claimed on other property or claimed by other taxpayers. Schedule c ez form   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. Schedule c ez form Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. Schedule c ez form For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. Schedule c ez form Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). Schedule c ez form Example. Schedule c ez form Jeff Free paid $120,000 for a tractor in 2012. Schedule c ez form On February 23, 2013, he traded it for a chopper and paid an additional $30,000. Schedule c ez form To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. Schedule c ez form Jeff can also depreciate the additional $30,000 for the chopper. Schedule c ez form Depreciation and amortization. Schedule c ez form   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. Schedule c ez form See Depreciation Recapture in chapter 3 of Publication 544 for more details. Schedule c ez form Ordinary depreciation deductions. Schedule c ez form Section 179 deduction (see chapter 7). Schedule c ez form Any special depreciation allowance. Schedule c ez form Amortization deductions for all the following costs. Schedule c ez form Acquiring a lease. Schedule c ez form Lessee improvements. Schedule c ez form Pollution control facilities. Schedule c ez form Reforestation expenses. Schedule c ez form Section 197 intangibles. Schedule c ez form Qualified disaster expenses. Schedule c ez form Franchises, trademarks, and trade names acquired before August 11, 1993. Schedule c ez form Example. Schedule c ez form You file your returns on a calendar year basis. Schedule c ez form In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. Schedule c ez form You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. Schedule c ez form You did not claim the section 179 expense deduction for the truck. Schedule c ez form You sold it in May 2013 for $7,000. Schedule c ez form The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). Schedule c ez form Figure the gain treated as ordinary income as follows. Schedule c ez form 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. Schedule c ez form   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. Schedule c ez form If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. Schedule c ez form If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. Schedule c ez form This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. Schedule c ez form Disposition of plants and animals. Schedule c ez form   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. Schedule c ez form If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. Schedule c ez form For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. Schedule c ez form For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. Schedule c ez form You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. Schedule c ez form Example. Schedule c ez form Janet Maple sold her apple orchard in 2013 for $80,000. Schedule c ez form Her adjusted basis at the time of sale was $60,000. Schedule c ez form She bought the orchard in 2006, but the trees did not produce a crop until 2009. Schedule c ez form Her pre-productive expenses were $6,000. Schedule c ez form She elected not to use the uniform capitalization rules. Schedule c ez form Janet must treat $6,000 of the gain as ordinary income. Schedule c ez form Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. Schedule c ez form It includes buildings and structural components that are not section 1245 property (discussed earlier). Schedule c ez form It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. Schedule c ez form A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. Schedule c ez form Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. Schedule c ez form To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. Schedule c ez form You will not have additional depreciation if any of the following apply to the property disposed of. Schedule c ez form You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. Schedule c ez form You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. Schedule c ez form The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. Schedule c ez form These properties are depreciated using the straight line method. Schedule c ez form Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. Schedule c ez form This applies even if no payments are received in that year. Schedule c ez form If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. Schedule c ez form For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. Schedule c ez form If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. Schedule c ez form To do this, allocate the selling price and the payments you receive in the year of sale to each asset. Schedule c ez form Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. Schedule c ez form For more information on installment sales, see chapter 10. Schedule c ez form Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. Schedule c ez form By gift. Schedule c ez form At death. Schedule c ez form In like-kind exchanges. Schedule c ez form In involuntary conversions. Schedule c ez form Publication 544 also explains how to handle a single transaction involving multiple properties. Schedule c ez form Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. Schedule c ez form Deductions for soil and water conservation expenditures (section 1252 property). Schedule c ez form Exclusions from income for certain cost sharing payments (section 1255 property). Schedule c ez form Section 1252 property. Schedule c ez form   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. Schedule c ez form Exceptions. Schedule c ez form   Do not treat gain on the following transactions as gain on section 1252 property. Schedule c ez form Disposition of farmland by gift. Schedule c ez form Transfer of farm property at death (except for income in respect of a decedent). Schedule c ez form For more information, see Regulations section 1. Schedule c ez form 1252-2. Schedule c ez form Amount to report as ordinary income. Schedule c ez form   You report as ordinary income the lesser of the following amounts. Schedule c ez form Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). Schedule c ez form The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. Schedule c ez form Applicable percentage. Schedule c ez form   The applicable percentage is based on the length of time you held the land. Schedule c ez form If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. Schedule c ez form If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. Schedule c ez form If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. Schedule c ez form Example. Schedule c ez form You acquired farmland on January 19, 2005. Schedule c ez form On October 3, 2013, you sold the land at a $30,000 gain. Schedule c ez form Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. Schedule c ez form The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. Schedule c ez form You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. Schedule c ez form Section 1255 property. Schedule c ez form   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. Schedule c ez form If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. Schedule c ez form Amount to report as ordinary income. Schedule c ez form   You report as ordinary income the lesser of the following amounts. Schedule c ez form The applicable percentage of the total excluded cost-sharing payments. Schedule c ez form The gain on the disposition of the property. Schedule c ez form You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. Schedule c ez form However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. Schedule c ez form Applicable percentage. Schedule c ez form   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. Schedule c ez form If the property is held less than 10 years after you receive the payments, the percentage is 100%. Schedule c ez form After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. Schedule c ez form Form 4797, Part III. Schedule c ez form   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. Schedule c ez form Prev  Up  Next   Home   More Online Publications
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The Schedule C Ez Form

Schedule c ez form Publication 3 - Main Content Table of Contents Gross IncomeForeign Source Income Military Spouses Residency Relief Act (MSRRA) Community Property Form W-2 Codes Adjustments to IncomeArmed Forces Reservists Individual Retirement Arrangements Moving Expenses Combat Zone ExclusionCombat Zone Serving in a Combat Zone Amount of Exclusion Alien StatusResident Aliens Nonresident Aliens Dual-Status Aliens Sale of HomePeriod of suspension. Schedule c ez form Qualified official extended duty. Schedule c ez form ForeclosuresLump Sum Portion of Settlement Payment. Schedule c ez form Interest Payment on Lump Sum Portion of Settlement Payment. Schedule c ez form Lost Equity Portion of Settlement Payment. Schedule c ez form The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Schedule c ez form Interest Payment on Lost Equity Portion of Settlement Payment. Schedule c ez form Itemized DeductionsEmployee Business Expenses Repayments CreditsFirst-Time Homebuyer Credit Child Tax Credit Earned Income Credit Credit for Excess Social Security Tax Withheld Forgiveness of Decedent's Tax LiabilityCombat Zone Related Forgiveness Terrorist or Military Action Related Forgiveness Claims for Tax Forgiveness Filing ReturnsSame-Sex Marriage Where To File When To File Signing Returns Extension of DeadlinesService That Qualifies for an Extension of Deadline Length of Extension Actions for Which Deadlines Are Extended Deferral of Payment Maximum Rate of Interest How To Get Tax HelpLow Income Taxpayer Clinics Gross Income Members of the Armed Forces receive many different types of pay and allowances. Schedule c ez form Some are included in gross income while others are excluded from gross income. Schedule c ez form Included items (Table 1) are subject to tax and must be reported on your tax return. Schedule c ez form Excluded items (Table 2) are not subject to tax, but may have to be shown on your tax return. Schedule c ez form For information on the exclusion of pay for service in a combat zone and other tax benefits for combat zone participants, see Combat Zone Exclusion and Extension of Deadlines , later. Schedule c ez form Table 1. Schedule c ez form Included Items These items are included in gross income, unless the pay is for service in a combat zone. Schedule c ez form Basic pay • Active duty   Bonus pay • Career status   • Attendance at a designated service school     • Enlistment  • Officer   • Back wages     • Overseas extension   • CONUS COLA       • Reenlistment   • Drills         • Reserve training         • Training duty   Other pay  • Accrued leave          • High deployment per diem Special • Aviation career incentives      • Personal money allowances paid to pay • Career sea     high-ranking officers   • Diving duty      • Student loan repayment from programs   • Foreign duty (outside the 48 contiguous     such as the Department of Defense   states and the District of Columbia)     Educational Loan Repayment Program   • Foreign language proficiency     when year's service (requirement) is not   • Hardship duty     attributable to a combat zone   • Hostile fire or imminent danger         • Medical and dental officers   Incentive pay  • Submarine   • Nuclear-qualified officers      • Flight   • Optometry      • Hazardous duty   • Pharmacy      • High altitude/Low Opening (HALO)   • Special compensation for assistance with activities of daily living (SCAADL)         • Special duty assignment pay         • Veterinarian         • Voluntary Separation Incentive       Basic allowance for housing (BAH). Schedule c ez form   You can still deduct mortgage interest and real estate taxes on your home if you pay these expenses with your BAH. Schedule c ez form Table 2. Schedule c ez form Excluded Items The exclusion for certain items applies whether the item is furnished in kind or is a reimbursement or allowance. Schedule c ez form There is no exclusion for the personal use of a government-provided vehicle. Schedule c ez form Combat  zone pay • Compensation for active service while in a combat zone Note: Limited amount for officers     • Housing and cost-of-living allowances abroad paid by the U. Schedule c ez form S. Schedule c ez form Government or by a foreign government         • OHA (Overseas Housing Allowance)                     Other pay • Defense counseling         • Disability, including payments received for injuries incurred as a direct result of a terrorist or military action         • Group-term life insurance   Moving • Dislocation   • Professional education   allowances • Military base realignment and   • ROTC educational and subsistence     closure benefit    allowances     (the exclusion is limited as   • State bonus pay for service in a     described above)   combat zone     • Move-in housing   • Survivor and retirement protection     • Moving household and   plan premiums     personal items   • Uniform allowances     • Moving trailers or mobile homes   • Uniforms furnished to enlisted     • Storage   personnel     • Temporary lodging and         temporary lodging expenses                 Travel • Annual round trip for dependent Death • Burial services   allowances students allowances • Death gratuity payments to     • Leave between consecutive   eligible survivors     overseas tours   • Travel of dependents to burial site     • Reassignment in a dependent         restricted status Family • Certain educational expenses for     • Transportation for you or your allowances dependents     dependents during ship overhaul   • Emergencies     or inactivation   • Evacuation to a place of safety     • Per diem   • Separation             In-kind military • Dependent-care assistance program Living • BAH (Basic Allowance for Housing)   benefits • Legal assistance allowances • BAS (Basic Allowance for Subsistence)     • Medical/dental care         • Commissary/exchange discounts         • Space-available travel on government aircraft           Death gratuity. Schedule c ez form   Any death gratuity paid to a survivor of a member of the Armed Forces is excluded from gross income. Schedule c ez form Differential wage payments. Schedule c ez form   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and that represent all or a portion of the wages the individual would have received from the employer if the individual was performing services for the employer. Schedule c ez form These amounts are taxable and cannot be excluded as combat pay. Schedule c ez form Military base realignment and closure benefit. Schedule c ez form   Payments made under the Homeowners Assistance Program (HAP) generally are excluded from income. Schedule c ez form However, the excludable amount cannot be more than the maximum amount described in subsection (c) of 42 USC 3374 as in effect on November 6, 2009. Schedule c ez form Any part of the payment that is more than this limit is included in gross income. Schedule c ez form For more information about the HAP, see http://hap. Schedule c ez form usace. Schedule c ez form army. Schedule c ez form mil/Overview. Schedule c ez form html. Schedule c ez form Qualified reservist distribution (QRD). Schedule c ez form   A QRD is a distribution to an individual of all or part of the individual's balance in a cafeteria plan or health flexible spending arrangement if: The individual was a reservist who was ordered or called to active duty for more than 179 days or for an indefinite period, and The distribution is made no sooner than the date the reservist was ordered or called to active duty and no later than the last day reimbursements could otherwise be made under the arrangement for the plan year which includes the date of the order or the call to duty. Schedule c ez form A QRD is included in gross income and is subject to employment taxes. Schedule c ez form The employer must include the QRD (reduced by after-tax contributions to the health flexible spending arrangement) as wages on Form W-2, Wage and Tax Statement. Schedule c ez form Thrift Savings Plan (TSP) distributions. Schedule c ez form   If you participate in the Uniformed Services TSP and receive a distribution from your account, the distribution is generally included in your taxable income. Schedule c ez form   If your contributions included tax-exempt combat zone pay, the part of the distribution attributable to those contributions is tax exempt. Schedule c ez form However, the earnings on the tax-exempt portion of the distribution are taxable. Schedule c ez form The TSP will provide a statement showing the taxable and non-taxable portions of the distribution. Schedule c ez form Roth Thrift Savings Plan (TSP) balance. Schedule c ez form   You may be able to contribute to a designated Roth Account through the TSP known as the Roth TSP. Schedule c ez form Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. Schedule c ez form Qualified distributions from a Roth TSP are not included in your income. Schedule c ez form For more details, see Thrift Savings Accounts in Part II of Publication 721, Tax Guide to U. Schedule c ez form S. Schedule c ez form Civil Service Retirement Benefits. Schedule c ez form State bonus payments. Schedule c ez form   Bonus payments made by a state (or a political subdivision thereof) to a member or former member of the uniformed services of the United States or to a dependent of such member are considered combat pay (and therefore may not be taxable) if the payments are made only because of the member's service in a combat zone. Schedule c ez form See Combat Zone , later, for a list of designated combat zones. Schedule c ez form Foreign Source Income If you are a U. Schedule c ez form S. Schedule c ez form citizen with income from sources outside the United States (foreign income), you must report all of that income (except for amounts that U. Schedule c ez form S. Schedule c ez form law allows you to exclude) on your tax return. Schedule c ez form This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or a Form 1099. Schedule c ez form This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Schedule c ez form Certain taxpayers can exclude income earned in foreign countries. Schedule c ez form For 2013, this exclusion amount can be as much as $97,600. Schedule c ez form However, the foreign earned income exclusion does not apply to the wages and salaries of military and civilian employees of the U. Schedule c ez form S. Schedule c ez form Government. Schedule c ez form Employees of the U. Schedule c ez form S. Schedule c ez form Government include those who work at United States Armed Forces exchanges, commissioned and noncommissioned officers' messes, Armed Forces motion picture services, and similar personnel. Schedule c ez form Other foreign income earned by military personnel or their spouses may be eligible for the foreign earned income exclusion. Schedule c ez form For more information on the exclusion, see Publication 54. Schedule c ez form Residents of American Samoa may be able to exclude income from American Samoa. Schedule c ez form This possession exclusion does not apply to wages and salaries of military and civilian employees of the U. Schedule c ez form S. Schedule c ez form Government. Schedule c ez form If you need information on the possession exclusion, see Publication 570, Tax Guide for Individuals With Income From U. Schedule c ez form S. Schedule c ez form Possessions. Schedule c ez form Military Spouses Residency Relief Act (MSRRA) If you are the civilian spouse of an active duty U. Schedule c ez form S. Schedule c ez form military servicemember and your domicile is the same as the servicemember's, you can choose to keep your prior residence or domicile for tax purposes when you accompany the servicemember spouse, who is relocating under military orders to a new duty station in one of the 50 states, the District of Columbia, or a U. Schedule c ez form S. Schedule c ez form possession. Schedule c ez form See Publication 570 for more information. Schedule c ez form Domicile. Schedule c ez form   Your domicile is the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. Schedule c ez form It is not always where you presently live. Schedule c ez form Community Property The pay you earn as a member of the Armed Forces may be subject to community property laws depending on your marital status, your domicile, and the nature of the payment. Schedule c ez form The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Schedule c ez form Marital status. Schedule c ez form   Community property rules apply to married persons whose domicile during the tax year was in a community property state. Schedule c ez form The rules may affect your tax liability if you file separate returns or are divorced during the year. Schedule c ez form Nevada, Washington, and California domestic partners. Schedule c ez form   A registered domestic partner in Nevada, Washington, or California generally must report half the combined income of the individual and his or her domestic partner. Schedule c ez form See Form 8958 and Publication 555, Community Property. Schedule c ez form Nature of the payment. Schedule c ez form   Active duty military pay is subject to community property laws. Schedule c ez form Armed Forces retired or retainer pay may be subject to community property laws. Schedule c ez form   For more information on community property laws, see Publication 555. Schedule c ez form Form W-2 Codes Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Schedule c ez form Form W-2 also shows other amounts that you may find important in box 12. Schedule c ez form The amounts shown in box 12 are generally preceded by a code. Schedule c ez form A list of codes used in box 12 is shown, next. Schedule c ez form Form W-2 Reference Guide for Box 12 Codes A Uncollected social security or RRTA J Nontaxable sick pay T Adoption benefits   tax on tips             K 20% excise tax on excess golden V Income from exercise of B Uncollected Medicare tax on tips   parachute payments   nonstatutory stock option(s)             C Taxable cost of group-term life L Substantiated employee business W Employer contributions (including   insurance over $50,000   expense reimbursements   employee contributions through a           cafeteria plan) to an employee's D Elective deferrals under a section M Uncollected social security or RRTA   health savings account (HSA)   401(k) cash or deferred arrangement   tax on taxable cost of group-term life       plan (including a SIMPLE 401(k)   insurance over $50,000 (former Y Deferrals under a section 409A   arrangement)   employees only)   nonqualified deferred           compensation plan E Elective deferrals under a section N Uncollected Medicare tax on taxable       403(b) salary reduction agreement   cost of group-term life insurance Z Income under section 409A on a       over $50,000 (former employees only)   nonqualified deferred F Elective deferrals under a section       compensation plan   408(k)(6) salary reduction SEP P Excludable moving expense           reimbursements paid directly to AA Designated Roth contributions G Elective deferrals and employer   employee   under a section 401(k) plan   contributions (including nonelective           deferrals) to a section 457(b) Q Nontaxable combat pay BB Designated Roth contributions   deferred compensation plan       under a section 403(b) plan     R Employer contributions to an Archer     H Elective deferrals to a section   MSA DD Cost of employer-sponsored   501(c)(18)(D) tax-exempt       health coverage   organization plan S Employee salary reduction contributions under a section 408(p) SIMPLE  EE  Designated Roth contributions under a governmental section 457(b) plan  Note. Schedule c ez form For more information on these codes, see your Form(s) W-2. Schedule c ez form Adjustments to Income Adjusted gross income is your total income minus certain adjustments. Schedule c ez form The following adjustments are of particular interest to members of the Armed Forces. Schedule c ez form Armed Forces Reservists If you are a member of a reserve component of the Armed Forces and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your unreimbursed travel expenses as an adjustment to income on line 24 of Form 1040, U. Schedule c ez form S. Schedule c ez form Individual Income Tax Return, rather than as a miscellaneous itemized deduction. Schedule c ez form Include all unreimbursed expenses from the time you leave home until the time you return home. Schedule c ez form The deduction is limited to the amount the federal government generally reimburses its employees for travel expenses. Schedule c ez form For more information about this limit, see Per Diem and Car Allowances in chapter 6 of Publication 463. Schedule c ez form Member of a reserve component. Schedule c ez form   You are a member of a reserve component of the Armed Forces if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Schedule c ez form How to report. Schedule c ez form   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Schedule c ez form Then enter on Form 1040, line 24, the part of your expenses, up to the federal rate, included on Form 2106, line 10, or Form 2106-EZ, line 6, that is for reserve-related travel more than 100 miles from your home. Schedule c ez form Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. Schedule c ez form Example. Schedule c ez form Captain Harris, a member of the Army Reserve, traveled to a location 220 miles from his home to perform his work in the reserves in April 2013. Schedule c ez form He incurred $1,549 of unreimbursed expenses consisting of $249 for mileage (440 miles × 56. Schedule c ez form 5 cents per mile), $300 for meals, and $1,000 for lodging. Schedule c ez form He also had other deductible mileage expenses of $110 for several trips to a location 20 miles from his home. Schedule c ez form Only 50% of his meal expenses are deductible. Schedule c ez form He shows his total deductible travel expenses of $1,509 ($249 + $150 (50% of $300) + $1,000 + $110) on Form 2106, line 10. Schedule c ez form He enters the $1,399 ($249 + $150 + $1,000) for travel over 100 miles from home on Form 1040, line 24. Schedule c ez form He then subtracts that $1,399 from the amount on Form 2106, $1,509, and enters $110 on Schedule A (Form 1040), line 21. Schedule c ez form Individual Retirement Arrangements Generally, you can deduct the lesser of the contributions to your traditional individual retirement arrangement (IRA) for the year or the general limit (or spousal IRA limit, if applicable). Schedule c ez form However, if you or your spouse was covered by an employer-maintained retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Schedule c ez form The Form W-2 you or your spouse receives from an employer has a box used to indicate whether you were covered for the year. Schedule c ez form The “Retirement plan” box should have a mark in it if you were covered. Schedule c ez form For purposes of a deduction for contributions to a traditional IRA, Armed Forces members (including reservists on active duty for more than 90 days during the year) are considered covered by an employer-maintained retirement plan. Schedule c ez form Individuals serving in the U. Schedule c ez form S. Schedule c ez form Armed Forces or in support of the U. Schedule c ez form S. Schedule c ez form Armed Forces in designated combat zones have additional time to make a qualified retirement contribution to an IRA. Schedule c ez form For more information on this extension of deadline provision, see Extension of Deadlines , later. Schedule c ez form For more information on IRAs, see Publication 590. Schedule c ez form Combat Pay For IRA purposes, your compensation includes nontaxable combat pay. Schedule c ez form This means that even though you do not have to include the combat pay in your gross income, you do include it in your compensation when figuring the limits on contributions and deductions of contributions to IRAs. Schedule c ez form Qualified Reservist Distributions A qualified reservist distribution is defined below. Schedule c ez form It is not subject to the 10% additional tax on early distributions from certain retirement plans. Schedule c ez form Definition. Schedule c ez form   A distribution you receive is a qualified reservist distribution if the following requirements are met. Schedule c ez form You were ordered or called to active duty after September 11, 2001. Schedule c ez form You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component (see Member of a reserve component , earlier, under Armed Forces Reservists. Schedule c ez form ) The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement. Schedule c ez form The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period. Schedule c ez form Qualified Reservist Repayments You may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined earlier) you received. Schedule c ez form You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Schedule c ez form You make these repayment contributions to an IRA, even if you received the qualified reservist distribution from a section 401(k) or 403(b) plan or a similar arrangement. Schedule c ez form Limit. Schedule c ez form   Your qualified reservist repayments cannot be more than your qualified reservist distributions. Schedule c ez form When repayment contributions can be made. Schedule c ez form   You cannot make these repayment contributions after the date that is 2 years after your active duty period ends. Schedule c ez form No deduction. Schedule c ez form   You cannot deduct qualified reservist repayments. Schedule c ez form Figuring your IRA deduction. Schedule c ez form   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Schedule c ez form Reporting the repayment. Schedule c ez form   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606, Nondeductible IRAs. Schedule c ez form Moving Expenses To deduct moving expenses, you generally must meet certain time and distance tests. Schedule c ez form However, if you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet these tests. Schedule c ez form You can deduct your unreimbursed moving expenses on Form 3903. Schedule c ez form Permanent change of station. Schedule c ez form   A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. Schedule c ez form The move must occur within 1 year of ending your active duty or within the period allowed under the Joint Federal Travel Regulations. Schedule c ez form Spouse and dependents. Schedule c ez form   If you are the spouse or dependent of a member of the Armed Forces who deserts, is imprisoned, or dies, a permanent change of station for you includes a move to: The member's place of enlistment or induction, Your, or the member's, home of record, or A nearer point in the United States. Schedule c ez form   If the military moves you to or from a different location than the member, the moves are treated as a single move to your new main job location. Schedule c ez form Services or reimbursements provided by the government. Schedule c ez form   Do not include in your income the value of moving and storage services provided by the government because of a permanent change of station. Schedule c ez form Similarly, do not include in income amounts received as a dislocation allowance, temporary lodging expense, temporary lodging allowance, or move-in housing allowance. Schedule c ez form   Generally, if the total reimbursements or allowances that you receive from the government because of the move are more than your actual moving expenses, the excess is included in your wages on Form W-2. Schedule c ez form However, if any reimbursements or allowances (other than dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess still must be included in gross income on Form 1040, line 7. Schedule c ez form   Use Form 3903 to deduct qualified expenses that exceed your reimbursements and allowances (including dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances that are excluded from gross income). Schedule c ez form   If you must relocate and your spouse and dependents move to or from a different location, do not include in income reimbursements, allowances, or the value of moving and storage services provided by the government to move you and your spouse and dependents to and from the separate locations. Schedule c ez form   Do not deduct any expenses for moving services that were provided by the government. Schedule c ez form Also, do not deduct any expenses that were reimbursed by an allowance you did not include in income. Schedule c ez form Deductible Moving Expenses If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. Schedule c ez form You can deduct expenses (if not reimbursed or furnished in kind) for: Moving household goods and personal effects, and Travel. Schedule c ez form Moving household goods and personal effects. Schedule c ez form   You can deduct the expenses of moving your household goods and personal effects, including expenses for hauling a trailer, packing, crating, in-transit storage, and insurance. Schedule c ez form You cannot deduct expenses for moving furniture or other goods you bought on the way from your old home to your new home. Schedule c ez form Storing and insuring household goods and personal effects. Schedule c ez form   You can include only the cost of storing and insuring your household goods and personal effects within any period of 30 consecutive days after the day these goods and effects are moved from your former home and before they are delivered to your new home. Schedule c ez form Travel. Schedule c ez form   You can deduct the expenses of traveling (including lodging but not meals) from your old home to your new home, including car expenses and air fare. Schedule c ez form You can deduct as car expenses either: Your actual out-of-pocket expenses such as gas and oil, or The standard mileage rate of 24 cents a mile. Schedule c ez form   You can add parking fees and tolls to the amount claimed under either method. Schedule c ez form You cannot deduct any expenses for meals. Schedule c ez form You cannot deduct the cost of unnecessary side trips or lavish and extravagant lodging. Schedule c ez form Member of your household. Schedule c ez form   A member of your household is anyone who has both your former home and your new home as his or her main home. Schedule c ez form It does not include a tenant or employee unless you can claim that person as a dependent. Schedule c ez form Foreign Moves A foreign move is a move from the United States or its possessions to a foreign country or from one foreign country to another foreign country. Schedule c ez form A move from a foreign country to the United States or its possessions is not a foreign move. Schedule c ez form For a foreign move, the deductible moving expenses described earlier are expanded to include the reasonable expenses of: Moving your household goods and personal effects to and from storage, and Storing these items for part or all of the time the new job location remains your main job location. Schedule c ez form The new job location must be outside the United States. Schedule c ez form Reporting Moving Expenses Figure moving expense deductions on Form 3903. Schedule c ez form Carry the deduction from Form 3903 to Form 1040, line 26. Schedule c ez form For more information, see Publication 521 and Form 3903. Schedule c ez form Combat Zone Exclusion If you are a member of the U. Schedule c ez form S. Schedule c ez form Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. Schedule c ez form This pay is generally referred to as “combat pay. Schedule c ez form ” You do not actually need to show the exclusion on your tax return because income that qualifies for the combat zone exclusion is not included in the wages reported on your Form W-2. Schedule c ez form (See Form W-2 , later. Schedule c ez form ) The month for which you receive the pay must be a month in which you either served in a combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. Schedule c ez form You do not have to receive the excluded pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. Schedule c ez form If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income. Schedule c ez form (Other officer personnel are discussed under Amount of Exclusion , later. Schedule c ez form ) Active duty pay earned in any month you served in a combat zone. Schedule c ez form Imminent danger/hostile fire pay. Schedule c ez form A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. Schedule c ez form Pay for accrued leave earned in any month you served in a combat zone. Schedule c ez form The Department of Defense must determine that the unused leave was earned during that period. Schedule c ez form Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. Schedule c ez form The pay must be earned in a month you served in a combat zone. Schedule c ez form Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone. Schedule c ez form Student loan repayments. Schedule c ez form If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. Schedule c ez form If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. Schedule c ez form For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion. Schedule c ez form Retirement pay and pensions do not qualify for the combat zone exclusion. Schedule c ez form Partial (month) service. Schedule c ez form   If you serve in a combat zone for any part of one or more days during a particular month, you are entitled to an exclusion for that entire month. Schedule c ez form Form W-2. Schedule c ez form   The wages shown in box 1 of your 2013 Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. Schedule c ez form If it does, you will need to get a corrected Form W-2 from your finance office. Schedule c ez form   You cannot exclude as combat pay any wages shown in box 1 of Form W-2. Schedule c ez form Combat Zone A combat zone is any area the President of the United States designates by Executive Order as an area in which the U. Schedule c ez form S. Schedule c ez form Armed Forces are engaging or have engaged in combat. Schedule c ez form An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order. Schedule c ez form Afghanistan area. Schedule c ez form   By Executive Order No. Schedule c ez form 13239, Afghanistan (and airspace above) was designated as a combat zone beginning September 19, 2001. Schedule c ez form On December 14, 2001, the following countries were certified by the Department of Defense for combat zone tax benefits due to their direct support of military operations in the Afghanistan combat zone. Schedule c ez form Djibouti. Schedule c ez form Jordan. Schedule c ez form Kyrgyzstan. Schedule c ez form Pakistan. Schedule c ez form Somalia. Schedule c ez form Syria. Schedule c ez form Tajikistan. Schedule c ez form Uzbekistan. Schedule c ez form Yemen. Schedule c ez form The Philippines. Schedule c ez form  Note. Schedule c ez form For the Philippines only, the personnel must be deployed in conjunction with Operation Enduring Freedom supporting military operations in the Afghanistan combat zone. Schedule c ez form The Kosovo area. Schedule c ez form   By Executive Order No. Schedule c ez form 13119, the following locations (including airspace above) were designated as a combat zone beginning March 24, 1999. Schedule c ez form Federal Republic of Yugoslavia (Serbia/Montenegro). Schedule c ez form Albania. Schedule c ez form Kosovo. Schedule c ez form The Adriatic Sea. Schedule c ez form The Ionian Sea—north of the 39th parallel. Schedule c ez form Note. Schedule c ez form The combat zone designation for Montenegro and Kosovo (previously a province within Serbia) under Executive Order 13119 remains in force even though Montenegro and Kosovo became independent nations since EO 13119 was signed. Schedule c ez form Arabian peninsula. Schedule c ez form   By Executive Order No. Schedule c ez form 12744, the following locations (and airspace above) were designated as a combat zone beginning January 17, 1991. Schedule c ez form The Persian Gulf. Schedule c ez form The Red Sea. Schedule c ez form The Gulf of Oman. Schedule c ez form The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude. Schedule c ez form The Gulf of Aden. Schedule c ez form The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates. Schedule c ez form Jordan which is in direct support of the Arabian Peninsula. Schedule c ez form Serving in a Combat Zone You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone. Schedule c ez form Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. Schedule c ez form If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes. Schedule c ez form Hospitalized While Serving in a Combat Zone If you are hospitalized while serving in a combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary. Schedule c ez form Example. Schedule c ez form You are hospitalized for a specific disease in a combat zone where you have been serving for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. Schedule c ez form The disease is presumed to have been incurred while you were serving in the combat zone. Schedule c ez form On the other hand, if the incubation period of the disease is 1 year, the disease would not have been incurred while you were serving in the combat zone. Schedule c ez form Hospitalized After Leaving a Combat Zone In some cases, the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left. Schedule c ez form In that case, you can exclude military pay earned while you are hospitalized as a result of the wound, disease, or injury. Schedule c ez form Example. Schedule c ez form You were hospitalized for a specific disease 3 weeks after you left the combat zone. Schedule c ez form The incubation period of the disease is from 2 to 4 weeks. Schedule c ez form The disease is presumed to have been incurred while serving in the combat zone. Schedule c ez form Nonqualifying Presence in Combat Zone None of the following types of military service qualify as service in a combat zone. Schedule c ez form Presence in a combat zone while on leave from a duty station located outside the combat zone. Schedule c ez form Passage over or through a combat zone during a trip between two points that are outside a combat zone. Schedule c ez form Presence in a combat zone solely for your personal convenience. Schedule c ez form Service Outside Combat Zone Considered Service in Combat Zone Military service outside a combat zone is considered to be performed in a combat zone if: The Department of Defense designates that the service is in direct support of military operations in the combat zone, and The service qualifies you for special military pay for duty subject to hostile fire or imminent danger. Schedule c ez form Military pay received for this service will qualify for the combat zone exclusion if all of the requirements (other than service in a combat zone) are met and the pay is verifiable by reference to military pay records. Schedule c ez form Amount of Exclusion If you are an enlisted member, warrant officer, or commissioned warrant officer and you serve in a combat zone during any part of a month, you can exclude all of your military pay for that month. Schedule c ez form It should not be included in the wages reported on your Form W-2. Schedule c ez form You also can exclude military pay earned while you are hospitalized as a result of wounds, disease, or injury incurred in the combat zone. Schedule c ez form If you are hospitalized, you cannot exclude any military pay received for any month of service that begins more than 2 years after the end of combat activities in the combat zone. Schedule c ez form Your hospitalization does not have to be in the combat zone. Schedule c ez form If you are a commissioned officer (other than a commissioned warrant officer), you can exclude your pay according to the rules just discussed. Schedule c ez form However, the amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. Schedule c ez form Alien Status For tax purposes, an alien is an individual who is not a U. Schedule c ez form S. Schedule c ez form citizen. Schedule c ez form An alien is in one of three categories: resident, nonresident, or dual-status. Schedule c ez form Placement in the correct category is crucial in determining what income to report and what forms to file. Schedule c ez form Under peacetime enlistment rules, you generally cannot enlist in the Armed Forces unless you are a citizen or have been legally admitted to the United States for permanent residence. Schedule c ez form If you are an alien enlistee in the Armed Forces, you are probably a resident alien. Schedule c ez form If, under an income tax treaty, you are considered a resident of a foreign country, see your base legal officer. Schedule c ez form Other aliens who are in the United States only because of military assignments and who have a home outside the United States are nonresident aliens. Schedule c ez form Guam and Puerto Rico have special rules. Schedule c ez form Residents of those areas should contact their taxing authority with their questions. Schedule c ez form Most members of the Armed Forces are U. Schedule c ez form S. Schedule c ez form citizens or resident aliens. Schedule c ez form However, if you have questions about your alien status or the alien status of your dependents or spouse, you should read the information in the following paragraphs and see Publication 519. Schedule c ez form Resident Aliens You are considered a resident alien of the United States for tax purposes if you meet either the “green card test” or the “substantial presence test” for the calendar year (January 1–December 31). Schedule c ez form If you meet the substantial presence test for 2014, you did not meet either the green card test or the substantial presence test for 2012 or 2013, and you did not choose to be treated as a resident for part of 2012, you may be able to choose to be treated as a U. Schedule c ez form S. Schedule c ez form resident for part of 2013. Schedule c ez form See First-Year Choice in Publication 519. Schedule c ez form These tests are explained in Publication 519. Schedule c ez form Generally, resident aliens are taxed on their worldwide income and file the same tax forms as U. Schedule c ez form S. Schedule c ez form citizens. Schedule c ez form Treating nonresident alien spouse as resident alien. Schedule c ez form   A nonresident alien spouse can be treated as a resident alien if all the following conditions are met. Schedule c ez form One spouse is a U. Schedule c ez form S. Schedule c ez form citizen or resident alien at the end of the tax year. Schedule c ez form That spouse is married to the nonresident alien at the end of the tax year. Schedule c ez form You both choose to treat the nonresident alien spouse as a resident alien. Schedule c ez form Making the choice. Schedule c ez form   Both you and your spouse must sign a statement and attach it to your joint return for the first tax year for which the choice applies. Schedule c ez form Include in the statement: A declaration that one spouse was a nonresident alien and the other was a U. Schedule c ez form S. Schedule c ez form citizen or resident alien on the last day of the year, A declaration that both spouses choose to be treated as U. Schedule c ez form S. Schedule c ez form residents for the entire tax year, and The name, address, and taxpayer identification number (social security number or individual taxpayer identification number) of each spouse. Schedule c ez form If the nonresident alien spouse is not eligible to get a social security number, he or she should file Form W-7, Application for IRS Individual Taxpayer Identification Number. Schedule c ez form    Once you make this choice, the nonresident alien spouse's worldwide income is subject to U. Schedule c ez form S. Schedule c ez form tax. Schedule c ez form If the nonresident alien spouse has substantial foreign income, there may be no advantage to making this choice. Schedule c ez form Ending the choice. Schedule c ez form   Once you make this choice, it applies to all later years unless one of the following situations occurs. Schedule c ez form You or your spouse revokes the choice. Schedule c ez form You or your spouse dies. Schedule c ez form You and your spouse become legally separated under a decree of divorce or separate maintenance. Schedule c ez form The Internal Revenue Service ends the choice because you or your spouse kept inadequate records. Schedule c ez form For specific details on these situations, see Publication 519. Schedule c ez form   If the choice is ended for any of these reasons, neither spouse can make the choice for any later year. Schedule c ez form Choice not made. Schedule c ez form   If you and your nonresident alien spouse do not make this choice: You cannot file a joint return. Schedule c ez form You can file as married filing separately, or head of household if you qualify. Schedule c ez form You can claim an exemption for your nonresident alien spouse if he or she has no gross income for U. Schedule c ez form S. Schedule c ez form tax purposes and is not another taxpayer's dependent. Schedule c ez form The nonresident alien spouse generally does not have to file a federal income tax return if he or she had no income from sources in the United States. Schedule c ez form If a return has to be filed, see the next discussion. Schedule c ez form The nonresident alien spouse is not eligible for the earned income credit if he or she has to file a return. Schedule c ez form Nonresident Aliens If you are an alien who does not meet the requirements discussed earlier to be a resident alien, you are a nonresident alien. Schedule c ez form If you are required to file a federal tax return, you must file either Form 1040NR, U. Schedule c ez form S. Schedule c ez form Nonresident Alien Income Tax Return, or Form 1040NR-EZ, U. Schedule c ez form S. Schedule c ez form Income Tax Return for Certain Nonresident Aliens With No Dependents. Schedule c ez form See the form instructions for information on who must file and filing status. Schedule c ez form If you are a nonresident alien, you generally must pay tax on income from sources in the United States. Schedule c ez form Your income from conducting a trade or business in the United States is taxed at graduated U. Schedule c ez form S. Schedule c ez form tax rates. Schedule c ez form Other income from U. Schedule c ez form S. Schedule c ez form sources is taxed at a flat 30% (or lower treaty) rate. Schedule c ez form For example, dividends from a U. Schedule c ez form S. Schedule c ez form corporation paid to a nonresident alien generally are subject to a 30% (or lower treaty) rate. Schedule c ez form Dual-Status Aliens You can be both a nonresident and resident alien during the same tax year. Schedule c ez form This usually occurs in the year you arrive in or depart from the United States. Schedule c ez form If you are a dual-status alien, you are taxed on income from all sources for the part of the year you are a resident alien. Schedule c ez form Generally, for the part of the year you are a nonresident alien, you are taxed only on income from sources in the United States. Schedule c ez form Sale of Home You may not have to pay tax on all or part of the gain from the sale of your main home. Schedule c ez form Usually, your main home is the one you live in most of the time. Schedule c ez form It can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Schedule c ez form You generally can exclude up to $250,000 of gain ($500,000, in most cases, if married filing a joint return) realized on the sale or exchange of a main home in 2013. Schedule c ez form The exclusion is allowed each time you sell or exchange a main home, but generally not more than once every 2 years. Schedule c ez form To be eligible, during the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years (the ownership test), and lived in the home as your main home for at least 2 years (the use test). Schedule c ez form Exception to ownership and use tests. Schedule c ez form   You can exclude gain, but the maximum amount of gain you can exclude will be reduced if you do not meet the ownership and use tests due to a move to a new permanent duty station. Schedule c ez form 5-year test period suspended. Schedule c ez form   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty as a member of the Armed Forces. Schedule c ez form This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Schedule c ez form Example. Schedule c ez form David bought and moved into a home in 2005. Schedule c ez form He lived in it as his main home for 2½ years. Schedule c ez form For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Schedule c ez form He then sold the home at a gain in 2013. Schedule c ez form To meet the use test, David chooses to suspend the 5-year test period for the 6 years he was on qualifying official extended duty. Schedule c ez form This means he can disregard those 6 years. Schedule c ez form Therefore, David's 5-year test period consists of the 5 years before he went on qualifying official extended duty. Schedule c ez form He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Schedule c ez form Period of suspension. Schedule c ez form   The period of suspension cannot last more than 10 years. Schedule c ez form You cannot suspend the 5-year period for more than one property at a time. Schedule c ez form You can revoke your choice to suspend the 5-year period at any time. Schedule c ez form Qualified official extended duty. Schedule c ez form   You are on qualified official extended duty if you serve on extended duty either: At a duty station at least 50 miles from your main home, or While you live in Government quarters under Government orders. Schedule c ez form   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Schedule c ez form Property used for rental or business. Schedule c ez form   You may be able to exclude your gain from the sale of a home that you have used as a rental property or for business. Schedule c ez form However, you must meet the ownership and use tests discussed in Publication 523. Schedule c ez form Nonqualified use. Schedule c ez form   If the sale of your main home results in a gain that is allocated to one or more period(s) of nonqualified use, you cannot exclude that gain from your income. Schedule c ez form   Nonqualified use means any period after 2008 when neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions. Schedule c ez form For example, a period of nonqualified use does not include any period (not to exceed a total of 10 years) during which you or your spouse is serving on qualified official extended duty. Schedule c ez form Loss. Schedule c ez form   You cannot deduct a loss from the sale of your main home. Schedule c ez form More information. Schedule c ez form   For more information, see Publication 523. Schedule c ez form Foreclosures There may be tax consequences as a result of compensation payments for foreclosures. Schedule c ez form Payments made for violations of the Service Members Civil Relief Act (SCRA). Schedule c ez form   All service members who received a settlement payment reported on a Form 1099 may need to report the amount on their tax return. Schedule c ez form Generally, you must include settlement payments in income. Schedule c ez form However, the tax treatment of settlement payments will depend on the facts and circumstances. Schedule c ez form Lump Sum Portion of Settlement Payment. Schedule c ez form    Generally, you must include the lump sum payment in gross income. Schedule c ez form In limited circumstances you may be able to exclude part or all of the lump sum payment from gross income. Schedule c ez form For example, you may qualify to exclude part or all of the payment from gross income if you can show that the payment was made to reimburse specific nondeductible expenses (such as living expenses) you incurred because of the SCRA violation. Schedule c ez form Interest Payment on Lump Sum Portion of Settlement Payment. Schedule c ez form    You must include any interest on the lump sum portion of your settlement payment in your income. Schedule c ez form Lost Equity Portion of Settlement Payment. Schedule c ez form    If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. Schedule c ez form You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. Schedule c ez form In many cases, this gain may be excluded from income. Schedule c ez form For more information on the rules for excluding all or part of any gain from the sale (including a foreclosure) of a main home, see Pub. Schedule c ez form 523, Selling Your Home. Schedule c ez form The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Schedule c ez form    To find rules for reporting gain or loss on the foreclosure of property that was not your main home, see Pub. Schedule c ez form 544, Sales and Other Dispositions of Assets. Schedule c ez form Interest Payment on Lost Equity Portion of Settlement Payment. Schedule c ez form    You must include any interest on the lost equity portion of your settlement payment in your income. Schedule c ez form Itemized Deductions To figure your taxable income, you must subtract either your standard deduction or your itemized deductions from adjusted gross income. Schedule c ez form For information on the standard deduction, see Publication 501. Schedule c ez form Itemized deductions are figured on Schedule A (Form 1040). Schedule c ez form This chapter discusses miscellaneous itemized deductions of particular interest to members of the Armed Forces. Schedule c ez form For information on other itemized deductions, see the publications listed below. Schedule c ez form Publication 502, Medical and Dental Expenses. Schedule c ez form Publication 526, Charitable Contributions. Schedule c ez form Publication 547, Casualties, Disasters, and Thefts. Schedule c ez form Publication 550, Investment Income and Expenses. Schedule c ez form You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Schedule c ez form For information on deductions that are not subject to the 2% limit, see Publication 529. Schedule c ez form Employee Business Expenses Deductible employee business expenses generally are miscellaneous itemized deductions subject to the 2% limit. Schedule c ez form Certain employee business expenses are deductible as adjustments to income. Schedule c ez form For information on many employee business expenses, see Publication 463. Schedule c ez form Generally, you must file Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to claim these expenses. Schedule c ez form You do not have to file Form 2106 or Form 2106-EZ if you are claiming only unreimbursed expenses for uniforms, professional society dues, and work-related educational expenses (all discussed later). Schedule c ez form You can deduct these expenses directly on Schedule A (Form 1040). Schedule c ez form Reimbursement. Schedule c ez form   Generally, to receive advances, reimbursements, or other allowances from the government, you must adequately account for your expenses and return any excess reimbursement. Schedule c ez form Your reimbursed expenses are not deductible. Schedule c ez form   If your expenses are more than your reimbursement, the excess expenses are deductible (subject to the 2% limit) if you can prove them. Schedule c ez form You must file Form 2106 to report these expenses. Schedule c ez form   You can use the shorter Form 2106-EZ if you meet all three of the following conditions. Schedule c ez form You are an employee deducting expenses related to your job. Schedule c ez form You were not reimbursed by your employer for your expenses. Schedule c ez form (Amounts included in box 1 of Form W-2 are not considered reimbursements. Schedule c ez form ) If you claim car expenses, you use the standard mileage rate. Schedule c ez form    For 2013, the standard mileage rate is 56. Schedule c ez form 5 cents a mile for all business miles driven. Schedule c ez form This rate is adjusted periodically. Schedule c ez form Travel Expenses You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home. Schedule c ez form If you are a member of the U. Schedule c ez form S. Schedule c ez form Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Schedule c ez form You cannot deduct your expenses for meals and lodging while at your permanent duty station. Schedule c ez form You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Schedule c ez form A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a home aboard ship for travel expense purposes. Schedule c ez form To be deductible, your travel expenses must be work related. Schedule c ez form You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty. Schedule c ez form Away from home. Schedule c ez form   Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. Schedule c ez form You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home. Schedule c ez form   Examples of deductible travel expenses include: Expenses for business-related meals (generally limited to 50% of your unreimbursed cost), lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary duty or temporary additional duty, and Expenses of carrying out official business while on “No Cost” orders. Schedule c ez form    You cannot deduct any expenses for travel away from home if the temporary assignment in a single location is realistically expected to last (and does in fact last) for more than 1 year. Schedule c ez form This rule may not apply if you are participating in a federal crime investigation or prosecution. Schedule c ez form For more information, see Publication 463 and the Form 2106 instructions. Schedule c ez form Transportation Expenses These expenses include the ordinary and necessary costs of: Getting from one workplace to another when you are not away from home, Going to a business meeting away from your regular workplace, and Getting from your home to a temporary workplace when you have a regular place of work. Schedule c ez form These expenses include the costs of transportation by air, bus, rail, taxi, and driving and maintaining your car. Schedule c ez form Transportation expenses incurred while traveling away from home are included with your travel expenses, discussed earlier. Schedule c ez form However, if you use your car while traveling away from home overnight, see the rules in chapter 4 of Publication 463 to figure your car expense deduction. Schedule c ez form If you must go from one workplace to another while on duty (for example, as a courier or to attend meetings) without being away from home, your unreimbursed transportation expenses are deductible. Schedule c ez form However, the expenses of getting to and from your regular place of work (commuting) are not deductible. Schedule c ez form Temporary work location. Schedule c ez form   If you have one or more regular places of business away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location. Schedule c ez form   Generally, if your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary. Schedule c ez form   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Schedule c ez form If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Schedule c ez form    If you do not have a regular place of business, but you ordinarily work in the metropolitan area where you live, you can deduct daily transportation expenses between your home and a temporary work site outside your metropolitan area. Schedule c ez form However, you cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Schedule c ez form These are nondeductible commuting costs. Schedule c ez form Armed Forces reservists. Schedule c ez form   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Schedule c ez form You can deduct the expense of getting from one workplace to the other. Schedule c ez form You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Schedule c ez form In this case, your transportation generally is a nondeductible commuting expense. Schedule c ez form However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Schedule c ez form   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Schedule c ez form If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Schedule c ez form See Armed Forces Reservists under Adjustments to Income, earlier. Schedule c ez form Uniforms You usually cannot deduct the expenses for uniform cost and upkeep. Schedule c ez form Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty. Schedule c ez form If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. Schedule c ez form Unreimbursed expenses for the cost and upkeep of the following articles are deductible. Schedule c ez form Military battle dress uniforms and utility uniforms that you cannot wear when off duty. Schedule c ez form Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords. Schedule c ez form Reservists' uniforms if you can wear the uniform only while performing duties as a reservist. Schedule c ez form Professional Dues You can deduct unreimbursed dues paid to professional societies directly related to your military position. Schedule c ez form However, you cannot deduct amounts paid to an officers' club or a noncommissioned officers' club. Schedule c ez form Example. Schedule c ez form Lieutenant Margaret Allen, an electrical engineer at Maxwell Air Force Base, can deduct professional dues paid to the American Society of Electrical Engineers. Schedule c ez form Educational Expenses You can deduct the unreimbursed costs of qualifying work-related education. Schedule c ez form This is education that meets at least one of the following two tests. Schedule c ez form The education is required by your employer or the law to keep your present salary, status, or job. Schedule c ez form The required education must serve a bona fide business purpose of your employer. Schedule c ez form The education maintains or improves skills needed in your present work. Schedule c ez form However, even if the education meets one or both of the above tests, it is not qualifying education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Schedule c ez form You can deduct the expenses for qualifying work-related education even if the education could lead to a degree. Schedule c ez form Example 1. Schedule c ez form Lieutenant Colonel Mason has a degree in financial management and is in charge of base finances at her post of duty. Schedule c ez form She took an advanced finance course. Schedule c ez form She already meets the minimum qualifications for her job. Schedule c ez form By taking the course, she is improving skills in her current position. Schedule c ez form The course does not qualify her for a new trade or business. Schedule c ez form She can deduct educational expenses that are more than the educational allowance she received. Schedule c ez form Example 2. Schedule c ez form Major Williams worked in the military base legal office as a legal intern. Schedule c ez form He was placed in excess leave status by his employer to attend law school. Schedule c ez form He paid all his educational expenses and was not reimbursed. Schedule c ez form After obtaining his law degree, he passed the state bar exam and worked as a judge advocate. Schedule c ez form His educational expenses are not deductible because the law degree qualified him for a new trade or business, even though the education maintained and improved his skills in his work. Schedule c ez form Travel to obtain education. Schedule c ez form   If your work-related education qualifies, you can deduct the costs of travel, including meals (subject to the 50% limit), and lodging, if the main purpose of the trip is to obtain the education. Schedule c ez form   You cannot deduct the cost of travel that is itself a form of education, even if it is directly related to your duties in your work or business. Schedule c ez form Transportation for education. Schedule c ez form   If your work-related education qualifies for a deduction, you can deduct the costs of transportation to obtain that education. Schedule c ez form However, you cannot deduct the cost of services provided in kind, such as base-provided transportation to or from class. Schedule c ez form Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Schedule c ez form   If you need more information on educational expenses, see Publication 970. Schedule c ez form Repayments If you had to repay to your employer an amount that you included in your income in an earlier year, you may be able to deduct the repaid amount from your income for the year in which you repaid it. Schedule c ez form Repayment of $3,000 or less. Schedule c ez form   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Schedule c ez form If you reported it as wages, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Schedule c ez form Repayment over $3,000. Schedule c ez form   If the amount you repaid was more than $3,000, see Repayments in Publication 525. Schedule c ez form Credits After you have figured your taxable income and tax liability, you can determine if you are entitled to any tax credits. Schedule c ez form This publication discusses the first-time homebuyer credit, child tax credit, earned income credit, and credit for excess social security tax withheld. Schedule c ez form For information on other credits, see your tax form instructions. Schedule c ez form First-Time Homebuyer Credit The first-time homebuyer credit is not available for homes purchased after 2011. Schedule c ez form In 2011, this credit had already expired for most taxpayers, however, certain members of the uniformed services and Foreign Service and certain employees of the intelligence community could claim the credit for homes purchased in 2011. Schedule c ez form If you bought the home (and claimed the credit) after 2008, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. Schedule c ez form If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit. Schedule c ez form If you bought your home in 2008, you generally must repay the credit over a 15-year period in 15 equal installments. Schedule c ez form For more information, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. Schedule c ez form Child Tax Credit The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. Schedule c ez form The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. Schedule c ez form The child tax credit is not the same as the credit for child and dependent care expenses. Schedule c ez form See Publication 503 for information on the credit for child and dependent care expenses. Schedule c ez form Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you, later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. Schedule c ez form S. Schedule c ez form citizen, a U. Schedule c ez form S. Schedule c ez form national, or a U. Schedule c ez form S. Schedule c ez form resident alien. Schedule c ez form If the child was adopted, see Adopted child . Schedule c ez form For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c, column (4). Schedule c ez form Exceptions to time lived with you. Schedule c ez form   A child is considered to have lived with you for all of 2013 if the child was born or died in 2013 and your home was this child's home for the entire time he or she was alive. Schedule c ez form Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. Schedule c ez form   There are also exceptions for kidnapped children and children of divorced or separated parents. Schedule c ez form For details, see Publication 501. Schedule c ez form Qualifying child of more than one person. Schedule c ez form   A special rule applies if your qualifying child is the qualifying child of more than one person. Schedule c ez form For details, see Publication 501. Schedule c ez form Adopted child. Schedule c ez form   An adopted child is always treated as your own child. Schedule c ez form An adopted child includes a child lawfully placed with you for legal adoption. Schedule c ez form   If you are a U. Schedule c ez form S. Schedule c ez form citizen or U. Schedule c ez form S. Schedule c ez form national and your adopted child lived with you as a member of your household all year, that child meets condition (7) above to be a qualifying child for the child tax credit. Schedule c ez form Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. Schedule c ez form Limits on the credit. Schedule c ez form   You must reduce your child tax credit if either (1) or (2), below, applies. Schedule c ez form The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. Schedule c ez form If the amount is zero, you cannot take this credit because there is no tax to reduce. Schedule c ez form However, you may be able to take the additional child tax credit. Schedule c ez form See Additional Child Tax Credit , later. Schedule c ez form Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. Schedule c ez form Married filing jointly — $110,000. Schedule c ez form Single, head of household,  or qualifying widow(er) — $75,000. Schedule c ez form Married filing separately — $55,000. Schedule c ez form Modified AGI. Schedule c ez form   For purposes of the child tax credit, your modified AGI is the amount on Form 1040, line 38, or Form 1040A, line 22, plus the following amounts that may apply to you. Schedule c ez form Any amount excluded from income because of the exclusion of income from Puerto Rico. Schedule c ez form Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. Schedule c ez form Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. Schedule c ez form Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Schedule c ez form   If you do not have any of the above, your modified AGI is the same as your AGI. Schedule c ez form Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. Schedule c ez form For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A. Schedule c ez form Also attach Schedule 8812, Child Tax Credit, if required. Schedule c ez form Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. Schedule c ez form The additional child tax credit may give you a refund even if you do not owe any tax. Schedule c ez form For more information, see the instructions for Form 1040 or Form 1040A, and Schedule 8812. Schedule c ez form Earned Income Credit The earned income credit (EIC) is a cr