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Tax Exemptions For Students

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Tax Exemptions For Students

Tax exemptions for students Publication 946 - Introductory Material Table of Contents What's New for 2013 What's New for 2014 Reminders IntroductionOrdering forms and publications. Tax exemptions for students Tax questions. Tax exemptions for students What's New for 2013 Increased section 179 deduction dollar limits. Tax exemptions for students  The maximum amount you can elect to deduct for most section 179 property you placed in service in 2013 is $500,000 ($535,000 for qualified enterprise zone property). Tax exemptions for students This limit is reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2,000,000. Tax exemptions for students See Dollar Limits under How Much Can You Deduct in chapter 2. Tax exemptions for students Depreciation limits on business vehicles. Tax exemptions for students  The total section 179 deduction and depreciation you can deduct for a passenger automobile (that is not a truck or van) you use in your business and first placed in service in 2013 is $3,160, if the special depreciation allowance does not apply. Tax exemptions for students The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2013 is $3,360, if the special depreciation allowance does not apply. Tax exemptions for students See Maximum Depreciation Deduction in chapter 5. Tax exemptions for students Special allowance for qualified second generation biofuel plant property. Tax exemptions for students . Tax exemptions for students  For tax years ending after December 31, 2012, you may be able to take a 50% special depreciation allowance for qualified second generation biofuel plant property placed in service after January 2, 2013, and before January 1, 2014. Tax exemptions for students Election to accelerate minimum tax credits for round 3 extension property. Tax exemptions for students . Tax exemptions for students  For tax years ending after December 31, 2012, a corporation can elect to claim pre-2006 unused minimum tax credits in lieu of the special depreciation allowance for round 3 extension property. Tax exemptions for students What's New for 2014 Expiration of the increased section 179 deduction limits and expanded definition of section 179 property. Tax exemptions for students  For tax years beginning after 2013, the increased section 179 expense deduction limit and threshold amount before reduction in limitation will no longer apply. Tax exemptions for students Also, the definition of section 179 property will no longer include certain qualified real property. Tax exemptions for students Expiration of the 7-year recovery period for motor sports entertainment complexes. Tax exemptions for students  Qualified motor sports entertainment complex property placed in service after December 31, 2013, will not be treated as 7-year property under MACRS. Tax exemptions for students Expiration of the 15-year recovery period for qualified leasehold improvement, restaurant, and retail improvement properties. Tax exemptions for students  Qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property placed in service after December 31, 2013, will not be treated as 15-year property under MACRS. Tax exemptions for students Expiration of the accelerated depreciation for qualified Indian reservation property. Tax exemptions for students  The accelerated depreciation of property on an Indian Reservation will not apply to property placed in service after December 31, 2013. Tax exemptions for students Expiration of the 3-year recovery period for certain race horses. Tax exemptions for students  The 3-year recovery period for race horses two years old or younger will expire for such horses placed in service after December 31, 2013. Tax exemptions for students Reminders Photographs of missing children. Tax exemptions for students  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Tax exemptions for students Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Tax exemptions for students You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Tax exemptions for students Introduction Future developments. Tax exemptions for students   For the latest information about developments related to Publication 946 such as legislation enacted after this publication was published, go to www. Tax exemptions for students irs. Tax exemptions for students gov/pub946. Tax exemptions for students This publication explains how you can recover the cost of business or income-producing property through deductions for depreciation (for example, the special depreciation allowance and deductions under the Modified Accelerated Cost Recovery System (MACRS)). Tax exemptions for students It also explains how you can elect to take a section 179 deduction, instead of depreciation deductions, for certain property, and the additional rules for listed property. Tax exemptions for students The depreciation methods discussed in this publication generally do not apply to property placed in service before 1987. Tax exemptions for students For more information, see Publication 534, Depreciating Property Placed in Service Before 1987. Tax exemptions for students Definitions. Tax exemptions for students   Many of the terms used in this publication are defined in the Glossary near the end of the publication. Tax exemptions for students Glossary terms used in each discussion under the major headings are listed before the beginning of each discussion throughout the publication. Tax exemptions for students Do you need a different publication?   The following table shows where you can get more detailed information when depreciating certain types of property. Tax exemptions for students For information on depreciating: See Publication: A car 463, Travel, Entertainment, Gift, and Car Expenses Residential rental property 527, Residential Rental Property (Including Rental of Vacation Home) Office space in your home 587, Business Use of Your Home (Including Use by Daycare Providers) Farm property 225, Farmer's Tax Guide Comments and suggestions. Tax exemptions for students   We welcome your comments about this publication and your suggestions for future editions. Tax exemptions for students   You can write to us at the following address: Internal Revenue Service Business, Exempt Organizations and International Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. Tax exemptions for students NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Tax exemptions for students Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Tax exemptions for students   You can send us comments from www. Tax exemptions for students irs. Tax exemptions for students gov/formspubs/. Tax exemptions for students Select “Comment on Tax Forms and Publications” under “More Information. Tax exemptions for students ”   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. Tax exemptions for students Ordering forms and publications. Tax exemptions for students   Visit www. Tax exemptions for students irs. Tax exemptions for students gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Tax exemptions for students Internal Revenue Service 1201 N. Tax exemptions for students Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Tax exemptions for students   If you have a tax question, check the information available on IRS. Tax exemptions for students gov or call 1-800-829-1040. Tax exemptions for students We cannot answer tax questions sent to either of the above addresses. Tax exemptions for students Prev  Up  Next   Home   More Online Publications
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The Tax Exemptions For Students

Tax exemptions for students Publication 939 - Main Content Table of Contents General Information Taxation of Periodic PaymentsInvestment in the Contract Expected Return Computation Under the General Rule How To Use Actuarial TablesUnisex Annuity Tables Special Elections Worksheets for Determining Taxable Annuity Actuarial Tables Requesting a Ruling on Taxation of Annuity How To Get Tax HelpLow Income Taxpayer Clinics General Information Some of the terms used in this publication are defined in the following paragraphs. Tax exemptions for students A pension is generally a series of payments made to you after you retire from work. Tax exemptions for students Pension payments are made regularly and are for past services with an employer. Tax exemptions for students An annuity is a series of payments under a contract. Tax exemptions for students You can buy the contract alone or you can buy it with the help of your employer. Tax exemptions for students Annuity payments are made regularly for more than one full year. Tax exemptions for students Note. Tax exemptions for students Distributions from pensions and annuities follow the same rules as outlined in this publication unless otherwise noted. Tax exemptions for students Types of pensions and annuities. Tax exemptions for students   Particular types of pensions and annuities include: Fixed period annuities. Tax exemptions for students You receive definite amounts at regular intervals for a definite length of time. Tax exemptions for students Annuities for a single life. Tax exemptions for students You receive definite amounts at regular intervals for life. Tax exemptions for students The payments end at death. Tax exemptions for students Joint and survivor annuities. Tax exemptions for students The first annuitant receives a definite amount at regular intervals for life. Tax exemptions for students After he or she dies, a second annuitant receives a definite amount at regular intervals for life. Tax exemptions for students The amount paid to the second annuitant may or may not differ from the amount paid to the first annuitant. Tax exemptions for students Variable annuities. Tax exemptions for students You receive payments that may vary in amount for a definite length of time or for life. Tax exemptions for students The amounts you receive may depend upon such variables as profits earned by the pension or annuity funds or cost-of-living indexes. Tax exemptions for students Disability pensions. Tax exemptions for students You are under minimum retirement age and receive payments because you retired on disability. Tax exemptions for students If, at the time of your retirement, you were permanently and totally disabled, you may be eligible for the credit for the elderly or the disabled discussed in Publication 524. Tax exemptions for students If your annuity starting date is after November 18, 1996, the General Rule cannot be used for the following qualified plans. Tax exemptions for students A qualified employee plan is an employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries. Tax exemptions for students This plan must meet Internal Revenue Code requirements. Tax exemptions for students It qualifies for special tax benefits, including tax deferral for employer contributions and rollover distributions. Tax exemptions for students However, you must use the General Rule if you were 75 or over and the annuity payments are guaranteed for more than 5 years. Tax exemptions for students A qualified employee annuity is a retirement annuity purchased by an employer for an employee under a plan that meets Internal Revenue Code requirements. Tax exemptions for students A tax-sheltered annuity is a special annuity plan or contract purchased for an employee of a public school or tax-exempt organization. Tax exemptions for students   The General Rule is used to figure the tax treatment of various types of pensions and annuities, including nonqualified employee plans. Tax exemptions for students A nonqualified employee plan is an employer's plan that does not meet Internal Revenue Code requirements. Tax exemptions for students It does not qualify for most of the tax benefits of a qualified plan. Tax exemptions for students Annuity worksheets. Tax exemptions for students   The worksheets found near the end of the text of this publication may be useful to you in figuring the taxable part of your annuity. Tax exemptions for students Request for a ruling. Tax exemptions for students   If you are unable to determine the income tax treatment of your pension or annuity, you may ask the Internal Revenue Service to figure the taxable part of your annuity payments. Tax exemptions for students This is treated as a request for a ruling. Tax exemptions for students See Requesting a Ruling on Taxation of Annuity near the end of this publication. Tax exemptions for students Withholding tax and estimated tax. Tax exemptions for students   Your pension or annuity is subject to federal income tax withholding unless you choose not to have tax withheld. Tax exemptions for students If you choose not to have tax withheld from your pension or annuity, or if you do not have enough income tax withheld, you may have to make estimated tax payments. Tax exemptions for students Taxation of Periodic Payments This section explains how the periodic payments you receive under a pension or annuity plan are taxed under the General Rule. Tax exemptions for students Periodic payments are amounts paid at regular intervals (such as weekly, monthly, or yearly) for a period of time greater than one year (such as for 15 years or for life). Tax exemptions for students These payments are also known as amounts received as an annuity. Tax exemptions for students If you receive an amount from your plan that is a nonperiodic payment (amount not received as an annuity), see Taxation of Nonperiodic Payments in Publication 575. Tax exemptions for students In general, you can recover your net cost of the pension or annuity tax free over the period you are to receive the payments. Tax exemptions for students The amount of each payment that is more than the part that represents your net cost is taxable. Tax exemptions for students Under the General Rule, the part of each annuity payment that represents your net cost is in the same proportion that your investment in the contract is to your expected return. Tax exemptions for students These terms are explained in the following discussions. Tax exemptions for students Investment in the Contract In figuring how much of your pension or annuity is taxable under the General Rule, you must figure your investment in the contract. Tax exemptions for students First, find your net cost of the contract as of the annuity starting date (defined later). Tax exemptions for students To find this amount, you must first figure the total premiums, contributions, or other amounts paid. Tax exemptions for students This includes the amounts your employer contributed if you were required to include these amounts in income. Tax exemptions for students It also includes amounts you actually contributed (except amounts for health and accident benefits and deductible voluntary employee contributions). Tax exemptions for students From this total cost you subtract: Any refunded premiums, rebates, dividends, or unrepaid loans (any of which were not included in your income) that you received by the later of the annuity starting date or the date on which you received your first payment. Tax exemptions for students Any additional premiums paid for double indemnity or disability benefits. Tax exemptions for students Any other tax-free amounts you received under the contract or plan before the later of the dates in (1). Tax exemptions for students The annuity starting date   is the later of the first day of the first period for which you receive payment under the contract or the date on which the obligation under the contract becomes fixed. Tax exemptions for students Example. Tax exemptions for students On January 1 you completed all your payments required under an annuity contract providing for monthly payments starting on August 1, for the period beginning July 1. Tax exemptions for students The annuity starting date is July 1. Tax exemptions for students This is the date you use in figuring your investment in the contract and your expected return (discussed later). Tax exemptions for students Adjustments If any of the following items apply, adjust (add or subtract) your total cost to find your net cost. Tax exemptions for students Foreign employment. Tax exemptions for students   If you worked abroad, your cost may include contributions by your employer to the retirement plan, but only if those contributions would be excludible from your gross income had they been paid directly to you as compensation. Tax exemptions for students The contributions that apply are: Contributions before 1963 by your employer, Contributions after 1962 by your employer if the contributions would be excludible from your gross income (without regard to the foreign earned income exclusion) had they been paid directly to you, or Contributions after 1996 by your employer on your behalf if you performed the services of a foreign missionary (a duly ordained, commissioned, or licensed minister of a church or a lay person) if the contributions would be excludible from your gross income had they been paid directly to you. Tax exemptions for students Foreign employment contributions while a nonresident alien. Tax exemptions for students   In determining your cost, special rules apply if you are a U. Tax exemptions for students S. Tax exemptions for students citizen or resident alien who received distributions from a plan to which contributions were made while you were a nonresident alien. Tax exemptions for students Your contributions and your employer's contributions are not included in your cost if the contributions: Were made based on compensation which was for services performed outside the United States which you were a nonresident alien, and Were not subject to income tax under the laws of the United States or any foreign country, but only if the contribution would have been subject to income tax if they had been paid as cash compensation when the services were performed. Tax exemptions for students Death benefit exclusion. Tax exemptions for students   If you are the beneficiary of a deceased employee (or former employee), who died before August 21, 1996, you may qualify for a death benefit exclusion of up to $5,000. Tax exemptions for students The beneficiary of a deceased employee who died after August 20, 1996, will not qualify for the death benefit exclusion. Tax exemptions for students How to adjust your total cost. Tax exemptions for students   If you are eligible, treat the amount of any allowable death benefit exclusion as additional cost paid by the employee. Tax exemptions for students Add it to the cost or unrecovered cost of the annuity at the annuity starting date. Tax exemptions for students See Example 3 under Computation Under General Rule for an illustration of the adjustment to the cost of the contract. Tax exemptions for students Net cost. Tax exemptions for students   Your total cost plus certain adjustments and minus other amounts already recovered before the annuity starting date is your net cost. Tax exemptions for students This is the unrecovered investment in the contract as of the annuity starting date. Tax exemptions for students If your annuity starting date is after 1986, this is the maximum amount that you may recover tax free under the contract. Tax exemptions for students Refund feature. Tax exemptions for students   Adjustment for the value of the refund feature is only applicable when you report your pension or annuity under the General Rule. Tax exemptions for students Your annuity contract has a refund feature if: The expected return ( discussed later) of an annuity depends entirely or partly on the life of one or more individuals, The contract provides that payments will be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a stated amount or a stated number of payments has not been paid to the annuitant or annuitants before death, and The payments are a refund of the amount you paid for the annuity contract. Tax exemptions for students   If your annuity has a refund feature, you must reduce your net cost of the contract by the value of the refund feature (figured using Table III or VII at the end of this publication, also see How To Use Actuarial Tables , later) to find the investment in the contract. Tax exemptions for students Zero value of refund feature. Tax exemptions for students   For a joint and survivor annuity, the value of the refund feature is zero if: Both annuitants are age 74 or younger, The payments are guaranteed for less than 2½ years, and The survivor's annuity is at least 50% of the first annuitant's annuity. Tax exemptions for students   For a single-life annuity without survivor benefit, the value of the refund feature is zero if: The payments are guaranteed for less than 2½ years, and The annuitant is: Age 57 or younger (if using the new (unisex) annuity tables), Age 42 or younger (if male and using the old annuity tables), or Age 47 or younger (if female and using the old annuity tables). Tax exemptions for students   If you do not meet these requirements, you will have to figure the value of the refund feature, as explained in the following discussion. Tax exemptions for students Examples. Tax exemptions for students The first example shows how to figure the value of the refund feature when there is only one beneficiary. Tax exemptions for students Example 2 shows how to figure the value of the refund feature when the contract provides, in addition to a whole life annuity, one or more temporary life annuities for the lives of children. Tax exemptions for students In both examples, the taxpayer elects to use Tables V through VIII. Tax exemptions for students If you need the value of the refund feature for a joint and survivor annuity, write to the Internal Revenue Service as explained under Requesting a Ruling on Taxation of Annuity near the end of this publication. Tax exemptions for students Example 1. Tax exemptions for students At age 65, Barbara bought for $21,053 an annuity with a refund feature. Tax exemptions for students She will get $100 a month for life. Tax exemptions for students Barbara's contract provides that if she does not live long enough to recover the full $21,053, similar payments will be made to her surviving beneficiary until a total of $21,053 has been paid under the contract. Tax exemptions for students In this case, the contract cost and the total guaranteed return are the same ($21,053). Tax exemptions for students Barbara's investment in the contract is figured as follows: Net cost $21,053 Amount to be received annually $1,200   Number of years for which payment is guaranteed ($21,053 divided by $1,200) 17. Tax exemptions for students 54   Rounded to nearest whole number of years 18   Percentage from Actuarial Table VII for age 65 with 18 years of guaranteed payments 15%   Value of the refund feature (rounded to the nearest dollar)—15% of $21,053 3,158 Investment in the contract, adjusted for value of refund feature $17,895       If the total guaranteed return were less than the $21,053 net cost of the contract, Barbara would apply the appropriate percentage from the tables to the lesser amount. Tax exemptions for students For example, if the contract guaranteed the $100 monthly payments for 17 years to Barbara's estate or beneficiary if she were to die before receiving all the payments for that period, the total guaranteed return would be $20,400 ($100 × 12 × 17 years). Tax exemptions for students In this case, the value of the refund feature would be $2,856 (14% of $20,400) and Barbara's investment in the contract would be $18,197 ($21,053 minus $2,856) instead of $17,895. Tax exemptions for students Example 2. Tax exemptions for students John died while still employed. Tax exemptions for students His widow, Eleanor, age 48, receives $171 a month for the rest of her life. Tax exemptions for students John's son, Elmer, age 9, receives $50 a month until he reaches age 18. Tax exemptions for students John's contributions to the retirement fund totaled $7,559. Tax exemptions for students 45, with interest on those contributions of $1,602. Tax exemptions for students 53. Tax exemptions for students The guarantee or total refund feature of the contract is $9,161. Tax exemptions for students 98 ($7,559. Tax exemptions for students 45 plus $1,602. Tax exemptions for students 53). Tax exemptions for students The adjustment in the investment in the contract is figured as follows: A) Expected return:*       1) Widow's expected return:         Annual annuity ($171 × 12) $2,052       Multiplied by factor from Table V         (nearest age 48) 34. Tax exemptions for students 9 $71,614. Tax exemptions for students 80   2) Child's expected return:         Annual annuity ($50 × 12) $600       Multiplied by factor from         Table VIII (nearest age 9         for term of 9 years) 9. Tax exemptions for students 0 5,400. Tax exemptions for students 00   3) Total expected return   $77,014. Tax exemptions for students 80 B) Adjustment for refund feature:       1) Contributions (net cost) $7,559. Tax exemptions for students 45   2) Guaranteed amount (contributions of $7,559. Tax exemptions for students 45 plus interest of $1,602. Tax exemptions for students 53) $9,161. Tax exemptions for students 98   3) Minus: Expected return under child's (temporary life) annuity (A(2)) 5,400. Tax exemptions for students 00   4) Net guaranteed amount $3,761. Tax exemptions for students 98   5) Multiple from Table VII (nearest age 48 for 2 years duration (recovery of $3,761. Tax exemptions for students 98 at $171 a month to nearest whole year)) 0%   6) Adjustment required for value of refund feature rounded to the nearest whole dollar  (0% × $3,761. Tax exemptions for students 98, the smaller of B(3) or B(6)) 0 *Expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Tax exemptions for students See the discussion of expected return, later in this publication. Tax exemptions for students Free IRS help. Tax exemptions for students   If you need to request assistance to figure the value of the refund feature, see Requesting a Ruling on Taxation of Annuity near the end of this publication. Tax exemptions for students Expected Return Your expected return is the total amount you and other eligible annuitants can expect to receive under the contract. Tax exemptions for students The following discussions explain how to figure the expected return with each type of annuity. Tax exemptions for students A person's age, for purposes of figuring the expected return, is the age at the birthday nearest to the annuity starting date. Tax exemptions for students Fixed period annuity. Tax exemptions for students   If you will get annuity payments for a fixed number of years, without regard to your life expectancy, you must figure your expected return based on that fixed number of years. Tax exemptions for students It is the total amount you will get beginning at the annuity starting date. Tax exemptions for students You will receive specific periodic payments for a definite period of time, such as a fixed number of months (but not less than 13). Tax exemptions for students To figure your expected return, multiply the fixed number of months for which payments are to be made by the amount of the payment specified for each period. Tax exemptions for students Single life annuity. Tax exemptions for students   If you are to get annuity payments for the rest of your life, find your expected return as follows. Tax exemptions for students You must multiply the amount of the annual payment by a multiple based on your life expectancy as of the annuity starting date. Tax exemptions for students These multiples are set out in actuarial Tables I and V near the end of this publication (see How To Use Actuarial Tables , later). Tax exemptions for students   You may need to adjust these multiples if the payments are made quarterly, semiannually, or annually. Tax exemptions for students See Adjustments to Tables I, II, V, VI, and VIA following Table I. Tax exemptions for students Example. Tax exemptions for students Henry bought an annuity contract that will give him an annuity of $500 a month for his life. Tax exemptions for students If at the annuity starting date Henry's nearest birthday is 66, the expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table V, age 66 × 19. Tax exemptions for students 2 Expected return $115,200 If the payments were to be made to Henry quarterly and the first payment was made one full month after the annuity starting date, Henry would adjust the 19. Tax exemptions for students 2 multiple by +. Tax exemptions for students 1. Tax exemptions for students His expected return would then be $115,800 ($6,000 × 19. Tax exemptions for students 3). Tax exemptions for students Annuity for shorter of life or specified period. Tax exemptions for students   With this type of annuity, you are to get annuity payments either for the rest of your life or until the end of a specified period, whichever period is shorter. Tax exemptions for students To figure your expected return, multiply the amount of your annual payment by a multiple in Table IV or VIII for temporary life annuities. Tax exemptions for students Find the proper multiple based on your sex (if using Table IV), your age at the annuity starting date, and the nearest whole number of years in the specified period. Tax exemptions for students Example. Tax exemptions for students Harriet purchased an annuity this year that will pay her $200 each month for five years or until she dies, whichever period is shorter. Tax exemptions for students She was age 65 at her birthday nearest the annuity starting date. Tax exemptions for students She figures the expected return as follows: Annual payment ($200 × 12 months) $2,400 Multiple shown in Table VIII, age 65, 5-year term × 4. Tax exemptions for students 9 Expected return $11,760 She uses Table VIII (not Table IV) because all her contributions were made after June 30, 1986. Tax exemptions for students See Special Elections, later. Tax exemptions for students Joint and survivor annuities. Tax exemptions for students   If you have an annuity that pays you a periodic income for life and after your death provides an identical lifetime periodic income to your spouse (or some other person), you figure the expected return based on your combined life expectancies. Tax exemptions for students To figure the expected return, multiply the annual payment by a multiple in Table II or VI based on your joint life expectancies. Tax exemptions for students If your payments are made quarterly, semiannually, or annually, you may need to adjust these multiples. Tax exemptions for students See Adjustments to Tables I, II, V, VI, and VIA following Table I near the end of this publication. Tax exemptions for students Example. Tax exemptions for students John bought a joint and survivor annuity providing payments of $500 a month for his life, and, after his death, $500 a month for the remainder of his wife's life. Tax exemptions for students At John's annuity starting date, his age at his nearest birthday is 70 and his wife's at her nearest birthday is 67. Tax exemptions for students The expected return is figured as follows: Annual payment ($500 × 12 months) $6,000 Multiple shown in Table VI, ages 67 and 70 × 22. Tax exemptions for students 0 Expected return $132,000 Different payments to survivor. Tax exemptions for students   If your contract provides that payments to a survivor annuitant will be different from the amount you receive, you must use a computation which accounts for both the joint lives of the annuitants and the life of the survivor. Tax exemptions for students Example 1. Tax exemptions for students Gerald bought a contract providing for payments to him of $500 a month for life and, after his death, payments to his wife, Mary, of $350 a month for life. Tax exemptions for students If, at the annuity starting date, Gerald's nearest birthday is 70 and Mary's is 67, the expected return under the contract is figured as follows: Combined multiple for Gerald and Mary, ages 70 and 67 (from Table VI)   22. Tax exemptions for students 0 Multiple for Gerald, age 70 (from Table V)   16. Tax exemptions for students 0 Difference: Multiple applicable to Mary   6. Tax exemptions for students 0 Gerald's annual payment ($500 × 12) $6,000   Gerald's multiple 16. Tax exemptions for students 0   Gerald's expected return   $96,000 Mary's annual payment ($350 × 12) $4,200   Mary's multiple 6. Tax exemptions for students 0   Mary's expected return   25,200 Total expected return under the contract   $121,200 Example 2. Tax exemptions for students Your husband died while still employed. Tax exemptions for students Under the terms of his employer's retirement plan, you are entitled to get an immediate annuity of $400 a month for the rest of your life or until you remarry. Tax exemptions for students Your daughters, Marie and Jean, are each entitled to immediate temporary life annuities of $150 a month until they reach age 18. Tax exemptions for students You were 50 years old at the annuity starting date. Tax exemptions for students Marie was 16 and Jean was 14. Tax exemptions for students Using the multiples shown in Tables V and VIII at the end of this publication, the total expected return on the annuity starting date is $169,680, figured as follows: Widow, age 50 (multiple from Table V—33. Tax exemptions for students 1 × $4,800 annual payment) $158,880 Marie, age 16 for 2 years duration (multiple from Table VIII—2. Tax exemptions for students 0 × $1,800 annual payment) 3,600 Jean, age 14 for 4 years duration (multiple from Table VIII—4. Tax exemptions for students 0 × $1,800 annual payment) 7,200 Total expected return $169,680 No computation of expected return is made based on your husband's age at the date of death because he died before the annuity starting date. Tax exemptions for students Computation Under the General Rule Note. Tax exemptions for students Variable annuities use a different computation for determining the exclusion amounts. Tax exemptions for students See Variable annuities later. Tax exemptions for students Under the General Rule, you figure the taxable part of your annuity by using the following steps: Step 1. Tax exemptions for students   Figure the amount of your investment in the contract, including any adjustments for the refund feature and the death benefit exclusion, if applicable. Tax exemptions for students See Death benefit exclusion , earlier. Tax exemptions for students Step 2. Tax exemptions for students   Figure your expected return. Tax exemptions for students Step 3. Tax exemptions for students   Divide Step 1 by Step 2 and round to three decimal places. Tax exemptions for students This will give you the exclusion percentage. Tax exemptions for students Step 4. Tax exemptions for students   Multiply the exclusion percentage by the first regular periodic payment. Tax exemptions for students The result is the tax-free part of each pension or annuity payment. Tax exemptions for students   The tax-free part remains the same even if the total payment increases due to variation in the annuity amount such as cost of living increases, or you outlive the life expectancy factor used. Tax exemptions for students However, if your annuity starting date is after 1986, the total amount of annuity income that is tax free over the years cannot exceed your net cost. Tax exemptions for students   Each annuitant applies the same exclusion percentage to his or her initial payment called for in the contract. Tax exemptions for students Step 5. Tax exemptions for students   Multiply the tax-free part of each payment (step 4) by the number of payments received during the year. Tax exemptions for students This will give you the tax-free part of the total payment for the year. Tax exemptions for students    In the first year of your annuity, your first payment or part of your first payment may be for a fraction of the payment period. Tax exemptions for students This fractional amount is multiplied by your exclusion percentage to get the tax-free part. Tax exemptions for students Step 6. Tax exemptions for students   Subtract the tax-free part from the total payment you received. Tax exemptions for students The rest is the taxable part of your pension or annuity. Tax exemptions for students Example 1. Tax exemptions for students You purchased an annuity with an investment in the contract of $10,800. Tax exemptions for students Under its terms, the annuity will pay you $100 a month for life. Tax exemptions for students The multiple for your age (age 65) is 20. Tax exemptions for students 0 as shown in Table V. Tax exemptions for students Your expected return is $24,000 (20 × 12 × $100). Tax exemptions for students Your cost of $10,800, divided by your expected return of $24,000, equals 45. Tax exemptions for students 0%. Tax exemptions for students This is the percentage you will not have to include in income. Tax exemptions for students Each year, until your net cost is recovered, $540 (45% of $1,200) will be tax free and you will include $660 ($1,200 − $540) in your income. Tax exemptions for students If you had received only six payments of $100 ($600) during the year, your exclusion would have been $270 (45% of $100 × 6 payments). Tax exemptions for students Example 2. Tax exemptions for students Gerald bought a joint and survivor annuity. Tax exemptions for students Gerald's investment in the contract is $62,712 and the expected return is $121,200. Tax exemptions for students The exclusion percentage is 51. Tax exemptions for students 7% ($62,712 ÷ $121,200). Tax exemptions for students Gerald will receive $500 a month ($6,000 a year). Tax exemptions for students Each year, until his net cost is recovered, $3,102 (51. Tax exemptions for students 7% of his total payments received of $6,000) will be tax free and $2,898 ($6,000 − $3,102) will be included in his income. Tax exemptions for students If Gerald dies, his wife will receive $350 a month ($4,200 a year). Tax exemptions for students If Gerald had not recovered all of his net cost before his death, his wife will use the same exclusion percentage (51. Tax exemptions for students 7%). Tax exemptions for students Each year, until the entire net cost is recovered, his wife will receive $2,171. Tax exemptions for students 40 (51. Tax exemptions for students 7% of her payments received of $4,200) tax free. Tax exemptions for students She will include $2,028. Tax exemptions for students 60 ($4,200 − $2,171. Tax exemptions for students 40) in her income tax return. Tax exemptions for students Example 3. Tax exemptions for students Using the same facts as Example 2 under Different payments to survivor, you are to receive an annual annuity of $4,800 until you die or remarry. Tax exemptions for students Your two daughters each receive annual annuities of $1,800 until they reach age 18. Tax exemptions for students Your husband contributed $25,576 to the plan. Tax exemptions for students You are eligible for the $5,000 death benefit exclusion because your husband died before August 21, 1996. Tax exemptions for students Adjusted Investment in the Contract Contributions $25,576 Plus: Death benefit exclusion 5,000 Adjusted investment in the contract $30,576 The total expected return, as previously figured (in Example 2 under Different payments to survivor), is $169,680. Tax exemptions for students The exclusion percentage of 18. Tax exemptions for students 0% ($30,576 ÷ $169,680) applies to the annuity payments you and each of your daughters receive. Tax exemptions for students Each full year $864 (18. Tax exemptions for students 0% × $4,800) will be tax free to you, and you must include $3,936 in your income tax return. Tax exemptions for students Each year, until age 18, $324 (18. Tax exemptions for students 0% × $1,800) of each of your daughters' payments will be tax free and each must include the balance, $1,476, as income on her own income tax return. Tax exemptions for students Part-year payments. Tax exemptions for students   If you receive payments for only part of a year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments received during the year. Tax exemptions for students   If you receive amounts during the year that represent 12 payments, one for each month in that year, and an amount that represents payments for months in a prior year, apply the exclusion percentage to the first regular periodic payment, and multiply the result by the number of payments the amounts received represent. Tax exemptions for students For instance, if you received amounts during the year that represent the 12 payments for that year plus an amount that represents three payments for a prior year, multiply that amount by the 15 (12 + 3) payments received that the year. Tax exemptions for students   If you received a fractional payment, follow Step 5, discussed earlier. Tax exemptions for students This gives you the tax-free part of your total payment. Tax exemptions for students Example. Tax exemptions for students On September 28, Mary bought an annuity contract for $22,050 that will give her $125 a month for life, beginning October 30. Tax exemptions for students The applicable multiple from Table V is 23. Tax exemptions for students 3 (age 61). Tax exemptions for students Her expected return is $34,950 ($125 × 12 × 23. Tax exemptions for students 3). Tax exemptions for students Mary's investment in the contract of $22,050, divided by her expected return of $34,950, equals 63. Tax exemptions for students 1%. Tax exemptions for students Each payment received will consist of 63. Tax exemptions for students 1% return of cost and 36. Tax exemptions for students 9% taxable income, until her net cost of the contract is fully recovered. Tax exemptions for students During the first year, Mary received three payments of $125, or $375, of which $236. Tax exemptions for students 63 (63. Tax exemptions for students 1% × $375) is a return of cost. Tax exemptions for students The remaining $138. Tax exemptions for students 37 is included in income. Tax exemptions for students Increase in annuity payments. Tax exemptions for students   The tax-free amount remains the same as the amount figured at the annuity starting date, even if the payment increases. Tax exemptions for students All increases in the installment payments are fully taxable. Tax exemptions for students   However, if your annuity payments are scheduled to increase at a definite date in the future you must figure the expected return for that annuity using the method described in section 1. Tax exemptions for students 72-5(a)(5) of the regulations. Tax exemptions for students Example. Tax exemptions for students Joe's wife died while she was still employed and, as her beneficiary, he began receiving an annuity of $147 per month. Tax exemptions for students In figuring the taxable part, Joe elects to use Tables V through VIII. Tax exemptions for students The cost of the contract was $7,938, consisting of the sum of his wife's net contributions, adjusted for any refund feature. Tax exemptions for students His expected return as of the annuity starting date is $35,280 (age 65, multiple of 20. Tax exemptions for students 0 × $1,764 annual payment). Tax exemptions for students The exclusion percentage is $7,938 ÷ $35,280, or 22. Tax exemptions for students 5%. Tax exemptions for students During the year he received 11 monthly payments of $147, or $1,617. Tax exemptions for students Of this amount, 22. Tax exemptions for students 5% × $147 × 11 ($363. Tax exemptions for students 83) is tax free as a return of cost and the balance of $1,253. Tax exemptions for students 17 is taxable. Tax exemptions for students Later, because of a cost-of-living increase, his annuity payment was increased to $166 per month, or $1,992 a year (12 × $166). Tax exemptions for students The tax-free part is still only 22. Tax exemptions for students 5% of the annuity payments as of the annuity starting date (22. Tax exemptions for students 5% × $147 × 12 = $396. Tax exemptions for students 90 for a full year). Tax exemptions for students The increase of $228 ($1,992 − $1,764 (12 × $147)) is fully taxable. Tax exemptions for students Variable annuities. Tax exemptions for students   For variable annuity payments, figure the amount of each payment that is tax free by dividing your investment in the contract (adjusted for any refund feature) by the total number of periodic payments you expect to get under the contract. Tax exemptions for students   If the annuity is for a definite period, you determine the total number of payments by multiplying the number of payments to be made each year by the number of years you will receive payments. Tax exemptions for students If the annuity is for life, you determine the total number of payments by using a multiple from the appropriate actuarial table. Tax exemptions for students Example. Tax exemptions for students Frank purchased a variable annuity at age 65. Tax exemptions for students The total cost of the contract was $12,000. Tax exemptions for students The annuity starting date is January 1 of the year of purchase. Tax exemptions for students His annuity will be paid, starting July 1, in variable annual installments for his life. Tax exemptions for students The tax-free amount of each payment, until he has recovered his cost of his contract, is: Investment in the contract $12,000 Number of expected annual payments (multiple for age 65 from Table V) 20 Tax-free amount of each payment ($12,000 ÷ 20) $600 If Frank's first payment is $920, he includes only $320 ($920 − $600) in his gross income. Tax exemptions for students   If the tax-free amount for a year is more than the payments you receive in that year, you may choose, when you receive the next payment, to refigure the tax-free part. Tax exemptions for students Divide the amount of the periodic tax-free part that is more than the payment you received by the remaining number of payments you expect. Tax exemptions for students The result is added to the previously figured periodic tax-free part. Tax exemptions for students The sum is the amount of each future payment that will be tax free. Tax exemptions for students Example. Tax exemptions for students Using the facts of the previous example about Frank, assume that after Frank's $920 payment, he received $500 in the following year, and $1,200 in the year after that. Tax exemptions for students Frank does not pay tax on the $500 (second year) payment because $600 of each annual pension payment is tax free. Tax exemptions for students Since the $500 payment is less than the $600 annual tax-free amount, he may choose to refigure his tax-free part when he receives his $1,200 (third year) payment, as follows: Amount tax free in second year $600. Tax exemptions for students 00 Amount received in second year 500. Tax exemptions for students 00 Difference $100. Tax exemptions for students 00 Number of remaining payments after the first 2 payments (age 67, from Table V) 18. Tax exemptions for students 4 Amount to be added to previously determined annual tax-free part ($100 ÷ 18. Tax exemptions for students 4) $5. Tax exemptions for students 43 Revised annual tax-free part for third and later years ($600 + $5. Tax exemptions for students 43) $605. Tax exemptions for students 43 Amount taxable in third year ($1,200 − $605. Tax exemptions for students 43) $594. Tax exemptions for students 57 If you choose to refigure your tax-free amount,   you must file a statement with your income tax return stating that you are refiguring the tax-free amount in accordance with the rules of section 1. Tax exemptions for students 72–4(d)(3) of the Income Tax Regulations. Tax exemptions for students The statement must also show the following information: The annuity starting date and your age on that date. Tax exemptions for students The first day of the first period for which you received an annuity payment in the current year. Tax exemptions for students Your investment in the contract as originally figured. Tax exemptions for students The total of all amounts received tax free under the annuity from the annuity starting date through the first day of the first period for which you received an annuity payment in the current tax year. Tax exemptions for students Exclusion Limits Your annuity starting date determines the total amount of annuity income that you can exclude from income over the years. Tax exemptions for students Exclusion limited to net cost. Tax exemptions for students   If your annuity starting date is after 1986, the total amount of annuity income that you can exclude over the years as a return of your cost cannot exceed your net cost (figured without any reduction for a refund feature). Tax exemptions for students This is the unrecovered investment in the contract as of the annuity starting date. Tax exemptions for students   If your annuity starting date is after July 1, 1986, any unrecovered net cost at your (or last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. Tax exemptions for students This deduction is not subject to the 2%-of-adjusted-gross-income limit. Tax exemptions for students Example 1. Tax exemptions for students Your annuity starting date is after 1986. Tax exemptions for students Your total cost is $12,500, and your net cost is $10,000, taking into account certain adjustments. Tax exemptions for students There is no refund feature. Tax exemptions for students Your monthly annuity payment is $833. Tax exemptions for students 33. Tax exemptions for students Your exclusion ratio is 12% and you exclude $100 a month. Tax exemptions for students Your exclusion ends after 100 months, when you have excluded your net cost of $10,000. Tax exemptions for students Thereafter, your annuity payments are fully taxable. Tax exemptions for students Example 2. Tax exemptions for students The facts are the same as in Example 1, except that there is a refund feature, and you die after 5 years with no surviving annuitant. Tax exemptions for students The adjustment for the refund feature is $1,000, so the investment in the contract is $9,000. Tax exemptions for students The exclusion ratio is 10. Tax exemptions for students 8%, and your monthly exclusion is $90. Tax exemptions for students After 5 years (60 months), you have recovered tax free only $5,400 ($90 x 60). Tax exemptions for students An itemized deduction for the unrecovered net cost of $4,600 ($10,000 net cost minus $5,400) may be taken on your final income tax return. Tax exemptions for students Your unrecovered investment is determined without regard to the refund feature adjustment, discussed earlier, under Adjustments. Tax exemptions for students Exclusion not limited to net cost. Tax exemptions for students   If your annuity starting date was before 1987, you could continue to take your monthly exclusion for as long as you receive your annuity. Tax exemptions for students If you choose a joint and survivor annuity, your survivor continues to take the survivor's exclusion figured as of the annuity starting date. Tax exemptions for students The total exclusion may be more than your investment in the contract. Tax exemptions for students How To Use Actuarial Tables In figuring, under the General Rule, the taxable part of your annuity payments that you are to get for the rest of your life (rather than for a fixed number of years), you must use one or more of the actuarial tables in this publication. Tax exemptions for students Unisex Annuity Tables Effective July 1, 1986, the Internal Revenue Service adopted new annuity Tables V through VIII, in which your sex is not considered when determining the applicable factor. Tax exemptions for students These tables correspond to the old Tables I through IV. Tax exemptions for students In general, Tables V through VIII must be used if you made contributions to the retirement plan after June 30, 1986. Tax exemptions for students If you made no contributions to the plan after June 30, 1986, generally you must use only Tables I through IV. Tax exemptions for students However, if you received an annuity payment after June 30, 1986, you may elect to use Tables V through VIII (see Annuity received after June 30, 1986, later). Tax exemptions for students Special Elections Although you generally must use Tables V through VIII if you made contributions to the retirement plan after June 30, 1986, and Tables I through IV if you made no contributions after June 30, 1986, you can make the following special elections to select which tables to use. Tax exemptions for students Contributions made both before July 1986 and after June 1986. Tax exemptions for students   If you made contributions to the retirement plan both before July 1986 and after June 1986, you may elect to use Tables I through IV for the pre-July 1986 cost of the contract, and Tables V through VIII for the post-June 1986 cost. Tax exemptions for students (See the examples below. Tax exemptions for students )    Making the election. Tax exemptions for students Attach this statement to your income tax return for the first year in which you receive an annuity:    “I elect to apply the provisions of paragraph (d) of section 1. Tax exemptions for students 72–6 of the Income Tax Regulations. Tax exemptions for students ”   The statement must also include your name, address, social security number, and the amount of the pre-July 1986 investment in the contract. Tax exemptions for students   If your investment in the contract includes post-June 1986 contributions to the plan, and you do not make the election to use Tables I through IV and Tables V through VIII, then you can only use Tables V through VIII in figuring the taxable part of your annuity. Tax exemptions for students You must also use Tables V through VIII if you are unable or do not wish to determine the portions of your contributions which were made before July 1, 1986, and after June 30, 1986. Tax exemptions for students    Advantages of election. Tax exemptions for students In general, a lesser amount of each annual annuity payment is taxable if you separately figure your exclusion ratio for pre-July 1986 and post-June 1986 contributions. Tax exemptions for students    If you intend to make this election, save your records that substantiate your pre-July 1986 and post-June 1986 contributions. Tax exemptions for students If the death benefit exclusion applies (see discussion, earlier), you do not have to apportion it between the pre-July 1986 and the post-June 1986 investment in the contract. Tax exemptions for students   The following examples illustrate the separate computations required if you elect to use Tables I through IV for your pre-July 1986 investment in the contract and Tables V through VIII for your post-June 1986 investment in the contract. Tax exemptions for students Example 1. Tax exemptions for students Bill, who is single, contributed $42,000 to the retirement plan and will receive an annual annuity of $24,000 for life. Tax exemptions for students Payment of the $42,000 contribution is guaranteed under a refund feature. Tax exemptions for students Bill is 55 years old as of the annuity starting date. Tax exemptions for students For figuring the taxable part of Bill's annuity, he chose to make separate computations for his pre-July 1986 investment in the contract of $41,300, and for his post-June 1986 investment in the contract of $700. Tax exemptions for students       Pre- July 1986   Post- June 1986 A. Tax exemptions for students Adjustment for refund feature         1) Net cost $41,300   $700   2) Annual annuity—$24,000  ($41,300/$42,000 × $24,000) $23,600       ($700/$42,000 × $24,000)     $400   3) Guarantee under contract $41,300   $700   4) No. Tax exemptions for students of years payments  guaranteed (rounded), A(3) ÷ A(2) 2   2   5) Applicable percentage from  Tables III and VII 1%   0%   6) Adjustment for value of refund  feature, A(5) × smaller of A(1)  or A(3) $413   $0 B. Tax exemptions for students Investment in the contract         1) Net cost $41,300   $700   2) Minus: Amount in A(6) 413   0   3) Investment in the contract $40,887   $700 C. Tax exemptions for students Expected return         1) Annual annuity receivable $24,000   $24,000   2) Multiples from Tables I and V 21. Tax exemptions for students 7   28. Tax exemptions for students 6   3) Expected return, C(1) × C(2) $520,800   $686,400 D. Tax exemptions for students Tax-free part of annuity         1) Exclusion ratio as decimal,  B(3) ÷ C(3) . Tax exemptions for students 079   . Tax exemptions for students 001   2) Tax-free part, C(1) × D(1) $1,896   $24 The tax-free part of Bill's total annuity is $1,920 ($1,896 plus $24). Tax exemptions for students The taxable part of his annuity is $22,080 ($24,000 minus $1,920). Tax exemptions for students If the annuity starting date is after 1986, the exclusion over the years cannot exceed the net cost (figured without any reduction for a refund feature). Tax exemptions for students Example 2. Tax exemptions for students Al is age 62 at his nearest birthday to the annuity starting date. Tax exemptions for students Al's wife is age 60 at her nearest birthday to the annuity starting date. Tax exemptions for students The joint and survivor annuity pays $1,000 per month to Al for life, and $500 per month to Al's surviving wife after his death. Tax exemptions for students The pre-July 1986 investment in the contract is $53,100 and the post-June 1986 investment in the contract is $7,000. Tax exemptions for students Al makes the election described in Example 1 . Tax exemptions for students For purposes of this example, assume the refund feature adjustment is zero. Tax exemptions for students If an adjustment is required, IRS will figure the amount. Tax exemptions for students See Requesting a Ruling on Taxation of Annuity near the end of this publication. Tax exemptions for students       Pre-  July 1986   Post-  June 1986 A. Tax exemptions for students Adjustment for refund feature         1) Net cost $53,100   $7,000   2) Annual annuity—$12,000  ($53,100/$60,100 × $12,000) $10,602       ($7,000/$60,100 × $12,000)     $1,398   3) Guaranteed under the contract $53,100   $7,000   4) Number of years guaranteed,  rounded, A(3) ÷ A(2) 5   5   5) Applicable percentages 0%   0%   6) Refund feature adjustment, A(5) × smaller of A(1) or A(3) 0   0 B. Tax exemptions for students Investment in the contract         1) Net cost $53,100   $7,000   2) Refund feature adjustment 0   0   3) Investment in the contract adjusted for refund feature $53,100   $7,000 C. Tax exemptions for students Expected return         1) Multiple for both annuitants from Tables II and VI 25. Tax exemptions for students 4   28. Tax exemptions for students 8   2) Multiple for first annuitant from Tables I and V 16. Tax exemptions for students 9   22. Tax exemptions for students 5   3) Multiple applicable to surviving annuitant, subtract C(2) from C(1) 8. Tax exemptions for students 5   6. Tax exemptions for students 3   4) Annual annuity to surviving annuitant $6,000   $6,000   5) Portion of expected return for surviving annuitant, C(4) × C(3) $51,000   $37,800   6) Annual annuity to first annuitant $12,000   $12,000   7) Plus: Portion of expected return for first annuitant, C(6) × C(2) $202,800   $270,000   8) Expected return for both annuitants, C(5) + C(7) $253,800   $307,800 D. Tax exemptions for students Tax-free part of annuity         1) Exclusion ratio as a decimal, B(3) ÷ C(8) . Tax exemptions for students 209   . Tax exemptions for students 023   2) Retiree's tax-free part of annuity, C(6) × D(1) $2,508   $276   3) Survivor's tax-free part of annuity, C(4) × D(1) $1,254   $138 The tax-free part of Al's total annuity is $2,784 ($2,508 + $276). Tax exemptions for students The taxable part of his annuity is $9,216 ($12,000 − $2,784). Tax exemptions for students The exclusion over the years cannot exceed the net cost of the contract (figured without any reduction for a refund feature) if the annuity starting date is after 1986. Tax exemptions for students After Al's death, his widow will apply the same exclusion percentages (20. Tax exemptions for students 9% and 2. Tax exemptions for students 3%) to her annual annuity of $6,000 to figure the tax-free part of her annuity. Tax exemptions for students Annuity received after June 30, 1986. Tax exemptions for students   If you receive an annuity payment after June 30, 1986, (regardless of your annuity starting date), you may elect to treat the entire cost of the contract as post-June 1986 cost (even if you made no post-June 1986 contributions to the plan) and use Tables V through VIII. Tax exemptions for students Once made, you cannot revoke the election, which will apply to all payments during the year and in any later year. Tax exemptions for students    Make the election by attaching the following statement to your income tax return. Tax exemptions for students    “I elect, under section 1. Tax exemptions for students 72–9 of the Income Tax Regulations, to treat my entire cost of the contract as a post-June 1986 cost of the plan. Tax exemptions for students ”   The statement must also include your name, address, and social security number. Tax exemptions for students   You should also indicate you are making this election if you are unable or do not wish to determine the parts of your contributions which were made before July 1, 1986, and after June 30, 1986. Tax exemptions for students Disqualifying form of payment or settlement. Tax exemptions for students   If your annuity starting date is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract, the entire investment in the contract is treated as post-June 1986 investment in the contract. Tax exemptions for students See regulations section 1. Tax exemptions for students 72–6(d)(3) for additional examples of disqualifying forms of payment or settlement. Tax exemptions for students You can find the Income Tax Regulations in many libraries and at Internal Revenue Service Offices. Tax exemptions for students Worksheets for Determining Taxable Annuity Worksheets I and II. Tax exemptions for students   Worksheets I and II follow for determining your taxable annuity under Regulations Section 1. Tax exemptions for students 72–6(d)(6) Election. Tax exemptions for students Worksheet I For Determining Taxable Annuity Under Regulations Section 1. Tax exemptions for students 72-6(d)(6) Election For Single Annuitant With No Survivor Annuity               Pre-July 1986   Post-June 1986 A. Tax exemptions for students   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Tax exemptions for students )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)   Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages* from Tables III and VII                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Tax exemptions for students If not, the IRS will calculate the refund feature percentage. Tax exemptions for students             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Tax exemptions for students   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund feature:                   B(1) minus B(2)                             C. Tax exemptions for students   Expected Return             1)   Annual Annuity:                   12 times monthly annuity**             2)   Expected return multiples from Tables I and V             3)     Expected return:                   C(1) times C(2)                             D. Tax exemptions for students   Tax-Free Part of Annuity             1)     Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(3)             2)     Tax-free part of annuity:                   C(1) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Tax exemptions for students     Worksheet II For Determining Taxable Annuity Under Regulations Section 1. Tax exemptions for students 72-6(d)(6) Election For Joint and Survivor Annuity               Pre-July 1986   Post-June 1986 A. Tax exemptions for students   Refund Feature Adjustment             1)   Net cost (total cost less returned premiums, dividends, etc. Tax exemptions for students )             2)   Annual annuity allocation:                   Portion of net cost in A(1) x annual annuity                   Net cost             3)   Guaranteed under the contract             4)     Number of years guaranteed, rounded to whole years:                   A(3) divided by A(2)             5)   Applicable percentages*                   *If your annuity meets the three conditions listed in Zero value of refund feature in Investment in the Contract, earlier, both percentages are 0. Tax exemptions for students If not, the IRS will calculate the refund feature percentage. Tax exemptions for students             6)   Refund feature adjustment:                   A(5) times lesser of A(1) or A(3)                             B. Tax exemptions for students   Investment in the Contract             1)   Net cost:                   A(1)             2)   Refund feature adjustment:                   A(6)             3)   Investment in the contract adjusted for refund future:                   B(1) minus B(2)                             C. Tax exemptions for students   Expected Return             1)   Multiples for both annuitants, Tables II and VI             2)   Multiple for retiree. Tax exemptions for students Tables I and VI             3)   Multiple for survivor:                   C(1) minus C(2)             4)   Annual annuity to survivor:                   12 times potential monthly rate for survivor**             5)   Expected return for survivor:                   C(3) times C(4)             6)   Annual annuity to retiree:                   12 times monthly rate for retiree**             7)   Expected return for retiree:                   C(2) times C(6)             8)   Total expected return:                   C(5) plus C(7)                             D. Tax exemptions for students   Tax-Free Part of Annuity             1)   Exclusion ratio, as a decimal rounded to 3 places:                   B(3) divided by C(8)             2)   Retiree's tax-free part of annuity:                   C(6) times D(1)             3)   Survivor's tax-free part of annuity, if surviving after death of retiree:                   C(4) times D(1)             **If the annuity is not paid monthly, figure the amount to enter by using the total number of periodic payments for the year times the amount of the periodic payment. Tax exemptions for students   Actuarial Tables Please click here for the text description of the image. Tax exemptions for students Actuarial Tables Please click here for the text description of the image. Tax exemptions for students Actuarial Tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Please click here for the text description of the image. Tax exemptions for students Actuarial tables Requesting a Ruling on Taxation of Annuity If you are a retiree, or the survivor of an employee or retiree, you may ask the Internal Revenue Service to help you determine the taxation of your annuity. Tax exemptions for students If you make this request, you are asking for a ruling. Tax exemptions for students User fee. Tax exemptions for students   Under the law in effect at the time this publication went to print, the IRS must charge a user fee for all ruling requests. Tax exemptions for students You should call the IRS for the proper fee. Tax exemptions for students A request solely for the value of the refund feature is not treated as a ruling request and requires no fee. Tax exemptions for students Send your request to:     Internal Revenue Service  Attention: EP Letter Rulings P. Tax exemptions for students O. Tax exemptions for students Box 27063 McPherson Station Washington, DC 20038 The user fee is allowed as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit. Tax exemptions for students When to make the request. Tax exemptions for students   Please note that requests sent between February 1 and April 15 may experience some delay. Tax exemptions for students We process requests in the order received, and we will reply to your request as soon as we can process it. Tax exemptions for students If you do not receive your ruling by the required filing date, you may use Form 4868, Application for Automatic Extension of Time To File U. Tax exemptions for students S. Tax exemptions for students Individual Income Tax Return, to get an extension of time to file. Tax exemptions for students Information you must furnish. Tax exemptions for students   You must furnish the information listed below so the IRS can comply with your request. Tax exemptions for students Failure to furnish the information will result in a delay in processing your request. Tax exemptions for students Please send only copies of the following documents, as the IRS retains all material sent for its records: A letter explaining the question(s) you wish to have resolved or the information you need from the ruling. Tax exemptions for students Copies of any documents showing distributions, annuity rates, and annuity options available to you. Tax exemptions for students A copy of any Form 1099–R you received since your annuity began. Tax exemptions for students A statement indicating whether you have filed your return for the year for which you are making the request. Tax exemptions for students If you have requested an extension of time to file that return, please indicate the extension date. Tax exemptions for students Your daytime phone number. Tax exemptions for students Your current mailing address. Tax exemptions for students A power of attorney if someone other than you, an attorney, a certified public accountant, or an enrolled agent is signing this request. Tax exemptions for students Form 2848, Power of Attorney and Declaration of Representative, may be used for this purpose. Tax exemptions for students A completed Tax Information Sheet (or facsimile) shown on the next page. Tax exemptions for students Sign and date the Disclosure and Perjury Statement (or facsimile) at the end of the tax information sheet. Tax exemptions for students This statement must be signed by the retiree or the survivor annuitant. Tax exemptions for students It cannot be signed by a representative. Tax exemptions for students Tax Information Sheet Please click here for the text description of the image. Tax exemptions for students Tax Information Sheet Please click here for the text description of the image. Tax exemptions for students Tax Information Sheet (continued) How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Tax exemptions for students Free help with your tax return. Tax exemptions for students   You can get free help preparing your return nationwide from IRS-certified volunteers. Tax exemptions for students The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Tax exemptions for students The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Tax exemptions for students Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Tax exemptions for students In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Tax exemptions for students To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Tax exemptions for students gov, download the IRS2Go app, or call 1-800-906-9887. Tax exemptions for students   As part of the TCE program, AARP offers the Tax-Aide counseling program. Tax exemptions for students To find the nearest AARP Tax-Aide site, visit AARP's website at www. Tax exemptions for students aarp. Tax exemptions for students org/money/taxaide or call 1-888-227-7669. Tax exemptions for students For more information on these programs, go to IRS. Tax exemptions for students gov and enter “VITA” in the search box. Tax exemptions for students Internet. Tax exemptions for students    IRS. Tax exemptions for students gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Tax exemptions for students Download the free IRS2Go app from the iTunes app store or from Google Play. Tax exemptions for students Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Tax exemptions for students Check the status of your 2013 refund with the Where's My Refund? application on IRS. Tax exemptions for students gov or download the IRS2Go app and select the Refund Status option. Tax exemptions for students The IRS issues more than 9 out of 10 refunds in less than 21 days. Tax exemptions for students Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Tax exemptions for students You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Tax exemptions for students The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Tax exemptions for students Use the Interactive Tax Assistant (ITA) to research your tax questions. Tax exemptions for students No need to wait on the phone or stand in line. Tax exemptions for students The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Tax exemptions for students When you reach the response screen, you can print the entire interview and the final response for your records. Tax exemptions for students New subject areas are added on a regular basis. Tax exemptions for students  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Tax exemptions for students gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Tax exemptions for students You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Tax exemptions for students The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Tax exemptions for students When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Tax exemptions for students Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Tax exemptions for students You can also ask the IRS to mail a return or an account transcript to you. Tax exemptions for students Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Tax exemptions for students gov or by calling 1-800-908-9946. Tax exemptions for students Tax return and tax account transcripts are generally available for the current year and the past three years. Tax exemptions for students Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Tax exemptions for students Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Tax exemptions for students If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Tax exemptions for students Check the status of your amended return using Where's My Amended Return? Go to IRS. Tax exemptions for students gov and enter Where's My Amended Return? in the search box. Tax exemptions for students You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Tax exemptions for students It can take up to 3 weeks from the date you mailed it to show up in our system. Tax exemptions for students Make a payment using one of several safe and convenient electronic payment options available on IRS. Tax exemptions for students gov. Tax exemptions for students Select the Payment tab on the front page of IRS. Tax exemptions for students gov for more information. Tax exemptions for students Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Tax exemptions for students Figure your income tax withholding with the IRS Withholding Calculator on IRS. Tax exemptions for students gov. Tax exemptions for students Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Tax exemptions for students Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Tax exemptions for students gov. Tax exemptions for students Request an Electronic Filing PIN by going to IRS. Tax exemptions for students gov and entering Electronic Filing PIN in the search box. Tax exemptions for students Download forms, instructions and publications, including accessible versions for people with disabilities. Tax exemptions for students Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Tax exemptions for students gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Tax exemptions for students An employee can answer questions about your tax account or help you set up a payment plan. Tax exemptions for students Before you visit, check the Office Locator on IRS. Tax exemptions for students gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Tax exemptions for students If you have a special need, such as a disability, you can request an appointment. Tax exemptions for students Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Tax exemptions for students Apply for an Employer Identification Number (EIN). Tax exemptions for students Go to IRS. Tax exemptions for students gov and enter Apply for an EIN in the search box. Tax exemptions for students Read the Internal Revenue Code, regulations, or other official guidance. Tax exemptions for students Read Internal Revenue Bulletins. Tax exemptions for students Sign up to receive local and national tax news and more by email. Tax exemptions for students Just click on “subscriptions” above the search box on IRS. Tax exemptions for students gov and choose from a variety of options. Tax exemptions for students    Phone. Tax exemptions for students You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Tax exemptions for students Download the free IRS2Go app from the iTunes app store or from Google Play. Tax exemptions for students Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Tax exemptions for students gov, or download the IRS2Go app. Tax exemptions for students Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Tax exemptions for students The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Tax exemptions for students Mos