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Tax Forms 2014

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Tax Forms 2014

Tax forms 2014 Publication 504 - Main Content Table of Contents Filing StatusUnmarried persons. Tax forms 2014 Married persons. Tax forms 2014 Same-sex marriage. Tax forms 2014 Exception. Tax forms 2014 Married Filing Jointly Married Filing Separately Head of Household ExemptionsPersonal Exemptions Exemptions for Dependents Phaseout of Exemptions AlimonyInvalid decree. Tax forms 2014 Amended instrument. Tax forms 2014 General Rules Instruments Executed After 1984 Instruments Executed Before 1985 Qualified Domestic Relations OrderRollovers. Tax forms 2014 Individual Retirement Arrangements Property SettlementsTransfer Between Spouses Gift Tax on Property Settlements Sale of Jointly-Owned Property Costs of Getting a Divorce Tax Withholding and Estimated Tax Community PropertyCommunity Income Alimony (Community Income) How To Get Tax Help Filing Status Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. Tax forms 2014 It may also be used in determining whether you can claim certain other deductions and credits. Tax forms 2014 The filing status you can choose depends partly on your marital status on the last day of your tax year. Tax forms 2014 Marital status. Tax forms 2014   If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying widow(er). Tax forms 2014 If you are married, your filing status is either married filing a joint return or married filing a separate return. Tax forms 2014 For information about the single and qualifying widow(er) filing statuses, see Publication 501. Tax forms 2014 Unmarried persons. Tax forms 2014   You are unmarried for the whole year if either of the following applies. Tax forms 2014 You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. Tax forms 2014 You must follow your state law to determine if you are divorced or legally separated. Tax forms 2014 Exception. Tax forms 2014 If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals. Tax forms 2014 You have obtained a decree of annulment, which holds that no valid marriage ever existed. Tax forms 2014 You must file amended returns (Form 1040X, Amended U. Tax forms 2014 S. Tax forms 2014 Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. Tax forms 2014 The statute of limitations generally does not end until 3 years (including extensions) after the date you file your original return or within 2 years after the date you pay the tax. Tax forms 2014 On the amended return you will change your filing status to single or, if you meet certain requirements, head of household. Tax forms 2014 Married persons. Tax forms 2014   You are married for the whole year if you are separated but you have not obtained a final decree of divorce or separate maintenance by the last day of your tax year. Tax forms 2014 An interlocutory decree is not a final decree. Tax forms 2014 Same-sex marriage. Tax forms 2014   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Tax forms 2014 The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. Tax forms 2014 However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state (or foreign) law are not considered married for federal tax purposes. Tax forms 2014 For more details, see Publication 501. Tax forms 2014 Exception. Tax forms 2014   If you live apart from your spouse, under certain circumstances, you may be considered unmarried and can file as head of household. Tax forms 2014 See Head of Household , later. Tax forms 2014 Married Filing Jointly If you are married, you and your spouse can choose to file a joint return. Tax forms 2014 If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. Tax forms 2014 You can file a joint return even if one of you had no income or deductions. Tax forms 2014 If both you and your spouse have income, you should usually figure your tax on both a joint return and separate returns (using the filing status of married filing separately) to see which gives the two of you the lower combined tax. Tax forms 2014 Nonresident alien. Tax forms 2014   To file a joint return, at least one of you must be a U. Tax forms 2014 S. Tax forms 2014 citizen or resident alien at the end of the tax year. Tax forms 2014 If either of you was a nonresident alien at any time during the tax year, you can file a joint return only if you agree to treat the nonresident spouse as a resident of the United States. Tax forms 2014 This means that your combined worldwide incomes are subject to U. Tax forms 2014 S. Tax forms 2014 income tax. Tax forms 2014 These rules are explained in Publication 519, U. Tax forms 2014 S. Tax forms 2014 Tax Guide for Aliens. Tax forms 2014 Signing a joint return. Tax forms 2014   Both you and your spouse generally must sign the return, or it will not be considered a joint return. Tax forms 2014 Joint and individual liability. Tax forms 2014   Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. Tax forms 2014 This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse. Tax forms 2014 Divorced taxpayers. Tax forms 2014   If you are divorced, you are jointly and individually responsible for any tax, interest, and penalties due on a joint return for a tax year ending before your divorce. Tax forms 2014 This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. Tax forms 2014 Relief from joint liability. Tax forms 2014   In some cases, a spouse may be relieved of the tax, interest, and penalties on a joint return. Tax forms 2014 You can ask for relief no matter how small the liability. Tax forms 2014   There are three types of relief available. Tax forms 2014 Innocent spouse relief. Tax forms 2014 Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date election of this relief is filed. Tax forms 2014 Equitable relief. Tax forms 2014   Married persons who live in community property states, but who did not file joint returns, may also qualify for relief from liability arising from community property law or for equitable relief. Tax forms 2014 See Relief from liability arising from community property law , later, under Community Property. Tax forms 2014    Each kind of relief has different requirements. Tax forms 2014 You must file Form 8857 to request relief under any of these categories. Tax forms 2014 Publication 971 explains these kinds of relief and who may qualify for them. Tax forms 2014 You can also find information on our website at IRS. Tax forms 2014 gov. Tax forms 2014 Tax refund applied to spouse's debts. Tax forms 2014   The overpayment shown on your joint return may be used to pay the past-due amount of your spouse's debts. Tax forms 2014 This includes your spouse's federal tax, state income tax, child or spousal support payments, or a federal nontax debt, such as a student loan. Tax forms 2014 You can get a refund of your share of the overpayment if you qualify as an injured spouse. Tax forms 2014 Injured spouse. Tax forms 2014   You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts. Tax forms 2014 An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount. Tax forms 2014   To be considered an injured spouse, you must: Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and Not be legally obligated to pay the past-due amount. Tax forms 2014 Note. Tax forms 2014 If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (2). Tax forms 2014 For more information, see Publication 555. Tax forms 2014    Refunds that involve community property states must be divided according to local law. Tax forms 2014 If you live in a community property state in which all community property is subject to the debts of either spouse, your entire refund is generally used to pay those debts. Tax forms 2014   If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. Tax forms 2014 Follow the instructions for the form. Tax forms 2014   If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. Tax forms 2014 You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. Tax forms 2014   If you filed your joint return and your joint refund was offset, file Form 8379 by itself. Tax forms 2014 When filed after offset, it can take up to 8 weeks to receive your refund. Tax forms 2014 Do not attach the previously filed tax return, but do include copies of all Forms W-2, Wage and Tax Statement, and W-2G, Certain Gambling Winnings, for both spouses and any Forms 1099 that show income tax withheld. Tax forms 2014    An injured spouse claim is different from an innocent spouse relief request. Tax forms 2014 An injured spouse uses Form 8379 to request an allocation of the tax overpayment attributed to each spouse. Tax forms 2014 An innocent spouse uses Form 8857 to request relief from joint liability for tax, interest, and penalties on a joint return for items of the other spouse (or former spouse) that were incorrectly reported on or omitted from the joint return. Tax forms 2014 For information on innocent spouses, see Relief from joint liability, earlier. Tax forms 2014 Married Filing Separately If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. Tax forms 2014 You can file a separate return even if only one of you had income. Tax forms 2014 For information on exemptions you can claim on your separate return, see Exemptions , later. Tax forms 2014 Community or separate income. Tax forms 2014   If you live in a community property state and file a separate return, your income may be separate income or community income for income tax purposes. Tax forms 2014 For more information, see Community Income under Community Property, later. Tax forms 2014 Separate liability. Tax forms 2014   If you and your spouse file separately, you each are responsible only for the tax due on your own return. Tax forms 2014 Itemized deductions. Tax forms 2014   If you and your spouse file separate returns and one of you itemizes deductions, the other spouse cannot use the standard deduction and should also itemize deductions. Tax forms 2014 Table 1. Tax forms 2014 Itemized Deductions on Separate Returns This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. Tax forms 2014  Caution: If you live in a community property state, these rules do not apply. Tax forms 2014 See Community Property. Tax forms 2014 IF you paid . Tax forms 2014 . Tax forms 2014 . Tax forms 2014 AND you . Tax forms 2014 . Tax forms 2014 . Tax forms 2014 THEN you can deduct on your separate federal return. Tax forms 2014 . Tax forms 2014 . Tax forms 2014   medical expenses   paid with funds deposited in a joint checking account in which you and your spouse have an equal interest     half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses. Tax forms 2014     state income tax   file a separate state income tax return     the state income tax you alone paid during the year. Tax forms 2014         file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax     the state income tax you alone paid during the year. Tax forms 2014         file a joint state income tax return and you  are liable for only your own share of state  income tax     the smaller of: the state income tax you alone paid during the year, or the total state income tax you and your spouse paid during the year multiplied by the following fraction. Tax forms 2014 The numerator is your gross income and the denominator  is your combined gross income. Tax forms 2014     property tax   paid the tax on property held as tenants by the entirety     the property tax you alone paid. Tax forms 2014     mortgage interest   paid the interest on a qualified home1 held  as tenants by the entirety     the mortgage interest you alone paid. Tax forms 2014     casualty loss   have a casualty loss on a home you own  as tenants by the entirety     half of the loss, subject to the deduction limits. Tax forms 2014 Neither spouse may report the total casualty loss. Tax forms 2014 1 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. Tax forms 2014 Dividing itemized deductions. Tax forms 2014   You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. Tax forms 2014 See Table 1, later. Tax forms 2014 Separate returns may give you a higher tax. Tax forms 2014   Some married couples file separate returns because each wants to be responsible only for his or her own tax. Tax forms 2014 There is no joint liability. Tax forms 2014 But in almost all instances, if you file separate returns, you will pay more combined federal tax than you would with a joint return. Tax forms 2014 This is because the following special rules apply if you file a separate return. Tax forms 2014 Your tax rate generally will be higher than it would be on a joint return. Tax forms 2014 Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer. Tax forms 2014 You cannot take the credit for child and dependent care expenses in most cases. Tax forms 2014 You cannot take the earned income credit. Tax forms 2014 You cannot take the exclusion or credit for adoption expenses in most cases. Tax forms 2014 You cannot take the credit for higher education expenses (American opportunity and lifetime learning credits), the deduction for student loan interest, or the tuition and fees deduction. Tax forms 2014 You cannot exclude the interest from qualified savings bonds that you used for higher education expenses. Tax forms 2014 If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received. Tax forms 2014 Your income limits that reduce the child tax credit, the retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are half of the limits for a joint return filer. Tax forms 2014 Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). Tax forms 2014 Your basic standard deduction, if allowable, is half of that allowed a joint return filer. Tax forms 2014 See Itemized deductions , earlier. Tax forms 2014 Joint return after separate returns. Tax forms 2014   If either you or your spouse (or both of you) file a separate return, you generally can change to a joint return within 3 years from the due date (not including extensions) of the separate return or returns. Tax forms 2014 This applies to a return either of you filed claiming married filing separately, single, or head of household filing status. Tax forms 2014 Use Form 1040X to change your filing status. Tax forms 2014 Separate returns after joint return. Tax forms 2014   After the due date of your return, you and your spouse cannot file separate returns if you previously filed a joint return. Tax forms 2014 Exception. Tax forms 2014   A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. Tax forms 2014 The personal representative has 1 year from the due date (including extensions) of the joint return to make the change. Tax forms 2014 Head of Household Filing as head of household has the following advantages. Tax forms 2014 You can claim the standard deduction even if your spouse files a separate return and itemizes deductions. Tax forms 2014 Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately. Tax forms 2014 Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately. Tax forms 2014 You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately. Tax forms 2014 Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are higher than the income limits if you claim a filing status of married filing separately. Tax forms 2014 Requirements. Tax forms 2014   You may be able to file as head of household if you meet all the following requirements. Tax forms 2014 You are unmarried or “considered unmarried” on the last day of the year. Tax forms 2014 You paid more than half the cost of keeping up a home for the year. Tax forms 2014 A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). Tax forms 2014 However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. Tax forms 2014 See Special rule for parent , later, under Qualifying person. Tax forms 2014 Considered unmarried. Tax forms 2014   You are considered unmarried on the last day of the tax year if you meet all the following tests. Tax forms 2014 You file a separate return. Tax forms 2014 A separate return includes a return claiming married filing separately, single, or head of household filing status. Tax forms 2014 You paid more than half the cost of keeping up your home for the tax year. Tax forms 2014 Your spouse did not live in your home during the last 6 months of the tax year. Tax forms 2014 Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. Tax forms 2014 See Temporary absences , later. Tax forms 2014 Your home was the main home of your child, stepchild, or foster child for more than half the year. Tax forms 2014 (See Qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year. Tax forms 2014 ) You must be able to claim an exemption for the child. Tax forms 2014 However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rule described later in Special rule for divorced or separated parents (or parents who live apart) under Exemptions for Dependents. Tax forms 2014 The general rules for claiming an exemption for a dependent are shown later in Table 3. Tax forms 2014    If you were considered married for part of the year and lived in a community property state (one of the states listed later under Community Property), special rules may apply in determining your income and expenses. Tax forms 2014 See Publication 555 for more information. Tax forms 2014 Nonresident alien spouse. Tax forms 2014   If your spouse was a nonresident alien at any time during the tax year, and you have not chosen to treat your spouse as a resident alien, you are considered unmarried for head of household purposes. Tax forms 2014 However, your spouse is not a qualifying person for head of household purposes. Tax forms 2014 You must have another qualifying person and meet the other requirements to file as head of household. Tax forms 2014 Keeping up a home. Tax forms 2014   You are keeping up a home only if you pay more than half the cost of its upkeep for the year. Tax forms 2014 This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. Tax forms 2014 This does not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household. Tax forms 2014 Qualifying person. Tax forms 2014    Table 2, later, shows who can be a qualifying person. Tax forms 2014 Any person not described in Table 2 is not a qualifying person. Tax forms 2014   Generally, the qualifying person must live with you for more than half of the year. Tax forms 2014 Table 2. Tax forms 2014 Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Caution. Tax forms 2014 See the text of this publication for the other requirements you must meet to claim head of household filing status. Tax forms 2014 IF the person is your . Tax forms 2014 . Tax forms 2014 . Tax forms 2014 AND . Tax forms 2014 . Tax forms 2014 . Tax forms 2014 THEN that person is . Tax forms 2014 . Tax forms 2014 . Tax forms 2014   qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2 he or she is single a qualifying person, whether or not you can claim an exemption for the person. Tax forms 2014     he or she is married and you can claim an exemption for him or her a qualifying person. Tax forms 2014     he or she is married and you cannot claim an exemption for him or her not a qualifying person. Tax forms 2014 3     qualifying relative4 who is your father or mother you can claim an exemption for him or her5 a qualifying person. Tax forms 2014 6     you cannot claim an exemption for him or her not a qualifying person. Tax forms 2014     qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and you can claim an exemption for him or her5 a qualifying person. Tax forms 2014     he or she did not live with you more than half the year not a qualifying person. Tax forms 2014     he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and is your qualifying relative only because he or she lived with you all year as a member of your household not a qualifying person. Tax forms 2014     you cannot claim an exemption for him or her not a qualifying person. Tax forms 2014   1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. Tax forms 2014 2 See Table 3, later, for the tests that must be met to be a qualifying child. Tax forms 2014 Note. Tax forms 2014 If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents (or Parents Who Live Apart) under Exemptions for Dependents, later. Tax forms 2014 If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. Tax forms 2014 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. Tax forms 2014 4 See Table 3, later, for the tests that must be met to be a qualifying relative. Tax forms 2014 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. Tax forms 2014 See Multiple Support Agreement in Publication 501. Tax forms 2014 6 See Special rule for parent . Tax forms 2014 Special rule for parent. Tax forms 2014   If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. Tax forms 2014 However, you must be able to claim an exemption for your father or mother. Tax forms 2014 Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. Tax forms 2014 You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. Tax forms 2014 Death or birth. Tax forms 2014   If the person for whom you kept up a home was born or died in 2013, you still may be able to file as head of household. Tax forms 2014 If the person is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. Tax forms 2014 If the person is anyone else, see Publication 501. Tax forms 2014 Temporary absences. Tax forms 2014   You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. Tax forms 2014 It must be reasonable to assume that the absent person will return to the home after the temporary absence. Tax forms 2014 You must continue to keep up the home during the absence. Tax forms 2014 Kidnapped child. Tax forms 2014   You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. Tax forms 2014 You can claim head of household filing status if all the following statements are true. Tax forms 2014 The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. Tax forms 2014 In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. Tax forms 2014 You would have qualified for head of household filing status if the child had not been kidnapped. Tax forms 2014   This treatment applies for all years until the earlier of: The year the child is returned, The year there is a determination that the child is dead, or The year the child would have reached age 18. Tax forms 2014 More information. Tax forms 2014   For more information on filing as head of household, see Publication 501. Tax forms 2014 Exemptions You can deduct $3,900 for each exemption you claim in 2013. Tax forms 2014 However, if your adjusted gross income is more than $150,000, see Phaseout of Exemptions , later. Tax forms 2014 There are two types of exemptions: personal exemptions and exemptions for dependents. Tax forms 2014 If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return. Tax forms 2014 Personal Exemptions You can claim your own exemption unless someone else can claim it. Tax forms 2014 If you are married, you may be able to take an exemption for your spouse. Tax forms 2014 These are called personal exemptions. Tax forms 2014 Exemption for Your Spouse Your spouse is never considered your dependent. Tax forms 2014 Joint return. Tax forms 2014   On a joint return, you can claim one exemption for yourself and one for your spouse. Tax forms 2014   If your spouse had any gross income, you can claim his or her exemption only if you file a joint return. Tax forms 2014 Separate return. Tax forms 2014   If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. Tax forms 2014 If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption. Tax forms 2014 Alimony paid. Tax forms 2014   If you paid alimony to your spouse, you cannot take an exemption for your spouse. Tax forms 2014 This is because alimony is gross income to the spouse who received it. Tax forms 2014 Divorced or separated spouse. Tax forms 2014   If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. Tax forms 2014 This rule applies even if you provided all of your former spouse's support. Tax forms 2014 Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. Tax forms 2014 You can claim an exemption for a dependent even if your dependent files a return. Tax forms 2014 The term “dependent” means: A qualifying child, or A qualifying relative. Tax forms 2014 Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. Tax forms 2014 For detailed information, see Publication 501. Tax forms 2014   Dependent not allowed a personal exemption. Tax forms 2014 If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. Tax forms 2014 This is true even if you do not claim the dependent's exemption on your return. Tax forms 2014 It is also true if the decedent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. Tax forms 2014 Table 3. Tax forms 2014 Overview of the Rules for Claiming an Exemption for a Dependent Caution. Tax forms 2014 This table is only an overview of the rules. Tax forms 2014 For details, see Publication 501. Tax forms 2014 • You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. Tax forms 2014 • You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. Tax forms 2014 • You cannot claim a person as a dependent unless that person is a U. Tax forms 2014 S. Tax forms 2014 citizen, U. Tax forms 2014 S. Tax forms 2014 resident alien, U. Tax forms 2014 S. Tax forms 2014 national, or a resident of Canada or Mexico. Tax forms 2014 1 • You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. Tax forms 2014   Tests To Be a Qualifying Child   Tests To Be a Qualifying Relative 1. Tax forms 2014     2. Tax forms 2014       3. Tax forms 2014    4. Tax forms 2014    5. Tax forms 2014    The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Tax forms 2014   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled. Tax forms 2014   The child must have lived with you for more than half of the year. Tax forms 2014 2   The child must not have provided more than half of his or her own support for the year. Tax forms 2014   The child is not filing a joint return for the year (unless that joint return is filed only as a claim for refund of withheld income tax or estimated tax paid). Tax forms 2014   1. Tax forms 2014    2. Tax forms 2014       3. Tax forms 2014    4. Tax forms 2014 The person cannot be your qualifying child or the qualifying child of anyone else. Tax forms 2014   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 or (b) must live with you all year as a member of your household 2 (and your relationship must not violate local law). Tax forms 2014   The person's gross income for the year must be less than $3,900. Tax forms 2014 3   You must provide more than half of the person's total support for the year. Tax forms 2014 4 If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. Tax forms 2014 See Special Rule for Qualifying Child of More Than One Person , later, to find out which person is the person entitled to claim the child as a qualifying child. Tax forms 2014     1 Exception exists for certain adopted children. Tax forms 2014 2 Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. Tax forms 2014 3 Exception exists for persons who are disabled and have income from a sheltered workshop. Tax forms 2014 4 Exceptions exist for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. Tax forms 2014 See Publication 501. Tax forms 2014 You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. Tax forms 2014 For more information, see the instructions for your tax return if you file Form 1040A or 1040. Tax forms 2014 Children of Divorced or Separated Parents (or Parents Who Live Apart) In most cases, because of the residency test (see item 3 under Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents is the qualifying child of the custodial parent. Tax forms 2014 However, the child will be treated as the qualifying child of the noncustodial parent if the special rule (discussed next) applies. Tax forms 2014 Special rule for divorced or separated parents (or parents who live apart). Tax forms 2014   A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true. Tax forms 2014 The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of the year, whether or not they are or were married. Tax forms 2014 The child received over half of his or her support for the year from the parents. Tax forms 2014 The child is in the custody of one or both parents for more than half of the year. Tax forms 2014 Either of the following applies. Tax forms 2014 The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. Tax forms 2014 (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement that went into effect after 1984 and before 2009 , later. Tax forms 2014 A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2013. Tax forms 2014 See Child support under pre-1985 agreement , later. Tax forms 2014 Custodial parent and noncustodial parent. Tax forms 2014   The custodial parent is the parent with whom the child lived for the greater number of nights during the year. Tax forms 2014 The other parent is the noncustodial parent. Tax forms 2014   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year. Tax forms 2014   A child is treated as living with a parent for a night if the child sleeps: At that parent's home, whether or not the parent is present, or In the company of the parent, when the child does not sleep at a parent's home (for example, the parent and child are on vacation together). Tax forms 2014 Equal number of nights. Tax forms 2014   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income. Tax forms 2014 December 31. Tax forms 2014   The night of December 31 is treated as part of the year in which it begins. Tax forms 2014 For example, December 31, 2013, is treated as part of 2013. Tax forms 2014 Emancipated child. Tax forms 2014   If a child is emancipated under state law, the child is treated as not living with either parent. Tax forms 2014 See Examples 5 and 6 . Tax forms 2014 Absences. Tax forms 2014    If a child was not with either parent on a particular night (because, for example, the child was staying at a friend's house), the child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. Tax forms 2014 But if it cannot be determined with which parent the child normally would have lived or if the child would not have lived with either parent that night, the child is treated as not living with either parent that night. Tax forms 2014 Parent works at night. Tax forms 2014   If, due to a parent's nighttime work schedule, a child lives for a greater number of days but not nights with the parent who works at night, that parent is treated as the custodial parent. Tax forms 2014 On a school day, the child is treated as living at the primary residence registered with the school. Tax forms 2014 Example 1 – child lived with one parent greater number of nights. Tax forms 2014 You and your child’s other parent are divorced. Tax forms 2014 In 2013, your child lived with you 210 nights and with the other parent 156 nights. Tax forms 2014 You are the custodial parent. Tax forms 2014 Example 2 – child is away at camp. Tax forms 2014 In 2013, your daughter lives with each parent for alternate weeks. Tax forms 2014 In the summer, she spends 6 weeks at summer camp. Tax forms 2014 During the time she is at camp, she is treated as living with you for 3 weeks and with her other parent, your ex-spouse, for 3 weeks because this is how long she would have lived with each parent if she had not attended summer camp. Tax forms 2014 Example 3 – child lived same number of days with each parent. Tax forms 2014 Your son lived with you 180 nights during the year and lived the same number of nights with his other parent, your ex-spouse. Tax forms 2014 Your adjusted gross income is $40,000. Tax forms 2014 Your ex-spouse's adjusted gross income is $25,000. Tax forms 2014 You are treated as your son's custodial parent because you have the higher adjusted gross income. Tax forms 2014 Example 4 – child is at parent’s home but with other parent. Tax forms 2014 Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. Tax forms 2014 You become ill and are hospitalized. Tax forms 2014 The other parent lives in your home with your son for 10 consecutive days while you are in the hospital. Tax forms 2014 Your son is treated as living with you during this 10-day period because he was living in your home. Tax forms 2014 Example 5 – child emancipated in May. Tax forms 2014 When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. Tax forms 2014 As a result, he is not considered in the custody of his parents for more than half of the year. Tax forms 2014 The special rule for children of divorced or separated parents (or parents who live apart) does not apply. Tax forms 2014 Example 6 – child emancipated in August. Tax forms 2014 Your daughter lives with you from January 1, 2013, until May 31, 2013, and lives with her other parent, your ex-spouse, from June 1, 2013, through the end of the year. Tax forms 2014 She turns 18 and is emancipated under state law on August 1, 2013. Tax forms 2014 Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2013. Tax forms 2014 You are the custodial parent. Tax forms 2014 Written declaration. Tax forms 2014    The custodial parent must use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. Tax forms 2014 The noncustodial parent must attach a copy of the form or statement to his or her tax return. Tax forms 2014   The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. Tax forms 2014 Divorce decree or separation agreement that went into effect after 1984 and before 2009. Tax forms 2014   If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Tax forms 2014 To be able to do this, the decree or agreement must state all three of the following. Tax forms 2014 The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. Tax forms 2014 The custodial parent will not claim the child as a dependent for the year. Tax forms 2014 The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. Tax forms 2014   The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return. Tax forms 2014 The cover page (write the other parent's social security number on this page). Tax forms 2014 The pages that include all of the information identified in items (1) through (3) above. Tax forms 2014 The signature page with the other parent's signature and the date of the agreement. Tax forms 2014 Post-2008 divorce decree or separation agreement. Tax forms 2014   If the decree or agreement went into effect after 2008, a noncustodial parent claiming an exemption for a child cannot attach pages from a divorce decree or separation agreement instead of Form 8332. Tax forms 2014 The custodial parent must sign either a Form 8332 or a similar statement. Tax forms 2014 The only purpose of this statement must be to release the custodial parent's claim to the child's exemption. Tax forms 2014 The noncustodial parent must attach a copy to his or her return. Tax forms 2014 The form or statement must release the custodial parent's claim to the child without any conditions. Tax forms 2014 For example, the release must not depend on the noncustodial parent paying support. Tax forms 2014    The noncustodial parent must attach the required information even if it was filed with a return in an earlier year. Tax forms 2014 Revocation of release of claim to an exemption. Tax forms 2014   The custodial parent can revoke a release of claim to exemption that he or she previously released to the noncustodial parent on Form 8332 or a similar statement. Tax forms 2014 In order for the revocation to be effective for 2013, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2012 or earlier. Tax forms 2014 The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. Tax forms 2014 Remarried parent. Tax forms 2014   If you remarry, the support provided by your new spouse is treated as provided by you. Tax forms 2014 Child support under pre-1985 agreement. Tax forms 2014   All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child, even if such amounts are not actually spent for child support. Tax forms 2014 Example. Tax forms 2014 Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. Tax forms 2014 This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support. Tax forms 2014 Parents who never married. Tax forms 2014   The special rule for divorced or separated parents also applies to parents who never married and lived apart at all times during the last 6 months of the year. Tax forms 2014 Alimony. Tax forms 2014   Payments to your spouse that are includible in his or her gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent. Tax forms 2014 Special Rule for Qualifying Child of More Than One Person If your qualifying child is not a qualifying child of anyone else, this special rule does not apply to you and you do not need to read about it. Tax forms 2014 This is also true if your qualifying child is not a qualifying child of anyone else except your spouse with whom you file a joint return. Tax forms 2014 If a child is treated as the qualifying child of the noncustodial parent under the Special rule for divorced or separated parents (or parents who live apart), earlier, see Applying this special rule to divorced or separated parents (or parents who live apart), later. Tax forms 2014 Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Tax forms 2014 (For a description of these tests, see list items 1 through 5 under Tests To Be a Qualifying Child in Table 3). Tax forms 2014 Although the child meets the conditions to be a qualifying child of each of these persons, only one person can actually use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Tax forms 2014 The exemption for the child. Tax forms 2014 The child tax credit. Tax forms 2014 Head of household filing status. Tax forms 2014 The credit for child and dependent care expenses. Tax forms 2014 The exclusion from income for dependent care benefits. Tax forms 2014 The earned income credit. Tax forms 2014 The other person cannot take any of these benefits based on this qualifying child. Tax forms 2014 In other words, you and the other person cannot agree to divide these tax benefits between you. Tax forms 2014 The other person cannot take any of these tax benefits unless he or she has a different qualifying child. Tax forms 2014 Tiebreaker rules. Tax forms 2014   To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply. Tax forms 2014 If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Tax forms 2014 If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Tax forms 2014 If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Tax forms 2014 If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Tax forms 2014 If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Tax forms 2014 If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' total AGI evenly between them; see Publication 501 for details. Tax forms 2014   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Tax forms 2014 Example 1—separated parents. Tax forms 2014 You, your husband, and your 10-year-old son lived together until August 1, 2013, when your husband moved out of the household. Tax forms 2014 In August and September, your son lived with you. Tax forms 2014 For the rest of the year, your son lived with your husband, the boy's father. Tax forms 2014 Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. Tax forms 2014 At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. Tax forms 2014 You and your husband will file separate returns. Tax forms 2014 Your husband agrees to let you treat your son as a qualifying child. Tax forms 2014 This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. Tax forms 2014 However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. Tax forms 2014 And, as a result of your filing status being married filing separately, you cannot claim the earned income credit or the credit for child and dependent care expenses. Tax forms 2014 Example 2—separated parents claim same child. Tax forms 2014 The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. Tax forms 2014 In this case, only your husband will be allowed to treat your son as a qualifying child. Tax forms 2014 This is because, during 2013, the boy lived with him longer than with you. Tax forms 2014 If you claimed an exemption, the child tax credit, or the exclusion for dependent care benefits for your son, the IRS will disallow your claim to all these tax benefits, unless you have another qualifying child. Tax forms 2014 In addition, because you and your husband did not live apart the last 6 months of the year, your husband cannot claim head of household filing status. Tax forms 2014 And, as a result of his filing status being married filing separately, he cannot claim the earned income credit or the credit for child and dependent care expenses. Tax forms 2014 Applying this special rule to divorced or separated parents (or parents who live apart). Tax forms 2014   If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents (or parents who live apart) described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. Tax forms 2014 However, the noncustodial parent cannot claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. Tax forms 2014 Only the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for those four tax benefits. Tax forms 2014 If the child is the qualifying child of more than one person for those tax benefits, the tiebreaker rules determine which person can treat the child as a qualifying child. Tax forms 2014 Example 1. Tax forms 2014 You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Tax forms 2014 Your AGI is $10,000. Tax forms 2014 Your mother's AGI is $25,000. Tax forms 2014 Your son's father does not live with you or your son. Tax forms 2014 Under the rules for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child if he meets all the requirements to do so. Tax forms 2014 Because of this, you cannot claim an exemption or the child tax credit for your son. Tax forms 2014 However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. Tax forms 2014 You and your mother did not have any child care expenses or dependent care benefits, but the boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. Tax forms 2014 (Note: The support test does not apply for the earned income credit. Tax forms 2014 ) However, you agree to let your mother claim your son. Tax forms 2014 This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit. Tax forms 2014 (You cannot claim head of household filing status because your mother paid the entire cost of keeping up the home. Tax forms 2014 ) Example 2. Tax forms 2014 The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. Tax forms 2014 Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Tax forms 2014 Example 3. Tax forms 2014 The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the earned income credit. Tax forms 2014 Your mother also claims him as a qualifying child for head of household filing status. Tax forms 2014 You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. Tax forms 2014 The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. Tax forms 2014 Phaseout of Exemptions The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. Tax forms 2014 These levels are as follows:    Filing Status AGI Level That Reduces Exemption Amount Married filing separately $150,000 Single 250,000 Head of household 275,000 Married filing jointly 300,000 Qualifying widow(er) 300,000 You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. Tax forms 2014 If your AGI exceeds the amount shown above by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero. Tax forms 2014 If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet found in the instructions for Form 1040 or Form 1040NR to figure the amount of your deduction for exemptions. Tax forms 2014 Alimony Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Tax forms 2014 It does not include voluntary payments that are not made under a divorce or separation instrument. Tax forms 2014 Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Tax forms 2014 Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Tax forms 2014 To be alimony, a payment must meet certain requirements. Tax forms 2014 There are some differences between the requirements that apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Tax forms 2014 The general requirements that apply to payments regardless of when the divorce or separation instrument was executed and the specific requirements that apply to post-1984 instruments (and, in certain cases, some pre-1985 instruments) are discussed in this publication. Tax forms 2014 See, Instruments Executed Before 1985 , later, if you are looking for information on where to find the specific requirements that apply to pre-1985 instruments. Tax forms 2014 Spouse or former spouse. Tax forms 2014   Unless otherwise stated, the term “spouse” includes former spouse. Tax forms 2014 Divorce or separation instrument. Tax forms 2014   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Tax forms 2014 This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Tax forms 2014 Invalid decree. Tax forms 2014   Payments under a divorce decree can be alimony even if the decree's validity is in question. Tax forms 2014 A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid. Tax forms 2014 Amended instrument. Tax forms 2014   An amendment to a divorce decree may change the nature of your payments. Tax forms 2014 Amendments are not ordinarily retroactive for federal tax purposes. Tax forms 2014 However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes. Tax forms 2014 Example 1. Tax forms 2014 A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. Tax forms 2014 This change also is effective retroactively for federal tax purposes. Tax forms 2014 Example 2. Tax forms 2014 Your original divorce decree did not fix any part of the payment as child support. Tax forms 2014 To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. Tax forms 2014 The amended order is effective retroactively for federal tax purposes. Tax forms 2014 Deducting alimony paid. Tax forms 2014   You can deduct alimony you paid, whether or not you itemize deductions on your return. Tax forms 2014 You must file Form 1040. Tax forms 2014 You cannot use Form 1040A, 1040EZ, or 1040NR. Tax forms 2014 Enter the amount of alimony you paid on Form 1040, line 31a. Tax forms 2014 In the space provided on line 31b, enter your spouse's social security number (SSN) or IRS individual taxpayer identification number (ITIN). Tax forms 2014 If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Tax forms 2014 Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Tax forms 2014 Enter your total payments on line 31a. Tax forms 2014 If you do not provide your spouse's SSN or ITIN, you may have to pay a $50 penalty and your deduction may be disallowed. Tax forms 2014 Reporting alimony received. Tax forms 2014   Report alimony you received as income on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. Tax forms 2014 You cannot use Form 1040A, 1040EZ, or 1040NR-EZ. Tax forms 2014    You must give the person who paid the alimony your SSN or ITIN. Tax forms 2014 If you do not, you may have to pay a $50 penalty. Tax forms 2014 Withholding on nonresident aliens. Tax forms 2014   If you are a U. Tax forms 2014 S. Tax forms 2014 citizen or resident alien and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% on each payment. Tax forms 2014 However, many tax treaties provide for an exemption from withholding for alimony payments. Tax forms 2014 For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Tax forms 2014 General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Tax forms 2014 Payments not alimony. Tax forms 2014   Not all payments under a divorce or separation instrument are alimony. Tax forms 2014 Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained later under Community Property , Payments to keep up the payer's property, or Use of the payer's property. Tax forms 2014 Example. Tax forms 2014 Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Tax forms 2014 Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. Tax forms 2014 Neither is the value of your spouse's use of the home. Tax forms 2014 If they otherwise qualify, you can deduct the payments for utilities as alimony. Tax forms 2014 Your spouse must report them as income. Tax forms 2014 If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. Tax forms 2014 However, if your spouse owned the home, see Example 2 under Payments to a third party, later. Tax forms 2014 If you owned the home jointly with your spouse, see Table 4. Tax forms 2014 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. Tax forms 2014 Child support. Tax forms 2014   To determine whether a payment is child support, see the discussion under Instruments Executed After 1984 , later. Tax forms 2014 If your divorce or separation agreement was executed before 1985, see the 2004 revision of Publication 504 available at www. Tax forms 2014 irs. Tax forms 2014 gov/formspubs. Tax forms 2014 Underpayment. Tax forms 2014   If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony. Tax forms 2014 Example. Tax forms 2014 Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. Tax forms 2014 If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony and your former spouse must report $1,800 as alimony received. Tax forms 2014 If you pay only $3,600 during the year, $2,400 is child support. Tax forms 2014 You can deduct only $1,200 ($3,600 – $2,400) as alimony and your former spouse must report $1,200 as alimony received. Tax forms 2014 Payments to a third party. Tax forms 2014   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Tax forms 2014 These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Tax forms 2014 ), taxes, tuition, etc. Tax forms 2014 The payments are treated as received by your spouse and then paid to the third party. Tax forms 2014 Example 1. Tax forms 2014 Under your divorce decree, you must pay your former spouse's medical and dental expenses. Tax forms 2014 If the payments otherwise qualify, you can deduct them as alimony on your return. Tax forms 2014 Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses. Tax forms 2014 Example 2. Tax forms 2014 Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. Tax forms 2014 If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. Tax forms 2014 If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. Tax forms 2014 However, if you owned the home, see the example under Payments not alimony , earlier. Tax forms 2014 If you owned the home jointly with your spouse, see Table 4. Tax forms 2014 Life insurance premiums. Tax forms 2014   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Tax forms 2014 Payments for jointly-owned home. Tax forms 2014   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony. Tax forms 2014 See Table 4. Tax forms 2014   However, if your spouse owned the home, see Example 2 under Payments to a third party, earlier. Tax forms 2014 If you owned the home, see the example under Payments not alimony , earlier. Tax forms 2014 Table 4. Tax forms 2014 Expenses for a Jointly-Owned Home Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction. Tax forms 2014 IF you must pay all of the . Tax forms 2014 . Tax forms 2014 . Tax forms 2014 AND your home is . Tax forms 2014 . Tax forms 2014 . Tax forms 2014 THEN you can deduct and your spouse (or former spouse) must include as alimony . Tax forms 2014 . Tax forms 2014 . Tax forms 2014 AND you can claim as an itemized deduction . Tax forms 2014 . Tax forms 2014 . Tax forms 2014   mortgage payments (principal and interest) jointly owned half of the total payments half of the interest as interest expense (if the home is a qualified home). Tax forms 2014 1   real estate taxes and home insurance held as tenants in common half of the total payments half of the real estate taxes2 and none of the home insurance. Tax forms 2014     held as tenants by the entirety or in joint tenancy none of the payments all of the real estate taxes and none of the home insurance. Tax forms 2014 1 Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home. Tax forms 2014  2 Your spouse (or former spouse) can deduct the other half of the real estate taxes. Tax forms 2014 Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Tax forms 2014 Exception for instruments executed before 1985. Tax forms 2014   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Tax forms 2014 A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Tax forms 2014 A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Tax forms 2014   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, see the 2004 revision of Publication 504 available at www. Tax forms 2014 irs. Tax forms 2014 gov/formspubs. Tax forms 2014 Example 1. Tax forms 2014 In November 1984, you and your former spouse executed a written separation agreement. Tax forms 2014 In February 1985, a decree of divorce was substituted for the written separation agreement. Tax forms 2014 The decree of divorce did not change the terms for the alimony you pay your former spouse. Tax forms 2014 The decree of divorce is treated as executed before 1985. Tax forms 2014 Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Tax forms 2014 Example 2. Tax forms 2014 The facts are the same as in Example 1 except that the decree of divorce changed the amount of the alimony. Tax forms 2014 In this example, the decree of divorce is not treated as executed before 1985. Tax forms 2014 The alimony payments are subject to the rules for payments under instruments executed after 1984. Tax forms 2014 Alimony Requirements A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Tax forms 2014 The payment is in cash. Tax forms 2014 The instrument does not designate the payment as not alimony. Tax forms 2014 The spouses are not members of the same household at the time the payments are made. Tax forms 2014 This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance. Tax forms 2014 There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Tax forms 2014 The payment is not treated as child support. Tax forms 2014 Each of these requirements is discussed next. Tax forms 2014 Cash payment requirement. Tax forms 2014   Only cash payments, including checks and money orders, qualify as alimony. Tax forms 2014 The following do not qualify as alimony. Tax forms 2014 Transfers of services or property (including a debt instrument of a third party or an annuity contract). Tax forms 2014 Execution of a debt instrument by the payer. Tax forms 2014 The use of the payer's property. Tax forms 2014 Payments to a third party. Tax forms 2014   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Tax forms 2014 See Payments to a third party under General Rules, earlier. Tax forms 2014   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Tax forms 2014 The payments are in lieu of payments of alimony directly to your spouse. Tax forms 2014 The written request states that both spouses intend the payments to be treated as alimony. Tax forms 2014 You receive the written request from your spouse before you file your return for the year you made the payments. Tax forms 2014 Payments designated as not alimony. Tax forms 2014   You and your spouse can designate that otherwise qualifying payments are not alimony. Tax forms 2014 You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Tax forms 2014 For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Tax forms 2014 If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Tax forms 2014   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Tax forms 2014 The copy must be attached each year the designation applies. Tax forms 2014 Spouses cannot be members of the same household. Tax forms 2014   Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Tax forms 2014 A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Tax forms 2014   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Tax forms 2014 Exception. Tax forms 2014   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Tax forms 2014 Liability for payments after death of recipient spouse. Tax forms 2014   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony whether made before or after the death. Tax forms 2014 If all of the payments would continue, then none of the payments made before or after the death are alimony. Tax forms 2014   The divorce or separation instrument does not have to expressly state that the payments cease upon the
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The Tax Forms 2014

Tax forms 2014 Other Methods of Depreciation Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: How To Figure the DeductionBasis Useful Life Salvage Value Methods To UseStraight Line Method Declining Balance Method Income Forecast Method How To Change Methods DispositionsSale or exchange. Tax forms 2014 Property not disposed of or abandoned. Tax forms 2014 Special rule for normal retirements from item accounts. Tax forms 2014 Abandoned property. Tax forms 2014 Single item accounts. Tax forms 2014 Multiple property account. Tax forms 2014 Topics - This chapter discusses: How to figure the deduction Methods to use How to change methods Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records 946 How To Depreciate Property Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization Schedule C (Form 1040) Profit or Loss From Business If your property is being depreciated under ACRS, you must continue to use rules for depreciation that applied when you placed the property in service. Tax forms 2014 If your property qualified for MACRS, you must depreciate it under MACRS. Tax forms 2014 See Publication 946. Tax forms 2014 However, you cannot use MACRS for certain property because of special rules that exclude it from MACRS. Tax forms 2014 Also, you can elect to exclude certain property from being depreciated under MACRS. Tax forms 2014 Property that you cannot depreciate using MACRS includes: Intangible property, Property you can elect to exclude from MACRS that you properly depreciate under a method that is not based on a term of years, Certain public utility property, Any motion picture film or video tape, Any sound recording, and Certain real and personal property placed in service before 1987. Tax forms 2014 Intangible property. Tax forms 2014   You cannot depreciate intangible property under ACRS or MACRS. Tax forms 2014 You depreciate intangible property using any other reasonable method, usually, the straight line method. Tax forms 2014 Note. Tax forms 2014 The cost of certain intangible property that you acquire after August 10, 1993, must be amortized over a 15-year period. Tax forms 2014 For more information, see chapter 12 of Publication 535. Tax forms 2014 Public utility property. Tax forms 2014   The law excludes from MACRS any public utility property for which the taxpayer does not use a normalization method of accounting. Tax forms 2014 This type of property is subject to depreciation under a special rule. Tax forms 2014 Videocassettes. Tax forms 2014   If you are in the videocassette rental business, you can depreciate those videocassettes purchased for rental. Tax forms 2014 You can depreciate the cost less salvage value of those videocassettes that have a useful life over one year using either: The straight line method, or The income forecast method. Tax forms 2014 The straight line method, salvage value, and useful life are discussed later under Methods To Use. Tax forms 2014 You can deduct in the year of purchase as a business expense the cost of any cassette that has a useful life of one year or less. Tax forms 2014 How To Figure the Deduction Two other reasonable methods can be used to figure your deduction for property not covered under ACRS or MACRS. Tax forms 2014 These methods are straight line and declining balance. Tax forms 2014 To figure depreciation using these methods, you must generally determine three things about the property you intend to depreciate. Tax forms 2014 They are: The basis, The useful life, and The estimated salvage value at the end of its useful life. Tax forms 2014 The amount of the deduction in any year also depends on which method of depreciation you choose. Tax forms 2014 Basis To deduct the proper amount of depreciation each year, first determine your basis in the property you intend to depreciate. Tax forms 2014 The basis used for figuring depreciation is the same as the basis that would be used for figuring the gain on a sale. Tax forms 2014 Your original basis is usually the purchase price. Tax forms 2014 However, if you acquire property in some other way, such as inheriting it, getting it as a gift, or building it yourself, you have to figure your original basis in a different way. Tax forms 2014 Adjusted basis. Tax forms 2014   Events will often change the basis of property. Tax forms 2014 When this occurs, the changed basis is called the adjusted basis. Tax forms 2014 Some events, such as improvements you make, increase basis. Tax forms 2014 Events such as deducting casualty losses and depreciation decrease basis. Tax forms 2014 If basis is adjusted, the depreciation deduction may also have to be changed, depending on the reason for the adjustment and the method of depreciation you are using. Tax forms 2014   Publication 551 explains how to figure basis for property acquired in different ways. Tax forms 2014 It also discusses what items increase and decrease basis, how to figure adjusted basis, and how to allocate cost if you buy several pieces of property at one time. Tax forms 2014 Useful Life The useful life of a piece of property is an estimate of how long you can expect to use it in your trade or business, or to produce income. Tax forms 2014 It is the length of time over which you will make yearly depreciation deductions of your basis in the property. Tax forms 2014 It is how long it will continue to be useful to you, not how long the property will last. Tax forms 2014 Many things affect the useful life of property, such as: Frequency of use, Age when acquired, Your repair policy, and Environmental conditions. Tax forms 2014 The useful life can also be affected by technological improvements, progress in the arts, reasonably foreseeable economic changes, shifting of business centers, prohibitory laws, and other causes. Tax forms 2014 Consider all these factors before you arrive at a useful life for your property. Tax forms 2014 The useful life of the same type of property varies from user to user. Tax forms 2014 When you determine the useful life of your property, keep in mind your own experience with similar property. Tax forms 2014 You can use the general experience of the industry you are in until you are able to determine a useful life of your property from your own experience. Tax forms 2014 Change in useful life. Tax forms 2014   You base your estimate of useful life on certain facts. Tax forms 2014 If these facts change significantly, you can adjust your estimate of the remaining useful life. Tax forms 2014 However, you redetermine the estimated useful life only when the change is substantial and there is a clear reason for making the change. Tax forms 2014 Salvage Value It is important for you to accurately determine the correct salvage value of the property you want to depreciate. Tax forms 2014 You generally cannot depreciate property below a reasonable salvage value. Tax forms 2014 Determining salvage value. Tax forms 2014   Salvage value is the estimated value of property at the end of its useful life. Tax forms 2014 It is what you expect to get for the property if you sell it after you can no longer use it productively. Tax forms 2014 You must estimate the salvage value of a piece of property when you first acquire it. Tax forms 2014   Salvage value is affected both by how you use the property and how long you use it. Tax forms 2014 If it is your policy to dispose of property that is still in good operating condition, the salvage value can be relatively large. Tax forms 2014 However, if your policy is to use property until it is no longer usable, its salvage value can be its junk value. Tax forms 2014 Changing salvage value. Tax forms 2014   Once you determine the salvage value for property, you should not change it merely because prices have changed. Tax forms 2014 However, if you redetermine the useful life of property, as discussed earlier under Change in useful life, you can also redetermine the salvage value. Tax forms 2014 When you redetermine the salvage value, take into account the facts that exist at the time. Tax forms 2014 Net salvage. Tax forms 2014   Net salvage is the salvage value of property minus what it costs to remove it when you dispose of it. Tax forms 2014 You can choose either salvage value or net salvage when you figure depreciation. Tax forms 2014 You must consistently use the one you choose and the treatment of the costs of removal must be consistent with the practice adopted. Tax forms 2014 However, if the cost to remove the property is more than the estimated salvage value, then net salvage is zero. Tax forms 2014 Your salvage value can never be less than zero. Tax forms 2014 Ten percent rule. Tax forms 2014   If you acquire personal property that has a useful life of 3 years or more, you can use an amount for salvage value that is less than your actual estimate. Tax forms 2014 You can subtract from your estimate of salvage value an amount equal to 10% of your basis in the property. Tax forms 2014 If salvage value is less than 10% of basis, you can ignore salvage value when you figure depreciation. Tax forms 2014 Methods To Use Two methods of depreciation are the straight line and declining balance methods. Tax forms 2014 If ACRS or MACRS does not apply, you can use one of these methods. Tax forms 2014 The straight line and declining balance methods discussed in this section are not figured in the same way as straight line or declining balance methods under MACRS. Tax forms 2014 Straight Line Method Before 1981, you could use any reasonable method for every kind of depreciable property. Tax forms 2014 One of these methods was the straight line method. Tax forms 2014 This method was also used for intangible property. Tax forms 2014 It lets you deduct the same amount of depreciation each year. Tax forms 2014 To figure your deduction, determine the adjusted basis of your property, its salvage value, and its estimated useful life. Tax forms 2014 Subtract the salvage value, if any, from the adjusted basis. Tax forms 2014 The balance is the total amount of depreciation you can take over the useful life of the property. Tax forms 2014 Divide the balance by the number of years remaining in the useful life. Tax forms 2014 This gives you the amount of your yearly depreciation deduction. Tax forms 2014 Unless there is a big change in adjusted basis, or useful life, this amount will stay the same throughout the time you depreciate the property. Tax forms 2014 If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. Tax forms 2014 Example. Tax forms 2014 In April 1994, Frank bought a franchise for $5,600. Tax forms 2014 It expires in 10 years. Tax forms 2014 This property is intangible property that cannot be depreciated under MACRS. Tax forms 2014 Frank depreciates the franchise under the straight line method, using a 10-year useful life and no salvage value. Tax forms 2014 He takes the $5,600 basis and divides that amount by 10 years ($5,600 ÷ 10 = $560, a full year's use). Tax forms 2014 He must prorate the $560 for his 9 months of use in 1994. Tax forms 2014 This gives him a deduction of $420 ($560 ÷ 9/12). Tax forms 2014 In 1995, Frank can deduct $560 for the full year. Tax forms 2014 Declining Balance Method The declining balance method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. Tax forms 2014 The rate cannot be more than twice the straight line rate. Tax forms 2014 Rate of depreciation. Tax forms 2014   Under this method, you must determine your declining balance rate of depreciation. Tax forms 2014 The initial step is to: Divide the number 1 by the useful life of your property to get a straight line rate. Tax forms 2014 (For example, if property has a useful life of 5 years, its normal straight line rate of depreciation is ⅕, or 20%. Tax forms 2014 ) Multiply this straight line rate by a number that is more than 1 but not more than 2 to determine the declining balance rate. Tax forms 2014 Unless there is a change in the useful life during the time you depreciate the property, the rate of depreciation generally will not change. Tax forms 2014 Depreciation deductions. Tax forms 2014   After you determine the rate of depreciation, multiply the adjusted basis of the property by it. Tax forms 2014 This gives you the amount of your deduction. Tax forms 2014 For example, if your adjusted basis at the beginning of the first year is $10,000, and your declining balance rate is 20%, your depreciation deduction for the first year is $2,000 ($10,000 ÷ 20%). Tax forms 2014 To figure your depreciation deduction in the second year, you must first adjust the basis for the amount of depreciation you deducted in the first year. Tax forms 2014 Subtract the previous year's depreciation from your basis ($10,000 - $2,000 = $8,000). Tax forms 2014 Multiply this amount by the rate of depreciation ($8,000 ÷ 20% = $1,600). Tax forms 2014 Your depreciation deduction for the second year is $1,600. Tax forms 2014   As you can see from this example, your adjusted basis in the property gets smaller each year. Tax forms 2014 Also, under this method, deductions are larger in the earlier years and smaller in the later years. Tax forms 2014 You can make a change to the straight line method without consent. Tax forms 2014 Salvage value. Tax forms 2014   Do not subtract salvage value when you figure your yearly depreciation deductions under the declining balance method. Tax forms 2014 However, you cannot depreciate the property below its reasonable salvage value. Tax forms 2014 Determine salvage value using the rules discussed earlier, including the special 10% rule. Tax forms 2014 Example. Tax forms 2014 If your adjusted basis has been decreased to $1,000 and the rate of depreciation is 20%, your depreciation deduction should be $200. Tax forms 2014 But if your estimate of salvage value was $900, you can only deduct $100. Tax forms 2014 This is because $100 is the amount that would lower your adjusted basis to equal salvage value. Tax forms 2014 Income Forecast Method The income forecast method requires income projections for each videocassette or group of videocassettes. Tax forms 2014 You can group the videocassettes by title for making this projection. Tax forms 2014 You determine the depreciation by applying a fraction to the cost less salvage value of the cassette. Tax forms 2014 The numerator is the income from the videocassette for the tax year and the denominator is the total projected income for the cassette. Tax forms 2014 For more information on the income forecast method, see Revenue Ruling 60-358 in Cumulative Bulletin 1960, Volume 2, on page 68. Tax forms 2014 How To Change Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. Tax forms 2014 If you change your method of depreciation, it is generally a change in your method of accounting. Tax forms 2014 You must get IRS consent before making the change. Tax forms 2014 However, you do not need permission for certain changes in your method of depreciation. Tax forms 2014 The rules discussed in this section do not apply to property depreciated under ACRS or MACRS. Tax forms 2014 For information on ACRS elections,see Revocation of election, in chapter 1 under Alternate ACRS Method. Tax forms 2014 Change to the straight line method. Tax forms 2014   You can change from the declining balance method to the straight line method at any time during the useful life of your property without IRS consent. Tax forms 2014 However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. Tax forms 2014 When the change is made, figure depreciation based on your adjusted basis in the property at that time. Tax forms 2014 Your adjusted basis takes into account all previous depreciation deductions. Tax forms 2014 Use the estimated remaining useful life of your property at the time of change and its estimated salvage value. Tax forms 2014   You can change from the declining balance method to straight line only on the original tax return for the year you first use the straight line method. Tax forms 2014 You cannot make the change on an amended return filed after the due date of the original return (including extensions). Tax forms 2014   When you make the change, attach a statement to your tax return showing: When you acquired the property, Its original cost or other original basis, The total amount claimed for depreciation and other allowances since you acquired it, Its salvage value and remaining useful life, and A description of the property and its use. Tax forms 2014   After you change to straight line, you cannot change back to the declining balance method or to any other method for a period of 10 years without written permission from the IRS. Tax forms 2014 Changes that require permission. Tax forms 2014   For most other changes in method of depreciation, you must get permission from the IRS. Tax forms 2014 To request a change in method of depreciation, file Form 3115. Tax forms 2014 File the application within the first 180 days of the tax year the change is to become effective. Tax forms 2014 In most cases, there is a user fee that must accompany Form 3115. Tax forms 2014 See the instructions for Form 3115 to determine if a fee is required. Tax forms 2014 Changes granted automatically. Tax forms 2014   The IRS automatically approves certain changes of a method of depreciation. Tax forms 2014 But, you must file Form 3115 for these automatic changes. Tax forms 2014   However, IRS can deny permission if Form 3115 is not filed on time. Tax forms 2014 For more information on automatic changes, see Revenue Procedure 74-11, 1974-1 C. Tax forms 2014 B. Tax forms 2014 420. Tax forms 2014 Changes for which approval is not automatic. Tax forms 2014   The automatic change procedures do not apply to: Property or an account where you made a change in depreciation within the last 10 tax years (unless the change was made under the Class Life System), Class Life Asset Depreciation Range System, and Public utility property. Tax forms 2014   You must request and receive permission for these changes. Tax forms 2014 To make the request, file Form 3115 during the first 180 days of the tax year for which you want the change to be effective. Tax forms 2014 Change from an improper method. Tax forms 2014   If the IRS disallows the method you are using, you do not need permission to change to a proper method. Tax forms 2014 You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. Tax forms 2014 If you file your tax return using an improper method, but later file an amended return, you can use a proper method on the amended return without getting IRS permission. Tax forms 2014 However, you must file the amended return before the filing date for the next tax year. Tax forms 2014 Dispositions Retirement is the permanent withdrawal of depreciable property from use in your trade or business or for the production of income. Tax forms 2014 You can do this by selling, exchanging, or abandoning the item of property. Tax forms 2014 You can also withdraw it from use without disposing of it. Tax forms 2014 For example, you could place it in a supplies or scrap account. Tax forms 2014 Retirements can be either normal or abnormal depending on all facts and circumstances. Tax forms 2014 The rules discussed next do not apply to MACRS and ACRS property. Tax forms 2014 Normal retirement. Tax forms 2014   A normal retirement is a permanent withdrawal of depreciable property from use if the following apply: The retirement is made within the useful life you estimated originally, and The property has reached a condition at which you customarily retire or would retire similar property from use. Tax forms 2014 A retirement is generally considered normal unless you can show that you retired the property because of a reason you did not consider when you originally estimated the useful life of the property. Tax forms 2014 Abnormal retirement. Tax forms 2014   A retirement can be abnormal if you withdraw the property early or under other circumstances. Tax forms 2014 For example, if the property is damaged by a fire or suddenly becomes obsolete and is now useless. Tax forms 2014 Gain or loss on retirement. Tax forms 2014   There are special rules for figuring the gain or loss on retirement of property. Tax forms 2014 The gain or loss will depend on several factors. Tax forms 2014 These include the type of withdrawal, if the withdrawal was from a single property or multiple property account, and if the retirement was normal or abnormal. Tax forms 2014 A single property account contains only one item of property. Tax forms 2014 A multiple property account is one in which several items have been combined with a single rate of depreciation assigned to the entire account. Tax forms 2014 Sale or exchange. Tax forms 2014   If property is retired by sale or exchange, you figure gain or loss by the usual rules that apply to sales or other dispositions of property. Tax forms 2014 See Publication 544. Tax forms 2014 Property not disposed of or abandoned. Tax forms 2014   If property is retired permanently, but not disposed of or physically abandoned, you do not recognize gain. Tax forms 2014 You are allowed a loss in such a case, but only if the retirement is: An abnormal retirement, A normal retirement from a single property account in which you determined the life of each item of property separately, or A normal retirement from a multiple property account in which the depreciation rate is based on the maximum expected life of the longest lived item of property and the loss occurs before the expiration of the full useful life. Tax forms 2014 However, you are not allowed a loss if the depreciation rate is based on the average useful life of the items of property in the account. Tax forms 2014   To figure your loss, subtract the estimated salvage or fair market value of the property at the date of retirement, whichever is more, from its adjusted basis. Tax forms 2014 Special rule for normal retirements from item accounts. Tax forms 2014   You can generally deduct losses upon retirement of a few depreciable items of property with similar useful lives, if: You account for each one in a separate account, and You use the average useful life to figure depreciation. Tax forms 2014 However, you cannot deduct losses if you use the average useful life to figure depreciation and they have a wide range of useful lives. Tax forms 2014   If you have a large number of depreciable property items and use average useful lives to figure depreciation, you cannot deduct the losses upon normal retirements from these accounts. Tax forms 2014 Abandoned property. Tax forms 2014   If you physically abandon property, you can deduct as a loss the adjusted basis of the property at the time of its abandonment. Tax forms 2014 However, your intent must be to discard the property so that you will not use it again or retrieve it for sale, exchange, or other disposition. Tax forms 2014 Basis of property retired. Tax forms 2014   The basis for figuring gain or loss on the retirement of property is its adjusted basis at the time of retirement, as determined in the following discussions. Tax forms 2014 Single item accounts. Tax forms 2014   If an item of property is accounted for in a single item account, the adjusted basis is the basis you would use to figure gain or loss for a sale or exchange of the property. Tax forms 2014 This is generally the cost or other basis of the item of property less depreciation. Tax forms 2014 See Publication 551. Tax forms 2014 Multiple property account. Tax forms 2014   For a normal retirement from a multiple property account, if you figured depreciation using the average expected useful life, the adjusted basis is the salvage value estimated for the item of property when it was originally acquired. Tax forms 2014 If you figured depreciation using the maximum expected useful life of the longest lived item of property in the account, you must use the depreciation method used for the multiple property account and a rate based on the maximum expected useful life of the item of property retired. Tax forms 2014   You make the adjustment for depreciation for an abnormal retirement from a multiple property account at the rate that would be proper if the item of property was depreciated in a single property account. Tax forms 2014 The method of depreciation used for the multiple property account is used. Tax forms 2014 You base the rate on either the average expected useful life or the maximum expected useful life of the retired item of property, depending on the method used to determine the depreciation rate for the multiple property account. Tax forms 2014 Prev  Up  Next   Home   More Online Publications