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State Tax Forms 2014

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State Tax Forms 2014

State tax forms 2014 4. State tax forms 2014   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. State tax forms 2014 Resident aliens are generally taxed in the same way as U. State tax forms 2014 S. State tax forms 2014 citizens. State tax forms 2014 Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business and how it is taxed. State tax forms 2014 Topics - This chapter discusses: Income that is effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 Income that is not effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 Interrupted period of residence. State tax forms 2014 Expatriation tax. State tax forms 2014 Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. State tax forms 2014 Resident Aliens Resident aliens are generally taxed in the same way as U. State tax forms 2014 S. State tax forms 2014 citizens. State tax forms 2014 This means that their worldwide income is subject to U. State tax forms 2014 S. State tax forms 2014 tax and must be reported on their U. State tax forms 2014 S. State tax forms 2014 tax return. State tax forms 2014 Income of resident aliens is subject to the graduated tax rates that apply to U. State tax forms 2014 S. State tax forms 2014 citizens. State tax forms 2014 Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. State tax forms 2014 S. State tax forms 2014 citizens. State tax forms 2014 Nonresident Aliens A nonresident alien's income that is subject to U. State tax forms 2014 S. State tax forms 2014 income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). State tax forms 2014 The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. State tax forms 2014 These are the same rates that apply to U. State tax forms 2014 S. State tax forms 2014 citizens and residents. State tax forms 2014 Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. State tax forms 2014 If you were formerly a U. State tax forms 2014 S. State tax forms 2014 citizen or resident alien, these rules may not apply. State tax forms 2014 See Expatriation Tax, later, in this chapter. State tax forms 2014 Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. State tax forms 2014 Whether you are engaged in a trade or business in the United States depends on the nature of your activities. State tax forms 2014 The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. State tax forms 2014 Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. State tax forms 2014 Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. State tax forms 2014 For more information, see Services Performed for Foreign Employer in chapter 3. State tax forms 2014 Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. State tax forms 2014 Students and trainees. State tax forms 2014   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. State tax forms 2014 A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. State tax forms 2014 The taxable part of any scholarship or fellowship grant that is U. State tax forms 2014 S. State tax forms 2014 source income is treated as effectively connected with a trade or business in the United States. State tax forms 2014 Business operations. State tax forms 2014   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. State tax forms 2014 Partnerships. State tax forms 2014   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. State tax forms 2014 Beneficiary of an estate or trust. State tax forms 2014   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. State tax forms 2014 Trading in stocks, securities, and commodities. State tax forms 2014   If your only U. State tax forms 2014 S. State tax forms 2014 business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. State tax forms 2014 S. State tax forms 2014 resident broker or other agent, you are not engaged in a trade or business in the United States. State tax forms 2014   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. State tax forms 2014   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. State tax forms 2014   This discussion does not apply if you have a U. State tax forms 2014 S. State tax forms 2014 office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. State tax forms 2014 Trading for a nonresident alien's own account. State tax forms 2014   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. State tax forms 2014 S. State tax forms 2014 business activity. State tax forms 2014 This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. State tax forms 2014   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. State tax forms 2014 This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. State tax forms 2014 Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . State tax forms 2014 Effectively Connected Income If you are engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. State tax forms 2014 This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. State tax forms 2014 Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. State tax forms 2014 In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. State tax forms 2014 For a discussion of these rules, see Foreign Income , later. State tax forms 2014 Investment Income Investment income from U. State tax forms 2014 S. State tax forms 2014 sources that may or may not be treated as effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business generally falls into the following three categories. State tax forms 2014 Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. State tax forms 2014 ). State tax forms 2014 Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. State tax forms 2014 Timber, coal, or domestic iron ore with a retained economic interest. State tax forms 2014 Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. State tax forms 2014 Patents transferred before October 5, 1966. State tax forms 2014 Original issue discount obligations. State tax forms 2014 Capital gains (and losses). State tax forms 2014 Use the two tests, described next, to determine whether an item of U. State tax forms 2014 S. State tax forms 2014 source income falling in one of the three categories above and received during the tax year is effectively connected with your U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. State tax forms 2014 If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. State tax forms 2014 Asset-use test. State tax forms 2014   This test usually applies to income that is not directly produced by trade or business activities. State tax forms 2014 Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. State tax forms 2014   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. State tax forms 2014 Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. State tax forms 2014 Business-activities test. State tax forms 2014   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. State tax forms 2014 The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. State tax forms 2014 Under this test, if the conduct of the U. State tax forms 2014 S. State tax forms 2014 trade or business was a material factor in producing the income, the income is considered effectively connected. State tax forms 2014 Personal Service Income You usually are engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business when you perform personal services in the United States. State tax forms 2014 Personal service income you receive in a tax year in which you are engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business is effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. State tax forms 2014 Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. State tax forms 2014 The income may be paid to you in the form of cash, services, or property. State tax forms 2014 If you are engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. State tax forms 2014 However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. State tax forms 2014 Pensions. State tax forms 2014   If you were a nonresident alien engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. State tax forms 2014 This is true whether or not you are engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business in the year you receive the retirement pay. State tax forms 2014 Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. State tax forms 2014 You had a fixed place of business in the United States involved in earning the income. State tax forms 2014 At least 90% of your U. State tax forms 2014 S. State tax forms 2014 source transportation income is attributable to regularly scheduled transportation. State tax forms 2014 “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. State tax forms 2014 “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. State tax forms 2014 This definition applies to both scheduled and chartered air transportation. State tax forms 2014 If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. State tax forms 2014 See Transportation Tax, later, in this chapter. State tax forms 2014 Business Profits and Losses and Sales Transactions All profits or losses from U. State tax forms 2014 S. State tax forms 2014 sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. State tax forms 2014 For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. State tax forms 2014 A share of U. State tax forms 2014 S. State tax forms 2014 source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. State tax forms 2014 Real Property Gain or Loss Gains and losses from the sale or exchange of U. State tax forms 2014 S. State tax forms 2014 real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. State tax forms 2014 You must treat the gain or loss as effectively connected with that trade or business. State tax forms 2014 U. State tax forms 2014 S. State tax forms 2014 real property interest. State tax forms 2014   This is any interest in real property located in the United States or the U. State tax forms 2014 S. State tax forms 2014 Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. State tax forms 2014 S. State tax forms 2014 real property holding corporation. State tax forms 2014 Real property includes the following. State tax forms 2014 Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. State tax forms 2014 Improvements on land, including buildings, other permanent structures, and their structural components. State tax forms 2014 Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. State tax forms 2014 U. State tax forms 2014 S. State tax forms 2014 real property holding corporation. State tax forms 2014   A corporation is a U. State tax forms 2014 S. State tax forms 2014 real property holding corporation if the fair market value of the corporation's U. State tax forms 2014 S. State tax forms 2014 real property interests are at least 50% of the total fair market value of: The corporation's U. State tax forms 2014 S. State tax forms 2014 real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. State tax forms 2014   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business unless you establish that the corporation is not a U. State tax forms 2014 S. State tax forms 2014 real property holding corporation. State tax forms 2014   A U. State tax forms 2014 S. State tax forms 2014 real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. State tax forms 2014 An interest in a foreign corporation owning U. State tax forms 2014 S. State tax forms 2014 real property generally is not a U. State tax forms 2014 S. State tax forms 2014 real property interest unless the corporation chooses to be treated as a domestic corporation. State tax forms 2014 Qualified investment entities. State tax forms 2014   Special rules apply to qualified investment entities (QIEs). State tax forms 2014 A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. State tax forms 2014 S. State tax forms 2014 real property holding corporation. State tax forms 2014    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. State tax forms 2014 S. State tax forms 2014 real property interest is treated as a U. State tax forms 2014 S. State tax forms 2014 real property gain by the shareholder receiving the distribution. State tax forms 2014 A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. State tax forms 2014 S. State tax forms 2014 real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. State tax forms 2014 A distribution that you do not treat as gain from the sale or exchange of a U. State tax forms 2014 S. State tax forms 2014 real property interest is included in your gross income as a regular dividend. State tax forms 2014 Note. State tax forms 2014 Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. State tax forms 2014 S. State tax forms 2014 real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. State tax forms 2014 Domestically controlled QIE. State tax forms 2014   The sale of an interest in a domestically controlled QIE is not the sale of a U. State tax forms 2014 S. State tax forms 2014 real property interest. State tax forms 2014 The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. State tax forms 2014 The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. State tax forms 2014 Wash sale. State tax forms 2014    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. State tax forms 2014 An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. State tax forms 2014 S. State tax forms 2014 real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. State tax forms 2014 If this occurs, you are treated as having gain from the sale or exchange of a U. State tax forms 2014 S. State tax forms 2014 real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. State tax forms 2014 This also applies to any substitute dividend payment. State tax forms 2014   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. State tax forms 2014 Alternative minimum tax. State tax forms 2014   There may be a minimum tax on your net gain from the disposition of U. State tax forms 2014 S. State tax forms 2014 real property interests. State tax forms 2014 Figure the amount of this tax, if any, on Form 6251. State tax forms 2014 Withholding of tax. State tax forms 2014   If you dispose of a U. State tax forms 2014 S. State tax forms 2014 real property interest, the buyer may have to withhold tax. State tax forms 2014 See the discussion of Tax Withheld on Real Property Sales in chapter 8. State tax forms 2014 Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. State tax forms 2014 An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. State tax forms 2014 The three kinds of foreign source income are listed below. State tax forms 2014 Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. State tax forms 2014 Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. State tax forms 2014 Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. State tax forms 2014 A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. State tax forms 2014 Income, gain, or loss from the sale outside the United States, through the U. State tax forms 2014 S. State tax forms 2014 office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. State tax forms 2014 Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. State tax forms 2014 Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 For example, foreign source interest and dividend equivalents are treated as U. State tax forms 2014 S. State tax forms 2014 effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. State tax forms 2014 Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. State tax forms 2014 S. State tax forms 2014 citizens and residents. State tax forms 2014 Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. State tax forms 2014 However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. State tax forms 2014 Example. State tax forms 2014 Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. State tax forms 2014 S. State tax forms 2014 office of his overseas employer. State tax forms 2014 He worked in the U. State tax forms 2014 S. State tax forms 2014 office until December 25, 2012, but did not leave this country until January 11, 2013. State tax forms 2014 On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. State tax forms 2014 All of Ted's income during his stay here is U. State tax forms 2014 S. State tax forms 2014 source income. State tax forms 2014 During 2012, Ted was engaged in the trade or business of performing personal services in the United States. State tax forms 2014 Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. State tax forms 2014 The salary payment Ted received in January 2013 is U. State tax forms 2014 S. State tax forms 2014 source income to him in 2013. State tax forms 2014 It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. State tax forms 2014 Real property income. State tax forms 2014   You may be able to choose to treat all income from real property as effectively connected. State tax forms 2014 See Income From Real Property , later, in this chapter. State tax forms 2014 The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. State tax forms 2014 S. State tax forms 2014 sources but only if the items are not effectively connected with your U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. State tax forms 2014 S. State tax forms 2014 source fixed or determinable annual or periodic gains, profits, or income. State tax forms 2014 Income is fixed when it is paid in amounts known ahead of time. State tax forms 2014 Income is determinable whenever there is a basis for figuring the amount to be paid. State tax forms 2014 Income can be periodic if it is paid from time to time. State tax forms 2014 It does not have to be paid annually or at regular intervals. State tax forms 2014 Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. State tax forms 2014 Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. State tax forms 2014 A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. State tax forms 2014 Other items of income, such as royalties, also may be subject to the 30% tax. State tax forms 2014 Some fixed or determinable income may be exempt from U. State tax forms 2014 S. State tax forms 2014 tax. State tax forms 2014 See chapter 3 if you are not sure whether the income is taxable. State tax forms 2014 Original issue discount (OID). State tax forms 2014   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. State tax forms 2014 The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. State tax forms 2014 The 30% tax applies in the following circumstances. State tax forms 2014 You received a payment on a debt instrument. State tax forms 2014 In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. State tax forms 2014 But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. State tax forms 2014 You sold or exchanged the debt instrument. State tax forms 2014 The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. State tax forms 2014   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. State tax forms 2014 S. State tax forms 2014 Source Income Subject to Withholding, if you bought the debt instrument at original issue. State tax forms 2014 However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. State tax forms 2014 You bought the debt instrument at a premium or paid an acquisition premium. State tax forms 2014 The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. State tax forms 2014 S. State tax forms 2014 Treasury securities). State tax forms 2014 The debt instrument is a contingent payment or inflation-indexed debt instrument. State tax forms 2014 For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. State tax forms 2014   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. State tax forms 2014 See chapter 12. State tax forms 2014 Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business and is not exempted by treaty. State tax forms 2014 However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. State tax forms 2014 Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 Social Security Benefits A nonresident alien must include 85% of any U. State tax forms 2014 S. State tax forms 2014 social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. State tax forms 2014 S. State tax forms 2014 source fixed or determinable annual or periodic income. State tax forms 2014 Social security benefits include monthly retirement, survivor, and disability benefits. State tax forms 2014 This income is exempt under some tax treaties. State tax forms 2014 See Table 1 in Publication 901, U. State tax forms 2014 S. State tax forms 2014 Tax Treaties, for a list of tax treaties that exempt U. State tax forms 2014 S. State tax forms 2014 social security benefits from U. State tax forms 2014 S. State tax forms 2014 tax. State tax forms 2014 Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. State tax forms 2014 They apply even if you are engaged in a trade or business in the United States. State tax forms 2014 These rules do not apply to the sale or exchange of a U. State tax forms 2014 S. State tax forms 2014 real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. State tax forms 2014 See Real Property Gain or Loss , earlier, under Effectively Connected Income. State tax forms 2014 A capital asset is everything you own except: Inventory. State tax forms 2014 Business accounts or notes receivable. State tax forms 2014 Depreciable property used in a trade or business. State tax forms 2014 Real property used in a trade or business. State tax forms 2014 Supplies regularly used in a trade or business. State tax forms 2014 Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. State tax forms 2014 Certain U. State tax forms 2014 S. State tax forms 2014 government publications. State tax forms 2014 Certain commodities derivative financial instruments held by a commodities derivatives dealer. State tax forms 2014 Hedging transactions. State tax forms 2014 A capital gain is a gain on the sale or exchange of a capital asset. State tax forms 2014 A capital loss is a loss on the sale or exchange of a capital asset. State tax forms 2014 If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. State tax forms 2014 S. State tax forms 2014 currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. State tax forms 2014 You may want to read Publication 544. State tax forms 2014 However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. State tax forms 2014 Specific tax treatment that applies to U. State tax forms 2014 S. State tax forms 2014 citizens or residents generally does not apply to you. State tax forms 2014 The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. State tax forms 2014 Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. State tax forms 2014 Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. State tax forms 2014 Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. State tax forms 2014 Gains on the sale or exchange of original issue discount obligations. State tax forms 2014 Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 See Income From Real Property , later. State tax forms 2014 183-day rule. State tax forms 2014   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. State tax forms 2014 For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. State tax forms 2014 S. State tax forms 2014 sources over your capital losses from U. State tax forms 2014 S. State tax forms 2014 sources. State tax forms 2014 This rule applies even if any of the transactions occurred while you were not in the United States. State tax forms 2014   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. State tax forms 2014 S. State tax forms 2014 trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. State tax forms 2014   In arriving at your net gain, do not take the following into consideration. State tax forms 2014 The four types of gains listed earlier. State tax forms 2014 The deduction for a capital loss carryover. State tax forms 2014 Capital losses in excess of capital gains. State tax forms 2014 Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). State tax forms 2014 Losses from the sale or exchange of property held for personal use. State tax forms 2014 However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). State tax forms 2014 See Itemized Deductions in chapter 5. State tax forms 2014   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. State tax forms 2014 Also, you must file your tax return on a calendar-year basis. State tax forms 2014   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. State tax forms 2014 Reporting. State tax forms 2014   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. State tax forms 2014 Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. State tax forms 2014 Attach them to Form 1040NR. State tax forms 2014 Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. State tax forms 2014 The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. State tax forms 2014 This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. State tax forms 2014 It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. State tax forms 2014 You can make this choice only for real property income that is not otherwise effectively connected with your U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. State tax forms 2014 This choice does not treat a nonresident alien, who is not otherwise engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business, as being engaged in a trade or business in the United States during the year. State tax forms 2014 Example. State tax forms 2014 You are a nonresident alien and are not engaged in a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 You own a single-family house in the United States that you rent out. State tax forms 2014 Your rental income for the year is $10,000. State tax forms 2014 This is your only U. State tax forms 2014 S. State tax forms 2014 source income. State tax forms 2014 As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. State tax forms 2014 You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. State tax forms 2014 You do not have to file a U. State tax forms 2014 S. State tax forms 2014 tax return (Form 1040NR) because your U. State tax forms 2014 S. State tax forms 2014 tax liability is satisfied by the withholding of tax. State tax forms 2014 If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. State tax forms 2014 (See Publication 527, Residential Rental Property, for information on rental expenses. State tax forms 2014 ) Any resulting net income is taxed at graduated rates. State tax forms 2014 If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. State tax forms 2014 For the first year you make the choice, also attach the statement discussed next. State tax forms 2014 Making the choice. State tax forms 2014   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. State tax forms 2014 Include the following in your statement. State tax forms 2014 That you are making the choice. State tax forms 2014 Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. State tax forms 2014 A complete list of all your real property, or any interest in real property, located in the United States. State tax forms 2014 Give the legal identification of U. State tax forms 2014 S. State tax forms 2014 timber, coal, or iron ore in which you have an interest. State tax forms 2014 The extent of your ownership in the property. State tax forms 2014 The location of the property. State tax forms 2014 A description of any major improvements to the property. State tax forms 2014 The dates you owned the property. State tax forms 2014 Your income from the property. State tax forms 2014 Details of any previous choices and revocations of the real property income choice. State tax forms 2014   This choice stays in effect for all later tax years unless you revoke it. State tax forms 2014 Revoking the choice. State tax forms 2014   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. State tax forms 2014 S. State tax forms 2014 Individual Income Tax Return, for the year you made the choice and for later tax years. State tax forms 2014 You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. State tax forms 2014 If this time period has expired for the year of choice, you cannot revoke the choice for that year. State tax forms 2014 However, you may revoke the choice for later tax years only if you have IRS approval. State tax forms 2014 For information on how to get IRS approval, see Regulation section 1. State tax forms 2014 871-10(d)(2). State tax forms 2014 Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . State tax forms 2014 If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. State tax forms 2014 Attach a statement to your return that includes the following information (if applicable). State tax forms 2014 Your name, taxpayer identification number, and tax year. State tax forms 2014 A description of the types of services performed (whether on or off board). State tax forms 2014 Names of vessels or registration numbers of aircraft on which you performed the services. State tax forms 2014 Amount of U. State tax forms 2014 S. State tax forms 2014 source transportation income derived from each type of service for each vessel or aircraft for the calendar year. State tax forms 2014 Total amount of U. State tax forms 2014 S. State tax forms 2014 source transportation income derived from all types of services for the calendar year. State tax forms 2014 This 4% tax applies to your U. State tax forms 2014 S. State tax forms 2014 source gross transportation income. State tax forms 2014 This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. State tax forms 2014 For transportation income from personal services, the transportation must be between the United States and a U. State tax forms 2014 S. State tax forms 2014 possession. State tax forms 2014 For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. State tax forms 2014 Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. State tax forms 2014 S. State tax forms 2014 residence with a period of nonresidence. State tax forms 2014 The special rule applies if you meet all of the following conditions. State tax forms 2014 You were a U. State tax forms 2014 S. State tax forms 2014 resident for a period that includes at least 3 consecutive calendar years. State tax forms 2014 You were a U. State tax forms 2014 S. State tax forms 2014 resident for at least 183 days in each of those years. State tax forms 2014 You ceased to be treated as a U. State tax forms 2014 S. State tax forms 2014 resident. State tax forms 2014 You then again became a U. State tax forms 2014 S. State tax forms 2014 resident before the end of the third calendar year after the end of the period described in (1) above. State tax forms 2014 Under this special rule, you are subject to tax on your U. State tax forms 2014 S. State tax forms 2014 source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. State tax forms 2014 Example. State tax forms 2014 John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. State tax forms 2014 On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. State tax forms 2014 During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). State tax forms 2014 He returned to the United States on October 5, 2013, as a lawful permanent resident. State tax forms 2014 He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). State tax forms 2014 Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. State tax forms 2014 Reporting requirements. State tax forms 2014   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. State tax forms 2014 The return is due by the due date (including extensions) for filing your U. State tax forms 2014 S. State tax forms 2014 income tax return for the year that you again become a U. State tax forms 2014 S. State tax forms 2014 resident. State tax forms 2014 If you already filed returns for that period, you must file amended returns. State tax forms 2014 You must attach a statement to your return that identifies the source of all of your U. State tax forms 2014 S. State tax forms 2014 and foreign gross income and the items of income subject to this special rule. State tax forms 2014 Expatriation Tax The expatriation tax provisions apply to U. State tax forms 2014 S. State tax forms 2014 citizens who have renounced their citizenship and long-term residents who have ended their residency. State tax forms 2014 The rules that apply are based on the dates of expatriation, which are described in the following sections. State tax forms 2014 Expatriation Before June 4, 2004. State tax forms 2014 Expatriation After June 3, 2004, and Before June 17, 2008. State tax forms 2014 Expatriation After June 16, 2008. State tax forms 2014 Long-term resident defined. State tax forms 2014   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. State tax forms 2014 In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. State tax forms 2014 Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. State tax forms 2014 S. State tax forms 2014 taxes. State tax forms 2014 Unless you received a ruling from the IRS that you did not expatriate to avoid U. State tax forms 2014 S. State tax forms 2014 taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. State tax forms 2014 The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). State tax forms 2014 Table 4-1. State tax forms 2014 Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . State tax forms 2014 . State tax forms 2014 . State tax forms 2014   THEN the rules outlined on this page apply if . State tax forms 2014 . State tax forms 2014 . State tax forms 2014     Your 5-year average annual net income tax was more than . State tax forms 2014 . State tax forms 2014 . State tax forms 2014 OR Your net worth equaled or exceeded . State tax forms 2014 . State tax forms 2014 . State tax forms 2014 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. State tax forms 2014 Reporting requirements. State tax forms 2014   If you lost your U. State tax forms 2014 S. State tax forms 2014 citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. State tax forms 2014 If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. State tax forms 2014   Your U. State tax forms 2014 S. State tax forms 2014 residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. State tax forms 2014 Penalties. State tax forms 2014   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. State tax forms 2014 The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. State tax forms 2014 The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. State tax forms 2014 Expatriation tax. State tax forms 2014   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. State tax forms 2014 It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. State tax forms 2014 See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. State tax forms 2014 Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. State tax forms 2014 Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. State tax forms 2014 $127,000 if you expatriated or terminated residency in 2005. State tax forms 2014 $131,000 if you expatriated or terminated residency in 2006. State tax forms 2014 $136,000 if you expatriated or terminated residency in 2007. State tax forms 2014 $139,000 if you expatriated or terminated residency in 2008. State tax forms 2014 Your net worth is $2 million or more on the date of your expatriation or termination of residency. State tax forms 2014 You fail to certify on Form 8854 that you have complied with all U. State tax forms 2014 S. State tax forms 2014 federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. State tax forms 2014 Exception for dual-citizens and certain minors. State tax forms 2014   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. State tax forms 2014 However, they still must provide the certification required in (3). State tax forms 2014 Certain dual-citizens. State tax forms 2014   You may qualify for the exception described above if all of the following apply. State tax forms 2014 You became at birth a U. State tax forms 2014 S. State tax forms 2014 citizen and a citizen of another country and you continue to be a citizen of that other country. State tax forms 2014 You were never a resident alien of the United States (as defined in chapter 1). State tax forms 2014 You never held a U. State tax forms 2014 S. State tax forms 2014 passport. State tax forms 2014 You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. State tax forms 2014 S. State tax forms 2014 citizenship. State tax forms 2014 Certain minors. State tax forms 2014   You may qualify for the exception described above if you meet all of the following requirements. State tax forms 2014 You became a U. State tax forms 2014 S. State tax forms 2014 citizen at birth. State tax forms 2014 Neither of your parents was a U. State tax forms 2014 S. State tax forms 2014 citizen at the time of your birth. State tax forms 2014 You expatriated before you were 18½. State tax forms 2014 You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. State tax forms 2014 Tax consequences of presence in the United States. State tax forms 2014   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. State tax forms 2014   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. State tax forms 2014 Instead, you are treated as a U. State tax forms 2014 S. State tax forms 2014 citizen or resident and taxed on your worldwide income for that tax year. State tax forms 2014 You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. State tax forms 2014   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. State tax forms 2014 However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. State tax forms 2014 You have ties with other countries. State tax forms 2014 You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. State tax forms 2014 You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. State tax forms 2014 Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. State tax forms 2014 See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. State tax forms 2014 Related employer. State tax forms 2014   If your employer in the United States is any of the following, then your employer is related to you. State tax forms 2014 You must count any days you performed services in the United States for that employer as days of presence in the United States. State tax forms 2014 Members of your family. State tax forms 2014 This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. State tax forms 2014 ), and lineal descendants (children, grandchildren, etc. State tax forms 2014 ). State tax forms 2014 A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. State tax forms 2014 A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. State tax forms 2014 (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. State tax forms 2014 ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. State tax forms 2014 Date of tax expatriation. State tax forms 2014   For purposes of U. State tax forms 2014 S. State tax forms 2014 tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. State tax forms 2014 You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. State tax forms 2014 You file Form 8854 in accordance with the form instructions. State tax forms 2014 Annual return. State tax forms 2014   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. State tax forms 2014 You must file this form even if you owe no U. State tax forms 2014 S. State tax forms 2014 tax. State tax forms 2014 Penalty. State tax forms 2014   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. State tax forms 2014 You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. State tax forms 2014 How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. State tax forms 2014 S. State tax forms 2014 source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. State tax forms 2014 S. State tax forms 2014 trade or business. State tax forms 2014 For this purpose, U. State tax forms 2014 S. State tax forms 2014 source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. State tax forms 2014 S. State tax forms 2014 domestic corporation, and Debt obligations of U. State tax forms 2014 S. State tax forms 2014 persons or of the United States, a state or political subdivision thereof, or the District of Columbia. State tax forms 2014 U. State tax forms 2014 S. State tax forms 2014 source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. State tax forms 2014 The income or gain is considered U. State tax forms 2014 S. State tax forms 2014 source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. State tax forms 2014 Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. State tax forms 2014 S. State tax forms 2014 source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. State tax forms 2014 Other information. State tax forms 2014   For more information on the expatriation tax provisions, including exceptions to the tax and special U. State tax forms 2014 S. State tax forms 2014 source rules, see section 877 of the Internal Revenue Code. State tax forms 2014 Expatriation Tax Return If you expatriated or terminated your U. State tax forms 2014 S. State tax forms 2014 residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. State tax forms 2014 Attach it to Form 1040NR if you are required to file that form. State tax forms 2014 If you are present in the United States following your expatriation and are subject to tax as a U. State tax forms 2014 S. State tax forms 2014 citizen or resident, file Form 8854 with Form 1040. State tax forms 2014 Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. State tax forms 2014 Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. State tax forms 2014 $145,000 if you expatriated or terminated residency in 2009 or 2010. State tax forms 2014 $147,000 if you expatriated or terminated residency in 2011. State tax forms 2014 $151,000 if you expatriated or terminated residency in 2012. State tax forms 2014 $155,000 if you expatriated or terminated residency in 2013. State tax forms 2014 Your net worth is $2 million or more on the date of your expatriation or termination of residency. State tax forms 2014 You fail to certify on Form 8854 that you have complied with all U. State tax forms 2014 S. State tax forms 2014 federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. State tax forms 2014 Exception for dual-citizens and certain minors. State tax forms 2014   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. State tax forms 2014 However, they still must provide the certification required in (3) above. State tax forms 2014 Certain dual-citizens. State tax forms 2014   You may qualify for the exception described above if both of the following apply. State tax forms 2014 You became at birth a U. State tax forms 2014 S. State tax forms 2014 citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. State tax forms 2014 You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. State tax forms 2014 For the purpose of determining U. State tax forms 2014 S. State tax forms 2014 residency, use the substantial presence test described in chapter 1. State tax forms 2014 Certain minors. State tax forms 2014   You may qualify for the exception described earlier if you meet both of the following requirements. State tax forms 2014 You expatriated before you were 18½. State tax forms 2014 You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. State tax forms 2014 For the purpose of determining U. State tax forms 2014 S. State tax forms 2014 residency, use the substantial presence test described in chapter 1. State tax forms 2014 Expatriation date. State tax forms 2014   Your expatriation date is the date you relinquish U. State tax forms 2014 S. State tax forms 2014 citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. State tax forms 2014 S. State tax forms 2014 resident). State tax forms 2014 Former U. State tax forms 2014 S. State tax forms 2014 citizen. State tax forms 2014   You are considered to have relinquished your U. State tax forms 2014 S. State tax forms 2014 citizenship on the earliest of the following dates. State tax forms 2014 The date you renounced U. State tax forms 2014 S. State tax forms 2014 citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). State tax forms 2014 The date you furnished to the State Department a signed statement of voluntary relinquishment of U. State tax forms 2014 S. State tax forms 2014 nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). State tax forms 2014 The date the State Department issued a certificate of loss of nationality. State tax forms 2014 The date that a U. State tax forms 2014 S. State tax forms 2014 court canceled your certificate of naturalization. State tax forms 2014 Former long-term resident. State tax forms 2014   You are considered to have terminated your long-term residency on the earliest of the following dates. State tax forms 2014 The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. State tax forms 2014 S. State tax forms 2014 consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. State tax forms 2014 The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. State tax forms 2014 If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. State tax forms 2014 See Effect of Tax Treaties in chapter 1 for more information about dual residents. State tax forms 2014 How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). State tax forms 2014 This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. State tax forms 2014 But see Exceptions , later. State tax forms 2014 Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. State tax forms 2014 S. State tax forms 2014 internal revenue laws. State tax forms 2014 Losses from deemed sales must be taken into account to the extent otherwise provided under U. State tax forms 2014 S. State tax forms 2014 internal revenue laws. State tax forms 2014 However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. State tax forms 2014 The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. State tax forms 2014 $626,000 if you expatriated or terminated residency in 2009. State tax forms 2014 $627,000 if you expatriated or terminated residency in 2010. State tax forms 2014 $636,000 if you expatriated or terminated residency in 2011. State tax forms 2014 $651,000 if you expatriated or terminated residency in 2012. State tax forms 2014 $668,000 if you expatriated or terminated residency in 2013. State tax forms 2014 Exceptions. State tax forms 2014   The mark-to-market tax does not apply to the following. State tax forms 2014 Eligible deferred compensation items. State tax forms 2014 Ineligible deferred compensation items. State tax forms 2014 Interests in nongrantor trusts. State tax forms 2014 Specified tax deferred accounts. State tax forms 2014 Instead, items (1) and (3) may be subject to withholding at source. State tax forms 2014 In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. State tax forms 2014 In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. State tax forms 2014 See paragraphs (d), (e), and (f) of section 877A for more information. State tax forms 2014 Expatriation Tax Return If you expatriated or terminated your U. State tax forms 2014 S. State tax forms 2014 residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. State tax forms 2014 Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. State tax forms 2014 Deferral of payment of mark-to-market tax. State tax forms 2014   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. State tax forms 2014 If you make this election, the following rules apply. State tax forms 2014 You can make the election on a property-by-property basis. State tax forms 2014 The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. State tax forms 2014 Interest is charged for the period the tax is deferred. State tax forms 2014 The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. State tax forms 2014 The due date of the return required for the year of death. State tax forms 2014 The time that the security provided for the property fails to be adequate. State tax forms 2014 See item (6) below. State tax forms 2014 You make the election on Form 8854. State tax forms 2014 You must provide adequate security (such as a bond). State tax forms 2014 You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. State tax forms 2014   For more information about the deferral of payment, see the Instructions for Form 8854. State tax forms 2014 Prev  Up  Next   Home   More Online Publications
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The State Tax Forms 2014

State tax forms 2014 4. State tax forms 2014   Special Situations Table of Contents Condominiums CooperativesDepreciation Property Changed to Rental UseBasis of Property Changed to Rental Use Figuring the Depreciation Deduction Renting Part of Property Not Rented for ProfitPostponing decision. State tax forms 2014 Example—Property Changed to Rental Use This chapter discusses some rental real estate activities that are subject to additional rules. State tax forms 2014 Condominiums A condominium is most often a dwelling unit in a multi-unit building, but can also take other forms, such as a townhouse or garden apartment. State tax forms 2014 If you own a condominium, you also own a share of the common elements, such as land, lobbies, elevators, and service areas. State tax forms 2014 You and the other condominium owners may pay dues or assessments to a special corporation that is organized to take care of the common elements. State tax forms 2014 Special rules apply if you rent your condominium to others. State tax forms 2014 You can deduct as rental expenses all the expenses discussed in chapters 1 and 2. State tax forms 2014 In addition, you can deduct any dues or assessments paid for maintenance of the common elements. State tax forms 2014 You cannot deduct special assessments you pay to a condominium management corporation for improvements. State tax forms 2014 However, you may be able to recover your share of the cost of any improvement by taking depreciation. State tax forms 2014 Cooperatives If you live in a cooperative, you do not own your apartment. State tax forms 2014 Instead, a corporation owns the apartments and you are a tenant-stockholder in the cooperative housing corporation. State tax forms 2014 If you rent your apartment to others, you usually can deduct, as a rental expense, all the maintenance fees you pay to the cooperative housing corporation. State tax forms 2014 In addition to the maintenance fees paid to the cooperative housing corporation, you can deduct your direct payments for repairs, upkeep, and other rental expenses, including interest paid on a loan used to buy your stock in the corporation. State tax forms 2014 Depreciation You will be depreciating your stock in the corporation rather than the apartment itself. State tax forms 2014 Figure your depreciation deduction as follows. State tax forms 2014 Figure the depreciation for all the depreciable real property owned by the corporation. State tax forms 2014 (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. State tax forms 2014 ) If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. State tax forms 2014 Multiply your cost per share by the total number of outstanding shares. State tax forms 2014 Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. State tax forms 2014 Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. State tax forms 2014 Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. State tax forms 2014 Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. State tax forms 2014 Multiply the result of (2) by the percentage you figured in (3). State tax forms 2014 This is your depreciation on the stock. State tax forms 2014 Your depreciation deduction for the year cannot be more than the part of your adjusted basis (defined in chapter 2) in the stock of the corporation that is allocable to your rental property. State tax forms 2014 Payments added to capital account. State tax forms 2014   Payments earmarked for a capital asset or improvement, or otherwise charged to the corporation's capital account are added to the basis of your stock in the corporation. State tax forms 2014 For example, you cannot deduct a payment used to pave a community parking lot, install a new roof, or pay the principal of the corporation's mortgage. State tax forms 2014   Treat as a capital cost the amount you were assessed for capital items. State tax forms 2014 This cannot be more than the amount by which your payments to the corporation exceeded your share of the corporation's mortgage interest and real estate taxes. State tax forms 2014   Your share of interest and taxes is the amount the corporation elected to allocate to you, if it reasonably reflects those expenses for your apartment. State tax forms 2014 Otherwise, figure your share in the following manner. State tax forms 2014 Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. State tax forms 2014 Multiply the corporation's deductible interest by the number you figured in (1). State tax forms 2014 This is your share of the interest. State tax forms 2014 Multiply the corporation's deductible taxes by the number you figured in (1). State tax forms 2014 This is your share of the taxes. State tax forms 2014 Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. State tax forms 2014 You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. State tax forms 2014 You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. State tax forms 2014 However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). State tax forms 2014 Example. State tax forms 2014 Your tax year is the calendar year. State tax forms 2014 You moved from your home in May and started renting it out on June 1. State tax forms 2014 You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. State tax forms 2014 Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. State tax forms 2014 When figuring depreciation, treat the property as placed in service on June 1. State tax forms 2014 Basis of Property Changed to Rental Use When you change property you held for personal use to rental use (for example, you rent your former home), the basis for depreciation will be the lesser of fair market value or adjusted basis on the date of conversion. State tax forms 2014 Fair market value. State tax forms 2014   This is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. State tax forms 2014 Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property. State tax forms 2014 Figuring the basis. State tax forms 2014   The basis for depreciation is the lesser of: The fair market value of the property on the date you changed it to rental use, or Your adjusted basis on the date of the change—that is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years' income tax returns and other decreases to basis. State tax forms 2014 For other increases and decreases to basis, see Adjusted Basis in chapter 2. State tax forms 2014 Example. State tax forms 2014 Several years ago you built your home for $140,000 on a lot that cost you $14,000. State tax forms 2014 Before changing the property to rental use this year, you added $28,000 of permanent improvements to the house and claimed a $3,500 casualty loss deduction for damage to the house. State tax forms 2014 Part of the improvements qualified for a $500 residential energy credit, which you claimed on your 2010 tax return. State tax forms 2014 Because land is not depreciable, you can only include the cost of the house when figuring the basis for depreciation. State tax forms 2014 The adjusted basis of the house at the time of the change in its use was $164,000 ($140,000 + $28,000 − $3,500 − $500). State tax forms 2014 On the date of the change in use, your property had a fair market value of $168,000, of which $21,000 was for the land and $147,000 was for the house. State tax forms 2014 The basis for depreciation on the house is the fair market value on the date of the change ($147,000), because it is less than your adjusted basis ($164,000). State tax forms 2014 Cooperatives If you change your cooperative apartment to rental use, figure your allowable depreciation as explained earlier. State tax forms 2014 (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. State tax forms 2014 ) The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. State tax forms 2014 The fair market value of the property on the date you change your apartment to rental use. State tax forms 2014 This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. State tax forms 2014 The corporation's adjusted basis in the property on that date. State tax forms 2014 Do not subtract depreciation when figuring the corporation's adjusted basis. State tax forms 2014 If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1) under Depreciation (under Cooperatives, near the beginning of this chapter). State tax forms 2014 The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. State tax forms 2014 Figuring the Depreciation Deduction To figure the deduction, use the depreciation system in effect when you convert your residence to rental use. State tax forms 2014 Generally, that will be MACRS for any conversion after 1986. State tax forms 2014 Treat the property as placed in service on the conversion date. State tax forms 2014 Example. State tax forms 2014 Your converted residence (see previous example under Figuring the basis) was available for rent on August 1. State tax forms 2014 Using Table 2-2d (see chapter 2), the percentage for Year 1 beginning in August is 1. State tax forms 2014 364% and the depreciation deduction for Year 1 is $2,005 ($147,000 × . State tax forms 2014 01364). State tax forms 2014 Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. State tax forms 2014 You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). State tax forms 2014 You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity, or painting the outside of the house. State tax forms 2014 There is no change in the types of expenses deductible for the personal-use part of your property. State tax forms 2014 Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). State tax forms 2014 You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. State tax forms 2014 You do not have to divide the expenses that belong only to the rental part of your property. State tax forms 2014 For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. State tax forms 2014 If you install a second phone line strictly for your tenant's use, all of the cost of the second line is deductible as a rental expense. State tax forms 2014 You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. State tax forms 2014 How to divide expenses. State tax forms 2014   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. State tax forms 2014 You can use any reasonable method for dividing the expense. State tax forms 2014 It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. State tax forms 2014 The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home. State tax forms 2014 Example. State tax forms 2014 You rent a room in your house. State tax forms 2014 The room is 12 × 15 feet, or 180 square feet. State tax forms 2014 Your entire house has 1,800 square feet of floor space. State tax forms 2014 You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. State tax forms 2014 If your heating bill for the year for the entire house was $600, $60 ($600 × . State tax forms 2014 10) is a rental expense. State tax forms 2014 The balance, $540, is a personal expense that you cannot deduct. State tax forms 2014 Duplex. State tax forms 2014   A common situation is the duplex where you live in one unit and rent out the other. State tax forms 2014 Certain expenses apply to the entire property, such as mortgage interest and real estate taxes, and must be split to determine rental and personal expenses. State tax forms 2014 Example. State tax forms 2014 You own a duplex and live in one half, renting the other half. State tax forms 2014 Both units are approximately the same size. State tax forms 2014 Last year, you paid a total of $10,000 mortgage interest and $2,000 real estate taxes for the entire property. State tax forms 2014 You can deduct $5,000 mortgage interest and $1,000 real estate taxes on Schedule E (Form 1040), and if you itemize your deductions, you can deduct the other $5,000 mortgage interest and $1,000 real estate taxes on Schedule A (Form 1040). State tax forms 2014 Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. State tax forms 2014 You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. State tax forms 2014 Where to report. State tax forms 2014   Report your not-for-profit rental income on Form 1040 or 1040NR, line 21. State tax forms 2014 For example, if you are filing Form 1040, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. State tax forms 2014   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. State tax forms 2014 You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. State tax forms 2014 Presumption of profit. State tax forms 2014   If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit. State tax forms 2014 Postponing decision. State tax forms 2014   If you are starting your rental activity and do not have 3 years showing a profit, you can elect to have the presumption made after you have the 5 years of experience required by the test. State tax forms 2014 You may choose to postpone the decision of whether the rental is for profit by filing Form 5213. State tax forms 2014 You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. State tax forms 2014 More information. State tax forms 2014   For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. State tax forms 2014 Example—Property Changed to Rental Use In January, Eileen Johnson bought a condominium apartment to live in. State tax forms 2014 Instead of selling the house she had been living in, she decided to change it to rental property. State tax forms 2014 Eileen selected a tenant and started renting the house on February 1. State tax forms 2014 Eileen charges $750 a month for rent and collects it herself. State tax forms 2014 Eileen also received a $750 security deposit from her tenant. State tax forms 2014 Because she plans to return it to her tenant at the end of the lease, she does not include it in her income. State tax forms 2014 Her rental expenses for the year are as follows. State tax forms 2014   Mortgage interest $1,800     Fire insurance (1-year policy) 100     Miscellaneous repairs (after renting) 297     Real estate taxes imposed and paid 1,200   Eileen must divide the real estate taxes, mortgage interest, and fire insurance between the personal use of the property and the rental use of the property. State tax forms 2014 She can deduct eleven-twelfths of these expenses as rental expenses. State tax forms 2014 She can include the balance of the allowable taxes and mortgage interest on Schedule A (Form 1040) if she itemizes. State tax forms 2014 She cannot deduct the balance of the fire insurance because it is a personal expense. State tax forms 2014 Eileen bought this house in 1984 for $35,000. State tax forms 2014 Her property tax was based on assessed values of $10,000 for the land and $25,000 for the house. State tax forms 2014 Before changing it to rental property, Eileen added several improvements to the house. State tax forms 2014 She figures her adjusted basis as follows:   Improvements Cost     House $25,000     Remodeled kitchen 4,200     Recreation room 5,800     New roof 1,600     Patio and deck 2,400     Adjusted basis $39,000   On February 1, when Eileen changed her house to rental property, the property had a fair market value of $152,000. State tax forms 2014 Of this amount, $35,000 was for the land and $117,000 was for the house. State tax forms 2014 Because Eileen's adjusted basis is less than the fair market value on the date of the change, Eileen uses $39,000 as her basis for depreciation. State tax forms 2014 As specified for residential rental property, Eileen must use the straight line method of depreciation over the GDS or ADS recovery period. State tax forms 2014 She chooses the GDS recovery period of 27. State tax forms 2014 5 years. State tax forms 2014 She uses Table 2-2d to find her depreciation percentage. State tax forms 2014 Since she placed the property in service in February, the percentage is 3. State tax forms 2014 182%. State tax forms 2014 On April 1, Eileen bought a new dishwasher for the rental property at a cost of $425. State tax forms 2014 The dishwasher is personal property used in a rental real estate activity, which has a 5-year recovery period. State tax forms 2014 She uses Table 2-2a to find the percentage for Year 1 under “Half-year convention” (20%) to figure her depreciation deduction. State tax forms 2014 On May 1, Eileen paid $4,000 to have a furnace installed in the house. State tax forms 2014 The furnace is residential rental property. State tax forms 2014 Because she placed the property in service in May, the percentage from Table 2-2d is 2. State tax forms 2014 273%. State tax forms 2014 Eileen figures her net rental income or loss for the house as follows: Total rental income received  ($750 × 11) $8,250 Minus: Expenses     Mortgage interest ($1,800 × 11/12) $1,650   Fire insurance ($100 × 11/12) 92   Miscellaneous repairs 297   Real estate taxes ($1,200 × 11/12) 1,100   Total expenses 3,139 Balance $5,111 Minus: Depreciation     House ($39,000 × . State tax forms 2014 03182) $1,241   Dishwasher ($425 × . State tax forms 2014 20) 85   Furnace ($4,000 × . State tax forms 2014 02273) 91   Total depreciation 1,417 Net rental income for house   $3,694       Eileen uses Schedule E, Part I, to report her rental income and expenses. State tax forms 2014 She enters her income, expenses, and depreciation for the house in the column for Property A. State tax forms 2014 Since all property was placed in service this year, Eileen must use Form 4562 to figure the depreciation. State tax forms 2014 See the Instructions for Form 4562 for more information on preparing the form. State tax forms 2014 Prev  Up  Next   Home   More Online Publications