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Tax Forms For Students

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Tax Forms For Students

Tax forms for students 5. Tax forms for students   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. Tax forms for students Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Reminder Foreign income. Tax forms for students   If you are a U. Tax forms for students S. Tax forms for students citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. Tax forms for students S. Tax forms for students law. Tax forms for students This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. Tax forms for students This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Tax forms for students If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. Tax forms for students For details, see Publication 54, Tax Guide for U. Tax forms for students S. Tax forms for students Citizens and Resident Aliens Abroad. Tax forms for students Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. Tax forms for students The following topics are included. Tax forms for students Bonuses and awards. Tax forms for students Special rules for certain employees. Tax forms for students Sickness and injury benefits. Tax forms for students The chapter explains what income is included in the employee's gross income and what is not included. Tax forms for students Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income Employee Compensation This section discusses various types of employee compensation including fringe benefits, retirement plan contributions, stock options, and restricted property. Tax forms for students Form W-2. Tax forms for students    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. Tax forms for students Include your pay on line 7 of Form 1040 or Form 1040A, or on line 1 of Form 1040EZ, even if you do not receive a Form W-2. Tax forms for students   If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. Tax forms for students These wages must be included on line 7 of Form 1040. Tax forms for students See Form 8919 for more information. Tax forms for students Childcare providers. Tax forms for students    If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. Tax forms for students If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Tax forms for students You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. Tax forms for students Babysitting. Tax forms for students   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. Tax forms for students Miscellaneous Compensation This section discusses different types of employee compensation. Tax forms for students Advance commissions and other earnings. Tax forms for students   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. Tax forms for students    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. Tax forms for students If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), or you may be able to take a credit for that year. Tax forms for students See Repayments in chapter 12. Tax forms for students Allowances and reimbursements. Tax forms for students    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. Tax forms for students If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. Tax forms for students Back pay awards. Tax forms for students    Include in income amounts you are awarded in a settlement or judgment for back pay. Tax forms for students These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. Tax forms for students They should be reported to you by your employer on Form W-2. Tax forms for students Bonuses and awards. Tax forms for students   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. Tax forms for students These include prizes such as vacation trips for meeting sales goals. Tax forms for students If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. Tax forms for students However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. Tax forms for students Employee achievement award. Tax forms for students   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. Tax forms for students However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. Tax forms for students Your employer can tell you whether your award is a qualified plan award. Tax forms for students Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. Tax forms for students   However, the exclusion does not apply to the following awards: A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. Tax forms for students A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. Tax forms for students Example. Tax forms for students Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. Tax forms for students Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. Tax forms for students However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 – $1,600) in his income. Tax forms for students Differential wage payments. Tax forms for students   This is any payment made to you by an employer for any period during which you are, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages you would have received from the employer during that period. Tax forms for students These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. Tax forms for students The payments are reported as wages on Form W-2. Tax forms for students Government cost-of-living allowances. Tax forms for students   Most payments received by U. Tax forms for students S. Tax forms for students Government civilian employees for working abroad are taxable. Tax forms for students However, certain cost-of-living allowances are tax free. Tax forms for students Publication 516, U. Tax forms for students S. Tax forms for students Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. Tax forms for students Nonqualified deferred compensation plans. Tax forms for students   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. Tax forms for students This amount is shown on Form W-2, box 12, using code Y. Tax forms for students This amount is not included in your income. Tax forms for students   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. Tax forms for students This amount is included in your wages shown on Form W-2, box 1. Tax forms for students It is also shown on Form W-2, box 12, using code Z. Tax forms for students Note received for services. Tax forms for students    If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. Tax forms for students When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. Tax forms for students Do not include that part again in your income. Tax forms for students Include the rest of the payment in your income in the year of payment. Tax forms for students   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. Tax forms for students Severance pay. Tax forms for students   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. Tax forms for students Accrued leave payment. Tax forms for students    If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. Tax forms for students   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. Tax forms for students You can reduce gross wages by the amount you repaid in the same tax year in which you received it. Tax forms for students Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on the return and the wages on your Forms W-2. Tax forms for students Outplacement services. Tax forms for students   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. Tax forms for students    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). Tax forms for students Sick pay. Tax forms for students   Pay you receive from your employer while you are sick or injured is part of your salary or wages. Tax forms for students In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. Tax forms for students A state sickness or disability fund. Tax forms for students An association of employers or employees. Tax forms for students An insurance company, if your employer paid for the plan. Tax forms for students However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. Tax forms for students For more information, see Publication 525. Tax forms for students Social security and Medicare taxes paid by employer. Tax forms for students   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. Tax forms for students The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. Tax forms for students However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. Tax forms for students Stock appreciation rights. Tax forms for students   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. Tax forms for students When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. Tax forms for students You include the cash payment in your income in the year you use the right. Tax forms for students Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. Tax forms for students Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. Tax forms for students Accounting period. Tax forms for students   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. Tax forms for students Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. Tax forms for students The general rule: benefits are reported for a full calendar year (January 1–December 31). Tax forms for students The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. Tax forms for students For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. Tax forms for students  Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. Tax forms for students   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). Tax forms for students Form W-2. Tax forms for students   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips, and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. Tax forms for students Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). Tax forms for students However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). Tax forms for students Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. Tax forms for students Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . Tax forms for students For information on the items covered in this section, other than Long-term care coverage, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. Tax forms for students Long-term care coverage. Tax forms for students    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. Tax forms for students However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. Tax forms for students This amount will be reported as wages in box 1 of your Form W-2. Tax forms for students   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. Tax forms for students Archer MSA contributions. Tax forms for students    Contributions by your employer to your Archer MSA generally are not included in your income. Tax forms for students Their total will be reported in box 12 of Form W-2 with code R. Tax forms for students You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. Tax forms for students File the form with your return. Tax forms for students Health flexible spending arrangement (health FSA). Tax forms for students   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. Tax forms for students Note. Tax forms for students Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. Tax forms for students The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. Tax forms for students For more information, see Notice 2012-40, 2012-26 I. Tax forms for students R. Tax forms for students B. Tax forms for students 1046, available at www. Tax forms for students irs. Tax forms for students gov/irb/2012-26 IRB/ar09. Tax forms for students html. Tax forms for students Health reimbursement arrangement (HRA). Tax forms for students   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. Tax forms for students Health savings accounts (HSA). Tax forms for students   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. Tax forms for students Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. Tax forms for students Contributions made by your employer are not included in your income. Tax forms for students Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. Tax forms for students Distributions not used for qualified medical expenses are included in your income. Tax forms for students See Publication 969 for the requirements of an HSA. Tax forms for students   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. Tax forms for students The contributions are treated as a distribution of money and are not included in the partner's gross income. Tax forms for students Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. Tax forms for students In both situations, the partner can deduct the contribution made to the partner's HSA. Tax forms for students   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. Tax forms for students The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. Tax forms for students Qualified HSA funding distribution. Tax forms for students   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. Tax forms for students See Publication 590 for the requirements for these qualified HSA funding distributions. Tax forms for students Failure to maintain eligibility. Tax forms for students   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. Tax forms for students If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. Tax forms for students This income is also subject to an additional 10% tax. Tax forms for students Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. Tax forms for students See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Tax forms for students Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. Tax forms for students They also are included as social security and Medicare wages in boxes 3 and 5. Tax forms for students However, they are not included as wages in box 1. Tax forms for students To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. Tax forms for students File the form with your return. Tax forms for students De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. Tax forms for students In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. Tax forms for students Holiday gifts. Tax forms for students   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. Tax forms for students However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. Tax forms for students Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. Tax forms for students For more information, see Publication 970, Tax Benefits for Education. Tax forms for students Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. Tax forms for students However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. Tax forms for students For exceptions, see Entire cost excluded , and Entire cost taxed , later. Tax forms for students If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. Tax forms for students Also, it is shown separately in box 12 with code C. Tax forms for students Group-term life insurance. Tax forms for students   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. Tax forms for students Permanent benefits. Tax forms for students   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. Tax forms for students Your employer should be able to tell you the amount to include in your income. Tax forms for students Accidental death benefits. Tax forms for students   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. Tax forms for students Former employer. Tax forms for students   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. Tax forms for students Also, it is shown separately in box 12 with code C. Tax forms for students Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. Tax forms for students You must pay these taxes with your income tax return. Tax forms for students Include them on line 60, Form 1040, and follow the instructions for line 60. Tax forms for students For more information, see the Instructions for Form 1040. Tax forms for students Two or more employers. Tax forms for students   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. Tax forms for students If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. Tax forms for students You must figure how much to include in your income. Tax forms for students Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. Tax forms for students Figuring the taxable cost. Tax forms for students   Use the following worksheet to figure the amount to include in your income. Tax forms for students     Worksheet 5-1. Tax forms for students Figuring the Cost of Group-Term Life Insurance To Include in Income 1. Tax forms for students Enter the total amount of your insurance coverage from your employer(s) 1. Tax forms for students   2. Tax forms for students Limit on exclusion for employer-provided group-term life insurance coverage 2. Tax forms for students 50,000 3. Tax forms for students Subtract line 2 from line 1 3. Tax forms for students   4. Tax forms for students Divide line 3 by $1,000. Tax forms for students Figure to the nearest tenth 4. Tax forms for students   5. Tax forms for students Go to Table 5-1. Tax forms for students Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Tax forms for students   6. Tax forms for students Multiply line 4 by line 5 6. Tax forms for students   7. Tax forms for students Enter the number of full months of coverage at this cost. Tax forms for students 7. Tax forms for students   8. Tax forms for students Multiply line 6 by line 7 8. Tax forms for students   9. Tax forms for students Enter the premiums you paid per month 9. Tax forms for students       10. Tax forms for students Enter the number of months you paid the premiums 10. Tax forms for students       11. Tax forms for students Multiply line 9 by line 10. Tax forms for students 11. Tax forms for students   12. Tax forms for students Subtract line 11 from line 8. Tax forms for students Include this amount in your income as wages 12. Tax forms for students      Table 5-1. Tax forms for students Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. Tax forms for students 05 25 through 29 . Tax forms for students 06 30 through 34 . Tax forms for students 08 35 through 39 . Tax forms for students 09 40 through 44 . Tax forms for students 10 45 through 49 . Tax forms for students 15 50 through 54 . Tax forms for students 23 55 through 59 . Tax forms for students 43 60 through 64 . Tax forms for students 66 65 through 69 1. Tax forms for students 27 70 and older 2. Tax forms for students 06 Example. Tax forms for students You are 51 years old and work for employers A and B. Tax forms for students Both employers provide group-term life insurance coverage for you for the entire year. Tax forms for students Your coverage is $35,000 with employer A and $45,000 with employer B. Tax forms for students You pay premiums of $4. Tax forms for students 15 a month under the employer B group plan. Tax forms for students You figure the amount to include in your income as shown in Worksheet 5-1. Tax forms for students Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. Tax forms for students Worksheet 5-1. Tax forms for students Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. Tax forms for students Enter the total amount of your insurance coverage from your employer(s) 1. Tax forms for students 80,000 2. Tax forms for students Limit on exclusion for employer-provided group-term life insurance coverage 2. Tax forms for students 50,000 3. Tax forms for students Subtract line 2 from line 1 3. Tax forms for students 30,000 4. Tax forms for students Divide line 3 by $1,000. Tax forms for students Figure to the nearest tenth 4. Tax forms for students 30. Tax forms for students 0 5. Tax forms for students Go to Table 5-1. Tax forms for students Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. Tax forms for students . Tax forms for students 23 6. Tax forms for students Multiply line 4 by line 5 6. Tax forms for students 6. Tax forms for students 90 7. Tax forms for students Enter the number of full months of coverage at this cost. Tax forms for students 7. Tax forms for students 12 8. Tax forms for students Multiply line 6 by line 7 8. Tax forms for students 82. Tax forms for students 80 9. Tax forms for students Enter the premiums you paid per month 9. Tax forms for students 4. Tax forms for students 15     10. Tax forms for students Enter the number of months you paid the premiums 10. Tax forms for students 12     11. Tax forms for students Multiply line 9 by line 10. Tax forms for students 11. Tax forms for students 49. Tax forms for students 80 12. Tax forms for students Subtract line 11 from line 8. Tax forms for students Include this amount in your income as wages 12. Tax forms for students 33. Tax forms for students 00 Entire cost excluded. Tax forms for students   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. Tax forms for students You are permanently and totally disabled and have ended your employment. Tax forms for students Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. Tax forms for students A charitable organization (defined in chapter 24) to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. Tax forms for students (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. Tax forms for students ) The plan existed on January 1, 1984, and You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. Tax forms for students Entire cost taxed. Tax forms for students   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply: The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. Tax forms for students You are a key employee and your employer's plan discriminates in favor of key employees. Tax forms for students Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. Tax forms for students Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. Tax forms for students You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. Tax forms for students Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. Tax forms for students A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. Tax forms for students Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. Tax forms for students However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. Tax forms for students Exclusion limit. Tax forms for students   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. Tax forms for students   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. Tax forms for students   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. Tax forms for students   If the benefits have a value that is more than these limits, the excess must be included in your income. Tax forms for students You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. Tax forms for students Commuter highway vehicle. Tax forms for students   This is a highway vehicle that seats at least six adults (not including the driver). Tax forms for students At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). Tax forms for students Transit pass. Tax forms for students   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. Tax forms for students Qualified parking. Tax forms for students   This is parking provided to an employee at or near the employer's place of business. Tax forms for students It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. Tax forms for students It does not include parking at or near the employee's home. Tax forms for students Qualified bicycle commuting. Tax forms for students   This is reimbursement based on the number of qualified bicycle commuting months for the year. Tax forms for students A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. Tax forms for students The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. Tax forms for students Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. Tax forms for students (Your employer can tell you whether your retirement plan is qualified. Tax forms for students ) However, the cost of life insurance coverage included in the plan may have to be included. Tax forms for students See Group-Term Life Insurance , earlier, under Fringe Benefits. Tax forms for students If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. Tax forms for students However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. Tax forms for students For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. Tax forms for students S. Tax forms for students Civil Service Retirement Benefits, if you are a federal employee or retiree). Tax forms for students Elective deferrals. Tax forms for students   If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. Tax forms for students The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. Tax forms for students An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. Tax forms for students However, it is included in wages subject to social security and Medicare taxes. Tax forms for students   Elective deferrals include elective contributions to the following retirement plans. Tax forms for students Cash or deferred arrangements (section 401(k) plans). Tax forms for students The Thrift Savings Plan for federal employees. Tax forms for students Salary reduction simplified employee pension plans (SARSEP). Tax forms for students Savings incentive match plans for employees (SIMPLE plans). Tax forms for students Tax-sheltered annuity plans (403(b) plans). Tax forms for students Section 501(c)(18)(D) plans. Tax forms for students Section 457 plans. Tax forms for students Qualified automatic contribution arrangements. Tax forms for students   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. Tax forms for students You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. Tax forms for students The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. Tax forms for students   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. Tax forms for students Overall limit on deferrals. Tax forms for students   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3) and (5) above. Tax forms for students The limit for SIMPLE plans is $12,000. Tax forms for students The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. Tax forms for students The limit for section 457 plans is the lesser of your includible compensation or $17,500. Tax forms for students Amounts deferred under specific plan limits are part of the overall limit on deferrals. Tax forms for students Designated Roth contributions. Tax forms for students   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. Tax forms for students Designated Roth contributions are treated as elective deferrals, except that they are included in income. Tax forms for students Excess deferrals. Tax forms for students   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. Tax forms for students However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. Tax forms for students   If you set aside more than the limit, the excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution. Tax forms for students See Publication 525 for a discussion of the tax treatment of excess deferrals. Tax forms for students Catch-up contributions. Tax forms for students   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. Tax forms for students Stock Options If you receive a nonstatutory option to buy or sell stock or other property as payment for your services, you usually will have income when you receive the option, when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option. Tax forms for students However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. Tax forms for students Your employer can tell you which kind of option you hold. Tax forms for students For more information, see Publication 525. Tax forms for students Restricted Property In most cases, if you receive property for your services, you must include its fair market value in your income in the year you receive the property. Tax forms for students However, if you receive stock or other property that has certain restrictions that affect its value, you do not include the value of the property in your income until it has substantially vested. Tax forms for students (You can choose to include the value of the property in your income in the year it is transferred to you. Tax forms for students ) For more information, see Restricted Property in Publication 525. Tax forms for students Dividends received on restricted stock. Tax forms for students   Dividends you receive on restricted stock are treated as compensation and not as dividend income. Tax forms for students Your employer should include these payments on your Form W-2. Tax forms for students Stock you chose to include in income. Tax forms for students   Dividends you receive on restricted stock you chose to include in your income in the year transferred are treated the same as any other dividends. Tax forms for students Report them on your return as dividends. Tax forms for students For a discussion of dividends, see chapter 8. Tax forms for students    For information on how to treat dividends reported on both your Form W-2 and Form 1099-DIV, see Dividends received on restricted stock in Publication 525. Tax forms for students Special Rules for Certain Employees This section deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers. Tax forms for students Clergy Generally, if you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. Tax forms for students , in addition to your salary. Tax forms for students If the offering is made to the religious institution, it is not taxable to you. Tax forms for students If you are a member of a religious organization and you give your outside earnings to the religious organization, you still must include the earnings in your income. Tax forms for students However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Tax forms for students See chapter 24. Tax forms for students Pension. Tax forms for students    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. Tax forms for students It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Tax forms for students Housing. Tax forms for students    Special rules for housing apply to members of the clergy. Tax forms for students Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. Tax forms for students However, the exclusion cannot be more than the reasonable pay for your service. Tax forms for students If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. Tax forms for students The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. Tax forms for students However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. Tax forms for students For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. Tax forms for students Members of Religious Orders If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order. Tax forms for students Services performed for the order. Tax forms for students   If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order. Tax forms for students   If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. Tax forms for students Any wages you earn as an agent of an order that you turn over to the order are not included in your income. Tax forms for students Example. Tax forms for students You are a member of a church order and have taken a vow of poverty. Tax forms for students You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. Tax forms for students You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. Tax forms for students However, you remain under the general direction and control of the order. Tax forms for students You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income. Tax forms for students Services performed outside the order. Tax forms for students   If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements: They are the kind of services that are ordinarily the duties of members of the order. Tax forms for students They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. Tax forms for students If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. Tax forms for students Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. Tax forms for students Example. Tax forms for students Mark Brown is a member of a religious order and has taken a vow of poverty. Tax forms for students He renounces all claims to his earnings and turns over his earnings to the order. Tax forms for students Mark is a schoolteacher. Tax forms for students He was instructed by the superiors of the order to get a job with a private tax-exempt school. Tax forms for students Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. Tax forms for students Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. Tax forms for students The wages Mark earns working for the school are included in his income. Tax forms for students Foreign Employer Special rules apply if you work for a foreign employer. Tax forms for students U. Tax forms for students S. Tax forms for students citizen. Tax forms for students   If you are a U. Tax forms for students S. Tax forms for students citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income. Tax forms for students Social security and Medicare taxes. Tax forms for students   You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. Tax forms for students However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. Tax forms for students This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. Tax forms for students Employees of international organizations or foreign governments. Tax forms for students   Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). Tax forms for students   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. Tax forms for students You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). Tax forms for students Your work is like the work done by employees of the United States in foreign countries. Tax forms for students The foreign government gives an equal exemption to employees of the United States in its country. Tax forms for students Waiver of alien status. Tax forms for students   If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, different rules may apply. Tax forms for students See Foreign Employer in Publication 525. Tax forms for students Employment abroad. Tax forms for students   For information on the tax treatment of income earned abroad, see Publication 54. Tax forms for students Military Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. Tax forms for students Allowances generally are not taxed. Tax forms for students For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. Tax forms for students Differential wage payments. Tax forms for students   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. Tax forms for students These wages are subject to income tax withholding and are reported on a Form W-2. Tax forms for students See the discussion under Miscellaneous Compensation , earlier. Tax forms for students Military retirement pay. Tax forms for students   If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Tax forms for students Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan. Tax forms for students   For more detailed discussion of survivor annuities, see chapter 10. Tax forms for students Disability. Tax forms for students   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. Tax forms for students Veterans' benefits. Tax forms for students   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). Tax forms for students The following amounts paid to veterans or their families are not taxable. Tax forms for students Education, training, and subsistence allowances. Tax forms for students Disability compensation and pension payments for disabilities paid either to veterans or their families. Tax forms for students Grants for homes designed for wheelchair living. Tax forms for students Grants for motor vehicles for veterans who lost their sight or the use of their limbs. Tax forms for students Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. Tax forms for students Interest on insurance dividends you leave on deposit with the VA. Tax forms for students Benefits under a dependent-care assistance program. Tax forms for students The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. Tax forms for students Payments made under the compensated work therapy program. Tax forms for students Any bonus payment by a state or political subdivision because of service in a combat zone. Tax forms for students Volunteers The tax treatment of amounts you receive as a volunteer worker for the Peace Corps or similar agency is covered in the following discussions. Tax forms for students Peace Corps. Tax forms for students   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. Tax forms for students Taxable allowances. Tax forms for students   The following allowances must be included in your income and reported as wages: Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States. Tax forms for students Living allowances designated by the Director of the Peace Corps as basic compensation. Tax forms for students These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. Tax forms for students Leave allowances. Tax forms for students Readjustment allowances or termination payments. Tax forms for students These are considered received by you when credited to your account. Tax forms for students Example. Tax forms for students Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. Tax forms for students Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. Tax forms for students Volunteers in Service to America (VISTA). Tax forms for students   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. Tax forms for students National Senior Services Corps programs. Tax forms for students   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. Tax forms for students Retired Senior Volunteer Program (RSVP). Tax forms for students Foster Grandparent Program. Tax forms for students Senior Companion Program. Tax forms for students Service Corps of Retired Executives (SCORE). Tax forms for students   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. Tax forms for students Volunteer tax counseling. Tax forms for students   Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE). Tax forms for students   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. Tax forms for students See chapter 24. Tax forms for students Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. Tax forms for students In most cases, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. Tax forms for students If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. Tax forms for students However, certain payments may not be taxable to you. Tax forms for students Your employer should be able to give you specific details about your pension plan and tell you the amount you paid for your disability pension. Tax forms for students In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. Tax forms for students Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. Tax forms for students Cost paid by you. Tax forms for students   If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. Tax forms for students If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. Tax forms for students See Reimbursement in a later year in chapter 21. Tax forms for students Cafeteria plans. Tax forms for students   In most cases, if you are covered by an accident or health insurance plan through a cafeteria plan, and the amount of the insurance premiums was not included in your income, you are not considered to have paid the premiums and you must include any benefits you receive in your income. Tax forms for students If the amount of the premiums was included in your income, you are considered to have paid the premiums, and any benefits you receive are not taxable. Tax forms for students Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. Tax forms for students You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. Tax forms for students Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. Tax forms for students You may be entitled to a tax credit if you were permanently and totally disabled when you retired. Tax forms for students For information on this credit and the definition of permanent and total disability, see chapter 33. Tax forms for students Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. Tax forms for students Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. Tax forms for students The rules for reporting pensions are explained in How To Report in chapter 10. Tax forms for students For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. Tax forms for students Retirement and profit-sharing plans. Tax forms for students   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. Tax forms for students The payments must be reported as a pension or annuity. Tax forms for students For more information on pensions, see chapter 10. Tax forms for students Accrued leave payment. Tax forms for students   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. Tax forms for students The payment is not a disability payment. Tax forms for students Include it in your income in the tax year you receive it. Tax forms for students Military and Government Disability Pensions Certain military and government disability pensions are not taxable. Tax forms for students Service-connected disability. Tax forms for students   You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services. Tax forms for students The armed forces of any country. Tax forms for students The National Oceanic and Atmospheric Administration. Tax forms for students The Public Health Service. Tax forms for students The Foreign Service. Tax forms for students Conditions for exclusion. Tax forms for students   Do not include the disability payments in your income if any of the following conditions apply. Tax forms for students You were entitled to receive a disability payment before September 25, 1975. Tax forms for students You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975. Tax forms for students You receive the disability payments for a combat-related injury. Tax forms for students This is a personal injury or sickness that Results directly from armed conflict, Takes place while you are engaged in extra-hazardous service, Takes place under conditions simulating war, including training exercises such as maneuvers, or Is caused by an instrumentality of war. Tax forms for students You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. Tax forms for students Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. Tax forms for students Pension based on years of service. Tax forms for students   If you receive a disability pension based on years of service, in most cases you must include it in your income. Tax forms for students However, if the pension qualifies for the exclusion for a service-connected disability (discussed earlier), do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. Tax forms for students You must include the rest of your pension in your income. Tax forms for students Retroactive VA determination. Tax forms for students   If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. Tax forms for students You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period. Tax forms for students You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. Tax forms for students The letter must show the amount withheld and the effective date of the benefit. Tax forms for students   If you receive a lump-sum disability severance payment and are later awarded VA disability benefits, exclude 100% of the severance benefit from your income. Tax forms for students However, you must include in your income any lump-sum readjustment or other nondisability severance payment you received on release from active duty, even if you are later given a retroactive disability rating by the VA. Tax forms for students Special statute of limitations. Tax forms for students   In most cases, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed. Tax forms for students However, if you receive a retroactive service-connected disability rating determination, the statute of limitations is extended by a 1-year period beginning on the date of the determination. Tax forms for students This 1-year extended period applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination. Tax forms for students Example. Tax forms for students You retired in 2007 and receive a pension based on your years of service. Tax forms for students On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. Tax forms for students Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. Tax forms for students However, under the special limitation period, you can also file a claim for 2009 as long as you file the claim by August 1, 2014. Tax forms for students You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. Tax forms for students Terrorist attack or military action. Tax forms for students   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. Tax forms for students Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. Tax forms for students Amounts you receive from them (other than policyholder dividends or premium refunds) in most cases are excludable from income as amounts received for personal injury or sickness. Tax forms for students To claim an exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract, you must file Form 8853 with your return. Tax forms for students A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. Tax forms for students The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits, and In most cases, not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. Tax forms for students Qualified long-term care services. Tax forms for students   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance and personal care services, and Required by a chronically ill individual and provided pursuant to a plan of care as prescribed by a licensed health care practitioner. Tax forms for students Chronically ill individual. Tax forms for students   A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: An individual who, for at least 90 days, is unable to perform at least two activities of daily living without substantial assistance due to loss of functional capacity. Tax forms for students Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Tax forms for students An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Tax forms for students Limit on exclusion. Tax forms for students   You generally can exclude from gross income up to $320 a day for 2013. Tax forms for students See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. Tax forms for students Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. Tax forms for students The exemption also applies to your survivors. Tax forms for students The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. Tax forms for students If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Tax forms for students For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Tax forms for students Return to work. Tax forms for students    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. Tax forms for students Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. Tax forms for students Railroad sick pay. Tax forms for students    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. Tax forms for students However, do not include them in your income if they are for an on-the-job injury. Tax forms for students   If you received income because of a disability, see Disability Pensions , earlier. Tax forms for students Federal Employees' Compensation Act (FECA). Tax forms for students   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. Tax forms for students However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. Tax forms for students Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. Tax forms for students Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. Tax forms for students    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. Tax forms for students For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. Tax forms for students    You can deduct the amount you spend to buy back sick leave for an earlier year to be eligible for nontaxable FECA benefits for that period. Tax forms for students It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). Tax forms for students If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. Tax forms for students Do not deduct it separately. Tax forms for students Other compensation. Tax forms for students   Many other amounts you receive as compensation for sickness or injury are not taxable. Tax forms for students These include the following amounts. Tax forms for students Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. Tax forms for students Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. Tax forms for students Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. Tax forms for students Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. Tax forms for students This compensation must be based only on the injury and not on the period of your absence from work. Tax forms for students These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. Tax forms for students Reimbursement for medical care. Tax forms for students    A reimbursement for medical care is generally not taxable. Tax forms for students However, it may reduce your medical expense deduction. Tax forms for students For more information, see chapter 21. Tax forms for students Prev  Up  Next   Home   More Online Publications
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The Tax Forms For Students

Tax forms for students 21. Tax forms for students   Medical and Dental Expenses Table of Contents What's New Introduction Useful Items - You may want to see: What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. Tax forms for students How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Yourself Spouse Dependent Decedent What Medical Expenses Are Includible?Insurance Premiums Meals and Lodging Transportation Disabled Dependent Care Expenses How Do You Treat Reimbursements?Insurance Reimbursement Damages for Personal Injuries How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons What's New Medical and dental expenses. Tax forms for students  Beginning January 1, 2013, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted gross income (AGI) (7. Tax forms for students 5% if either you or your spouse is age 65 or older). Tax forms for students Standard mileage rate. Tax forms for students  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. Tax forms for students See Transportation under What Medical Expenses Are Includible. Tax forms for students Introduction This chapter will help you determine the following. Tax forms for students What medical expenses are. Tax forms for students What expenses you can include this year. Tax forms for students How much of the expenses you can deduct. Tax forms for students Whose medical expenses you can include. Tax forms for students What medical expenses are includible. Tax forms for students How to treat reimbursements. Tax forms for students How to report the deduction on your tax return. Tax forms for students How to report impairment-related work expenses. Tax forms for students How to report health insurance costs if you are self-employed. Tax forms for students Useful Items - You may want to see: Publications 502 Medical and Dental Expenses 969 Health Savings Accounts and Other Tax-Favored Health Plans Form (and Instructions) Schedule A (Form 1040) Itemized Deductions What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Tax forms for students These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. Tax forms for students They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Tax forms for students Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Tax forms for students They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Tax forms for students Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Tax forms for students Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. Tax forms for students What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Tax forms for students If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Tax forms for students If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Tax forms for students If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Tax forms for students Separate returns. Tax forms for students   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Tax forms for students Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Tax forms for students Community property states. Tax forms for students   If you and your spouse live in a community property state and file separate returns, or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. Tax forms for students Each of you should include half the expenses. Tax forms for students If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. Tax forms for students If you live in a community property state, and are not filing a joint return, see Publication 555, Community Property. Tax forms for students How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Tax forms for students 5% of your AGI if either you or your spouse is age 65 or older)(Form 1040, line 38). Tax forms for students Example. Tax forms for students You are unmarried and under age 65 and your AGI is $40,000, 10% of which is $4,000. Tax forms for students You paid medical expenses of $2,500. Tax forms for students You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. Tax forms for students Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. Tax forms for students There are different rules for decedents and for individuals who are the subject of multiple support agreements. Tax forms for students See Support claimed under a multiple support agreement , later. Tax forms for students Yourself You can include medical expenses you paid for yourself. Tax forms for students Spouse You can include medical expenses you paid for your spouse. Tax forms for students To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. Tax forms for students Example 1. Tax forms for students Mary received medical treatment before she married Bill. Tax forms for students Bill paid for the treatment after they married. Tax forms for students Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. Tax forms for students If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Tax forms for students Mary would include the amounts she paid during the year in her separate return. Tax forms for students If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. Tax forms for students Example 2. Tax forms for students This year, John paid medical expenses for his wife Louise, who died last year. Tax forms for students John married Belle this year and they file a joint return. Tax forms for students Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. Tax forms for students Dependent You can include medical expenses you paid for your dependent. Tax forms for students For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. Tax forms for students A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. Tax forms for students The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. Tax forms for students S. Tax forms for students citizen or national, or a resident of the United States, Canada, or Mexico. Tax forms for students If your qualifying child was adopted, see Exception for adopted child , next. Tax forms for students You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Tax forms for students Exception for adopted child. Tax forms for students   If you are a U. Tax forms for students S. Tax forms for students citizen or U. Tax forms for students S. Tax forms for students national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. Tax forms for students S. Tax forms for students citizen or national or a resident of the United States, Canada, or Mexico. Tax forms for students Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, or, if he or she did, it was only to claim a refund. Tax forms for students Adopted child. Tax forms for students   A legally adopted child is treated as your own child. Tax forms for students This includes a child lawfully placed with you for legal adoption. Tax forms for students   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. Tax forms for students   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. Tax forms for students   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. Tax forms for students    You may be able to take an adoption credit for other expenses related to an adoption. Tax forms for students See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Tax forms for students Child of divorced or separated parents. Tax forms for students   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Tax forms for students Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. Tax forms for students This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). Tax forms for students Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of either of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child earlier) of any other person for 2013, and For whom you provided over half of the support in 2013. Tax forms for students But see Child of divorced or separated parents , earlier, and Support claimed under a multiple support agreement, next. Tax forms for students Support claimed under a multiple support agreement. Tax forms for students   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Tax forms for students A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Tax forms for students   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. Tax forms for students However, you can include the entire unreimbursed amount you paid for medical expenses. Tax forms for students Example. Tax forms for students You and your three brothers each provide one-fourth of your mother's total support. Tax forms for students Under a multiple support agreement, you treat your mother as your dependent. Tax forms for students You paid all of her medical expenses. Tax forms for students Your brothers reimbursed you for three-fourths of these expenses. Tax forms for students In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Tax forms for students Your brothers cannot include any part of the expenses. Tax forms for students However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. Tax forms for students Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. Tax forms for students This includes expenses for the decedent's spouse and dependents as well as for the decedent. Tax forms for students The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. Tax forms for students The expenses must be paid within the 1-year period beginning with the day after the date of death. Tax forms for students If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. Tax forms for students Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. Tax forms for students Amended returns and claims for refund are discussed in chapter 1. Tax forms for students What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. Tax forms for students The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. Tax forms for students What Medical Expenses Are Includible? Use Table 21-1, later, as a guide to determine which medical and dental expenses you can include on Schedule A (Form 1040). Tax forms for students This table does not include all possible medical expenses. Tax forms for students To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. Tax forms for students Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Tax forms for students Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). Tax forms for students See Qualified Long-Term Care Insurance Contracts in Publication 502. Tax forms for students If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Tax forms for students The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. Tax forms for students Note. Tax forms for students When figuring the amount of insurance premiums you can include in medical expenses on Schedule A, do not include any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Tax forms for students Also, do not include insurance premiums attributable to a nondependent child under age 27 if your premiums increased as a result of adding this child to your policy. Tax forms for students Employer-sponsored health insurance plan. Tax forms for students   Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included in box 1 of your Form W-2. Tax forms for students Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form W-2. Tax forms for students Example. Tax forms for students You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. Tax forms for students Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. Tax forms for students Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. Tax forms for students Long-term care services. Tax forms for students   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. Tax forms for students This amount will be reported as wages in box 1 of your Form W-2. Tax forms for students Health reimbursement arrangement (HRA). Tax forms for students   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. Tax forms for students This is because an HRA is funded solely by the employer. Tax forms for students Retired public safety officers. Tax forms for students   If you are a retired public safety officer, do not include as medical expenses any health or long-term care premiums that you elected to have paid with tax-free distributions from your retirement plan. Tax forms for students This applies only to distributions that would otherwise be included in income. Tax forms for students Medicare A. Tax forms for students   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. Tax forms for students The payroll tax paid for Medicare A is not a medical expense. Tax forms for students   If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. Tax forms for students In this situation you can include the premiums you paid for Medicare A as a medical expense. Tax forms for students Medicare B. Tax forms for students   Medicare B is supplemental medical insurance. Tax forms for students Premiums you pay for Medicare B are a medical expense. Tax forms for students Check the information you received from the Social Security Administration to find out your premium. Tax forms for students Medicare D. Tax forms for students    Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. Tax forms for students You can include as a medical expense premiums you pay for Medicare D. Tax forms for students Prepaid insurance premiums. Tax forms for students   Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Tax forms for students Unused sick leave used to pay premiums. Tax forms for students   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. Tax forms for students You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. Tax forms for students You can include this cost of continuing participation in the health plan as a medical expense. Tax forms for students   If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. Tax forms for students You cannot include this cost of continuing participation in that health plan as a medical expense. Tax forms for students Table 21-1. Tax forms for students Medical and Dental Expenses Checklist. Tax forms for students See Publication 502 for more information about these and other expenses. Tax forms for students You can include: You cannot include: Bandages Birth control pills prescribed by your doctor Body scan Braille books Breast pump and supplies Capital expenses for equipment or improvements to your home needed for medical care (see the worksheet in Publication 502) Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Fertility enhancement, certain procedures Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. Tax forms for students ) Lead-based paint removal Legal abortion Legal operation to prevent having children such as a vasectomy or tubal ligation Long-term care contracts, qualified Meals and lodging provided by a hospital during medical treatment Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Medical and hospital insurance premiums Nursing services Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Physical examination Pregnancy test kit Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services, below) Special items (artificial limbs, false teeth, eye-glasses, contact lenses, hearing aids, crutches, wheelchair, etc. Tax forms for students ) Special education for mentally or physically disabled persons Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services Weight-loss, certain expenses for obesity Baby sitting and childcare Bottled water Contributions to Archer MSAs (see Publication 969) Diaper service Expenses for your general health (even if following your doctor's advice) such as— —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pre-tax basis) Funeral, burial, or cremation expenses Health savings account payments for medical expenses Illegal operation, treatment, or medicine Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. Tax forms for students Maternity clothes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. Tax forms for students , unless recommended by a medical practitioner as a treatment for a specific medical condition diagnosed by a physician Surgery for purely cosmetic reasons Toothpaste, toiletries, cosmetics, etc. Tax forms for students Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to get medical care. Tax forms for students See Nursing home , later. Tax forms for students You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. Tax forms for students You can include the cost of such lodging while away from home if all of the following requirements are met. Tax forms for students The lodging is primarily for and essential to medical care. Tax forms for students The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Tax forms for students The lodging is not lavish or extravagant under the circumstances. Tax forms for students There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Tax forms for students The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. Tax forms for students You can include lodging for a person traveling with the person receiving the medical care. Tax forms for students For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Tax forms for students Meals are not included. Tax forms for students Nursing home. Tax forms for students   You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. Tax forms for students This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Tax forms for students   Do not include the cost of meals and lodging if the reason for being in the home is personal. Tax forms for students You can, however, include in medical expenses the part of the cost that is for medical or nursing care. Tax forms for students Transportation Include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Tax forms for students You can include: Bus, taxi, train, or plane fares, or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. Tax forms for students Car expenses. Tax forms for students   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use your car for medical reasons. Tax forms for students You cannot include depreciation, insurance, general repair, or maintenance expenses. Tax forms for students   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents per mile. Tax forms for students    You can also include parking fees and tolls. Tax forms for students You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. Tax forms for students Example. Tax forms for students In 2013, Bill Jones drove 2,800 miles for medical reasons. Tax forms for students He spent $500 for gas, $30 for oil, and $100 for tolls and parking. Tax forms for students He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. Tax forms for students He figures the actual expenses first. Tax forms for students He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. Tax forms for students He then figures the standard mileage amount. Tax forms for students He multiplies 2,800 miles by 24 cents a mile for a total of $672. Tax forms for students He then adds the $100 tolls and parking for a total of $772. Tax forms for students Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. Tax forms for students Transportation expenses you cannot include. Tax forms for students   You cannot include in medical expenses the cost of transportation in the following situations. Tax forms for students Going to and from work, even if your condition requires an unusual means of transportation. Tax forms for students Travel for purely personal reasons to another city for an operation or other medical care. Tax forms for students Travel that is merely for the general improvement of one's health. Tax forms for students The costs of operating a specially equipped car for other than medical reasons. Tax forms for students Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. Tax forms for students (See chapter 32 and Publication 503, Child and Dependent Care Expenses. Tax forms for students ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. Tax forms for students How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the taxable year for which you received no insurance or other reimbursement. Tax forms for students Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. Tax forms for students This includes payments from Medicare. Tax forms for students Even if a policy provides reimbursement for only certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. Tax forms for students Example. Tax forms for students You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. Tax forms for students The insurance you receive for the hospital and doctors' bills is more than their charges. Tax forms for students In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. Tax forms for students Health reimbursement arrangement (HRA). Tax forms for students   A health reimbursement arrangement is an employer-funded plan that reimburses employees for medical care expenses and allows unused amounts to be carried forward. Tax forms for students An HRA is funded solely by the employer and the reimbursements for medical expenses, up to a maximum dollar amount for a coverage period, are not included in your income. Tax forms for students Other reimbursements. Tax forms for students   Generally, you do not reduce medical expenses by payments you receive for: Permanent loss or loss of use of a member or function of the body (loss of limb, sight, hearing, etc. Tax forms for students ) or disfigurement to the extent the payment is based on the nature of the injury without regard to the amount of time lost from work, or Loss of earnings. Tax forms for students   You must, however, reduce your medical expenses by any part of these payments that is designated for medical costs. Tax forms for students See How Do You Figure and Report the Deduction on Your Tax Return , later. Tax forms for students   For how to treat damages received for personal injury or sickness, see Damages for Personal Injuries , later. Tax forms for students You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year. Tax forms for students Excess reimbursement. Tax forms for students   If you are reimbursed more than your medical expenses, you may have to include the excess in income. Tax forms for students You may want to use Figure 21-A to help you decide if any of your reimbursement is taxable. Tax forms for students Premiums paid by you. Tax forms for students   If you pay either the entire premium for your medical insurance or all of the costs of a plan similar to medical insurance and your insurance payments or other reimbursements are more than your total medical expenses for the year, you have an excess reimbursement. Tax forms for students Generally, you do not include the excess reimbursement in your gross income. Tax forms for students Premiums paid by you and your employer. Tax forms for students   If both you and your employer contribute to your medical insurance plan and your employer's contributions are not included in your gross income, you must include in your gross income the part of your excess reimbursement that is from your employer's contribution. Tax forms for students   See Publication 502 to figure the amount of the excess reimbursement you must include in gross income. Tax forms for students Reimbursement in a later year. Tax forms for students   If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you generally must report the reimbursement as income up to the amount you previously deducted as medical expenses. Tax forms for students   However, do not report as income the amount of reimbursement you received up to the amount of your medical deductions that did not reduce your tax for the earlier year. Tax forms for students For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Itemized Deduction Recoveries in chapter 12. Tax forms for students Figure 21-A. Tax forms for students Is Your Excess Medical Reimbursement Taxable? Please click here for the text description of the image. Tax forms for students Figure 21-A. Tax forms for students Is Your Excess Medical Reimbursement Taxable? Medical expenses not deducted. Tax forms for students   If you did not deduct a medical expense in the year you paid it because your medical expenses were not more than 10% of your AGI (7. Tax forms for students 5% of your AGI if either you or your spouse was age 65 or older), or because you did not itemize deductions, do not include the reimbursement up to the amount of the expense in income. Tax forms for students However, if the reimbursement is more than the expense, see Excess reimbursement , earlier. Tax forms for students Example. Tax forms for students For 2013, you were unmarried and under age 65 and you had medical expenses of $500. Tax forms for students You cannot deduct the $500 because it is less than 10% of your AGI. Tax forms for students If, in a later year, you are reimbursed for any of the $500 in medical expenses, you do not include the amount reimbursed in your gross income. Tax forms for students Damages for Personal Injuries If you receive an amount in settlement of a personal injury suit, part of that award may be for medical expenses that you deducted in an earlier year. Tax forms for students If it is, you must include that part in your income in the year you receive it to the extent it reduced your taxable income in the earlier year. Tax forms for students See Reimbursement in a Later Year , discussed under How Do You Treat Reimbursements, earlier. Tax forms for students Future medical expenses. Tax forms for students   If you receive an amount in settlement of a damage suit for personal injuries, part of that award may be for future medical expenses. Tax forms for students If it is, you must reduce any future medical expenses for these injuries until the amount you received has been completely used. Tax forms for students How Do You Figure and Report the Deduction on Your Tax Return? Once you have determined which medical expenses you can include, you figure and report the deduction on your tax return. Tax forms for students What Tax Form Do You Use? You figure your medical expense deduction on Schedule A (Form 1040). Tax forms for students You cannot claim medical expenses on Form 1040A or Form 1040EZ. Tax forms for students If you need more information on itemized deductions or you are not sure if you can itemize, see chapter 20. Tax forms for students Enter the amount you paid for medical and dental expenses on Schedule A (Form 1040). Tax forms for students This should be your expenses that were not reimbursed by insurance or any other sources. Tax forms for students Generally, you can deduct only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Tax forms for students 5% if either you or your spouse was age 65 or older) shown on line 38, Form 1040. Tax forms for students Impairment-Related Work Expenses If you are a person with a disability, you can take a business deduction for expenses that are necessary for you to be able to work. Tax forms for students If you take a business deduction for impairment-related work expenses, do not take a medical deduction for the same expenses. Tax forms for students You have a disability if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Tax forms for students Impairment-related expenses defined. Tax forms for students   Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Tax forms for students Where to report. Tax forms for students   If you are self-employed, deduct the business expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Tax forms for students   If you are an employee, complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Tax forms for students Enter on Schedule A (Form 1040), that part of the amount on Form 2106, or Form 2106-EZ, that is related to your impairment. Tax forms for students Enter the amount that is unrelated to your impairment also on Schedule A (Form 1040). Tax forms for students Your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. Tax forms for students Example. Tax forms for students You are blind. Tax forms for students You must use a reader to do your work. Tax forms for students You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Tax forms for students The reader's services are only for your work. Tax forms for students You can deduct your expenses for the reader as business expenses. Tax forms for students Health Insurance Costs for Self-Employed Persons If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and, your children who were under age 27 at the end of 2013. Tax forms for students For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. Tax forms for students The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business. Tax forms for students You cannot deduct payments for medical insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or, an employer of your dependent or your child under age 27 at the end of 2013. Tax forms for students You cannot deduct payments for a qualified long-term care insurance contract for any month in which you were eligible to participate in a long-term care insurance plan subsidized by your employer or your spouse's employer. Tax forms for students If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. Tax forms for students But if any of the following applies, do not use that worksheet. Tax forms for students You had more than one source of income subject to self-employment tax. Tax forms for students You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Tax forms for students You are using amounts paid for qualified long-term care insurance to figure the deduction. Tax forms for students If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction. Tax forms for students Note. Tax forms for students When figuring the amount you can deduct for insurance premiums, do not include any advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Tax forms for students If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, from the total insurance premiums you paid. Tax forms for students Do not include amounts paid for health insurance coverage with retirement plan distributions that were tax-free because you are a retired public safety officer. Tax forms for students Where to report. Tax forms for students    You take this deduction on Form 1040. Tax forms for students If you itemize your deductions and do not claim 100% of your self-employed health insurance on Form 1040, you can generally include any remaining premiums with all other medical expenses on Schedule A (Form 1040), subject to the 10% limit (7. Tax forms for students 5% if either you or your spouse was age 65 or older). Tax forms for students See Self-Employed Health Insurance Deduction in chapter 6 of Publication 535, Business Expenses, and Medical and Dental Expenses in the Instructions for Schedule A (Form 1040), for more information. Tax forms for students Prev  Up  Next   Home   More Online Publications