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Tax slayer 11. Tax slayer   Social Security and Equivalent Railroad Retirement Benefits Table of Contents Introduction Useful Items - You may want to see: Are Any of Your Benefits Taxable? How To Report Your BenefitsHow Much Is Taxable? Examples Deductions Related to Your BenefitsRepayments More Than Gross Benefits Introduction This chapter explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. Tax slayer It explains the following topics. Tax slayer How to figure whether your benefits are taxable. Tax slayer How to use the social security benefits worksheet (with examples). Tax slayer How to report your taxable benefits. Tax slayer How to treat repayments that are more than the benefits you received during the year. Tax slayer Social security benefits include monthly retirement, survivor, and disability benefits. Tax slayer They do not include supplemental security income (SSI) payments, which are not taxable. Tax slayer Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. Tax slayer They are commonly called the social security equivalent benefit (SSEB) portion of tier 1 benefits. Tax slayer If you received these benefits during 2013, you should have received a Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Payments by the Railroad Retirement Board. Tax slayer These forms show the amounts received and repaid, and taxes withheld for the year. Tax slayer You may receive more than one of these forms for the same year. Tax slayer You should add the amounts shown on all the Forms SSA-1099 and Forms RRB-1099 you receive for the year to determine the total amounts received and repaid, and taxes withheld for that year. Tax slayer See the Appendix at the end of Publication 915 for more information. Tax slayer Note. Tax slayer When the term “benefits” is used in this chapter, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. Tax slayer What is not covered in this chapter. Tax slayer   This chapter does not cover the tax rules for the following railroad retirement benefits. Tax slayer Non-social security equivalent benefit (NSSEB) portion of tier 1 benefits. Tax slayer Tier 2 benefits. Tax slayer Vested dual benefits. Tax slayer Supplemental annuity benefits. Tax slayer For information on these benefits, see Publication 575, Pension and Annuity Income. Tax slayer   This chapter does not cover the tax rules for social security benefits reported on Form SSA-1042S, Social Security Benefit Statement, or Form RRB-1042S, Statement for Nonresident Alien Recipients of: Payments by the Railroad Retirement Board. Tax slayer For information about these benefits, see Publication 519, U. Tax slayer S. Tax slayer Tax Guide for Aliens, and Publication 915, Social Security and Equivalent Railroad Retirement Benefits. Tax slayer   This chapter also does not cover the tax rules for foreign social security benefits. Tax slayer These benefits are taxable as annuities, unless they are exempt from U. Tax slayer S. Tax slayer tax or treated as a U. Tax slayer S. Tax slayer social security benefit under a tax treaty. Tax slayer Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 915 Social Security and Equivalent Railroad Retirement Benefits Forms (and Instructions) 1040-ES Estimated Tax for Individuals SSA-1099 Social Security Benefit Statement RRB-1099 Payments by the Railroad Retirement Board W-4V Voluntary Withholding Request Are Any of Your Benefits Taxable? To find out whether any of your benefits may be taxable, compare the base amount for your filing status with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. Tax slayer When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. Tax slayer S. Tax slayer savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned by bona fide residents of American Samoa or Puerto Rico. Tax slayer Children's benefits. Tax slayer   The rules in this chapter apply to benefits received by children. Tax slayer See Who is taxed , later. Tax slayer Figuring total income. Tax slayer   To figure the total of one-half of your benefits plus your other income, use Worksheet 11-1 later in this discussion. Tax slayer If the total is more than your base amount, part of your benefits may be taxable. Tax slayer    If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. Tax slayer Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. Tax slayer    If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. Tax slayer If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. Tax slayer Base amount. Tax slayer   Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er), $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $-0- if you are married filing separately and lived with your spouse at any time during 2013. Tax slayer Worksheet 11-1. Tax slayer   You can use Worksheet 11-1 to figure the amount of income to compare with your base amount. Tax slayer This is a quick way to check whether some of your benefits may be taxable. Tax slayer Worksheet 11-1. Tax slayer A Quick Way To Check if Your Benefits May Be Taxable A. Tax slayer Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Tax slayer Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. Tax slayer (If you received more than one form, combine the amounts from box 5 and enter the total. Tax slayer ) A. Tax slayer   Note. Tax slayer If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. Tax slayer B. Tax slayer Enter one-half of the amount on line A B. Tax slayer   C. Tax slayer Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Tax slayer   D. Tax slayer Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. Tax slayer   E. Tax slayer Add lines B, C, and D E. Tax slayer   Note. Tax slayer Compare the amount on line E to your base amount for your filing status. Tax slayer If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. Tax slayer If the amount on line E is more than your base amount, some of your benefits may be taxable. Tax slayer You need to complete Worksheet 1 in Publication 915 (or the Social Security Benefits Worksheet in your tax form instructions). Tax slayer If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits. Tax slayer Example. Tax slayer You and your spouse (both over 65) are filing a joint return for 2013 and you both received social security benefits during the year. Tax slayer In January 2014, you received a Form SSA-1099 showing net benefits of $7,500 in box 5. Tax slayer Your spouse received a Form SSA-1099 showing net benefits of $3,500 in box 5. Tax slayer You also received a taxable pension of $22,800 and interest income of $500. Tax slayer You did not have any tax-exempt interest income. Tax slayer Your benefits are not taxable for 2013 because your income, as figured in Worksheet 11-1, is not more than your base amount ($32,000) for married filing jointly. Tax slayer Even though none of your benefits are taxable, you must file a return for 2013 because your taxable gross income ($23,300) exceeds the minimum filing requirement amount for your filing status. Tax slayer Filled-in Worksheet 11-1. Tax slayer A Quick Way To Check if Your Benefits May Be Taxable A. Tax slayer Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. Tax slayer Include the full amount of any lump-sum benefit payments received in 2013, for 2013 and earlier years. Tax slayer (If you received more than one form, combine the amounts from box 5 and enter the total. Tax slayer ) A. Tax slayer $11,000 Note. Tax slayer If the amount on line A is zero or less, stop here; none of your benefits are taxable this year. Tax slayer B. Tax slayer Enter one-half of the amount on line A B. Tax slayer 5,500 C. Tax slayer Enter your taxable pensions, wages, interest, dividends, and other taxable income C. Tax slayer 23,300 D. Tax slayer Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier) D. Tax slayer -0- E. Tax slayer Add lines B, C, and D E. Tax slayer $28,800 Note. Tax slayer Compare the amount on line E to your base amount for your filing status. Tax slayer If the amount on line E equals or is less than the base amount for your filing status, none of your benefits are taxable this year. Tax slayer If the amount on line E is more than your base amount, some of your benefits may be taxable. Tax slayer You need to complete Worksheet 1 in Publication 915 (or the Social Security Benefits Worksheet in your tax form instructions). Tax slayer If none of your benefits are taxable, but you otherwise must file a tax return, see Benefits not taxable , later, under How To Report Your Benefits. Tax slayer Who is taxed. Tax slayer   Benefits are included in the taxable income (to the extent they are taxable) of the person who has the legal right to receive the benefits. Tax slayer For example, if you and your child receive benefits, but the check for your child is made out in your name, you must use only your part of the benefits to see whether any benefits are taxable to you. Tax slayer One-half of the part that belongs to your child must be added to your child's other income to see whether any of those benefits are taxable to your child. Tax slayer Repayment of benefits. Tax slayer   Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. Tax slayer It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. Tax slayer If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. Tax slayer   Your gross benefits are shown in box 3 of Form SSA-1099 or RRB-1099. Tax slayer Your repayments are shown in box 4. Tax slayer The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). Tax slayer Use the amount in box 5 to figure whether any of your benefits are taxable. Tax slayer Tax withholding and estimated tax. Tax slayer   You can choose to have federal income tax withheld from your social security benefits and/or the SSEB portion of your tier 1 railroad retirement benefits. Tax slayer If you choose to do this, you must complete a Form W-4V. Tax slayer   If you do not choose to have income tax withheld, you may have to request additional withholding from other income or pay estimated tax during the year. Tax slayer For details, see Publication 505 or the instructions for Form 1040-ES. Tax slayer How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040 or Form 1040A. Tax slayer You cannot use Form 1040EZ. Tax slayer Reporting on Form 1040. Tax slayer   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 20a and the taxable part on line 20b. Tax slayer If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. Tax slayer Reporting on Form 1040A. Tax slayer   Report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on line 14a and the taxable part on line 14b. Tax slayer If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. Tax slayer Benefits not taxable. Tax slayer   If you are filing Form 1040EZ, do not report any benefits on your tax return. Tax slayer If you are filing Form 1040 or Form 1040A, report your net benefits (the total amount from box 5 of all your Forms SSA-1099 and Forms RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. Tax slayer Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax slayer If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax slayer How Much Is Taxable? If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Tax slayer Generally, the higher that total amount, the greater the taxable part of your benefits. Tax slayer Maximum taxable part. Tax slayer   Generally, up to 50% of your benefits will be taxable. Tax slayer However, up to 85% of your benefits can be taxable if either of the following situations applies to you. Tax slayer The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). Tax slayer You are married filing separately and lived with your spouse at any time during 2013. Tax slayer Which worksheet to use. Tax slayer   A worksheet you can use to figure your taxable benefits is in the instructions for your Form 1040 or Form 1040A. Tax slayer You can use either that worksheet or Worksheet 1 in Publication 915, unless any of the following situations applies to you. Tax slayer You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse is covered by a retirement plan at work. Tax slayer In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. Tax slayer Situation (1) does not apply and you take an exclusion for interest from qualified U. Tax slayer S. Tax slayer savings bonds (Form 8815), for adoption benefits (Form 8839), for foreign earned income or housing (Form 2555 or Form 2555-EZ), or for income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. Tax slayer In this situation, you must use Worksheet 1 in Publication 915 to figure your taxable benefits. Tax slayer You received a lump-sum payment for an earlier year. Tax slayer In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. Tax slayer See Lump-sum election next. Tax slayer Lump-sum election. Tax slayer   You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. Tax slayer    This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. Tax slayer No part of the lump-sum death benefit is subject to tax. Tax slayer   Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. Tax slayer However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. Tax slayer You can elect this method if it lowers your taxable benefits. Tax slayer Making the election. Tax slayer   If you received a lump-sum benefit payment in 2013 that includes benefits for one or more earlier years, follow the instructions in Publication 915 under Lump-Sum Election to see whether making the election will lower your taxable benefits. Tax slayer That discussion also explains how to make the election. Tax slayer    Because the earlier year's taxable benefits are included in your 2013 income, no adjustment is made to the earlier year's return. Tax slayer Do not file an amended return for the earlier year. Tax slayer Examples The following are a few examples you can use as a guide to figure the taxable part of your benefits. Tax slayer Example 1. Tax slayer George White is single and files Form 1040 for 2013. Tax slayer He received the following income in 2013: Fully taxable pension $18,600 Wages from part-time job 9,400 Taxable interest income 990 Total $28,990 George also received social security benefits during 2013. Tax slayer The Form SSA-1099 he received in January 2014 shows $5,980 in box 5. Tax slayer To figure his taxable benefits, George completes the worksheet shown here. Tax slayer Filled-in Worksheet 1. Tax slayer Figuring Your Taxable Benefits 1. Tax slayer Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax slayer Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $5,980 2. Tax slayer Enter one-half of line 1 2,990 3. Tax slayer Combine the amounts from:     Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21. Tax slayer     Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 28,990 4. Tax slayer Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-       5. Tax slayer Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico -0-       6. Tax slayer Combine lines 2, 3, 4, and 5 31,980 7. Tax slayer Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax slayer     Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 -0- 8. Tax slayer Is the amount on line 7 less than the amount on line 6?     No. Tax slayer None of your social security benefits are taxable. Tax slayer Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax slayer   Yes. Tax slayer Subtract line 7 from line 6 31,980 9. Tax slayer If you are: Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 25,000   Note. Tax slayer If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax slayer 85) and enter the result on line 17. Tax slayer Then go to line 18. Tax slayer   10. Tax slayer Is the amount on line 9 less than the amount on line 8?     No. Tax slayer None of your benefits are taxable. Tax slayer Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax slayer If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax slayer     Yes. Tax slayer Subtract line 9 from line 8 6,980 11. Tax slayer Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 9,000 12. Tax slayer Subtract line 11 from line 10. Tax slayer If zero or less, enter -0- -0- 13. Tax slayer Enter the smaller of line 10 or line 11 6,980 14. Tax slayer Enter one-half of line 13 3,490 15. Tax slayer Enter the smaller of line 2 or line 14 2,990 16. Tax slayer Multiply line 12 by 85% (. Tax slayer 85). Tax slayer If line 12 is zero, enter -0- -0- 17. Tax slayer Add lines 15 and 16 2,990 18. Tax slayer Multiply line 1 by 85% (. Tax slayer 85) 5,083 19. Tax slayer Taxable benefits. Tax slayer Enter the smaller of line 17 or line 18. Tax slayer Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b $2,990 The amount on line 19 of George's worksheet shows that $2,990 of his social security benefits is taxable. Tax slayer On line 20a of his Form 1040, George enters his net benefits of $5,980. Tax slayer On line 20b, he enters his taxable benefits of $2,990. Tax slayer Example 2. Tax slayer Ray and Alice Hopkins file a joint return on Form 1040A for 2013. Tax slayer Ray is retired and received a fully taxable pension of $15,500. Tax slayer He also received social security benefits, and his Form SSA-1099 for 2013 shows net benefits of $5,600 in box 5. Tax slayer Alice worked during the year and had wages of $14,000. Tax slayer She made a deductible payment to her IRA account of $1,000. Tax slayer Ray and Alice have two savings accounts with a total of $250 in taxable interest income. Tax slayer They complete Worksheet 1, entering $29,750 ($15,500 + $14,000 + $250) on line 3. Tax slayer They find none of Ray's social security benefits are taxable. Tax slayer On Form 1040A, they enter $5,600 on line 14a and -0- on line 14b. Tax slayer Filled-in Worksheet 1. Tax slayer Figuring Your Taxable Benefits 1. Tax slayer Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax slayer Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $5,600 2. Tax slayer Enter one-half of line 1 2,800 3. Tax slayer Combine the amounts from:     Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21. Tax slayer     Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 29,750 4. Tax slayer Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-       5. Tax slayer Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico -0-       6. Tax slayer Combine lines 2, 3, 4, and 5 32,550 7. Tax slayer Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax slayer     Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 1,000 8. Tax slayer Is the amount on line 7 less than the amount on line 6?     No. Tax slayer None of your social security benefits are taxable. Tax slayer Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax slayer   Yes. Tax slayer Subtract line 7 from line 6 31,550 9. Tax slayer If you are: Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 32,000   Note. Tax slayer If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax slayer 85) and enter the result on line 17. Tax slayer Then go to line 18. Tax slayer   10. Tax slayer Is the amount on line 9 less than the amount on line 8?     No. Tax slayer None of your benefits are taxable. Tax slayer Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax slayer If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax slayer     Yes. Tax slayer Subtract line 9 from line 8   11. Tax slayer Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013   12. Tax slayer Subtract line 11 from line 10. Tax slayer If zero or less, enter -0-   13. Tax slayer Enter the smaller of line 10 or line 11   14. Tax slayer Enter one-half of line 13   15. Tax slayer Enter the smaller of line 2 or line 14   16. Tax slayer Multiply line 12 by 85% (. Tax slayer 85). Tax slayer If line 12 is zero, enter -0-   17. Tax slayer Add lines 15 and 16   18. Tax slayer Multiply line 1 by 85% (. Tax slayer 85)   19. Tax slayer Taxable benefits. Tax slayer Enter the smaller of line 17 or line 18. Tax slayer Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b   Example 3. Tax slayer Joe and Betty Johnson file a joint return on Form 1040 for 2013. Tax slayer Joe is a retired railroad worker and in 2013 received the social security equivalent benefit (SSEB) portion of tier 1 railroad retirement benefits. Tax slayer Joe's Form RRB-1099 shows $10,000 in box 5. Tax slayer Betty is a retired government worker and receives a fully taxable pension of $38,000. Tax slayer They had $2,300 in taxable interest income plus interest of $200 on a qualified U. Tax slayer S. Tax slayer savings bond. Tax slayer The savings bond interest qualified for the exclusion. Tax slayer They figure their taxable benefits by completing Worksheet 1. Tax slayer Because they have qualified U. Tax slayer S. Tax slayer savings bond interest, they follow the note at the beginning of the worksheet and use the amount from line 2 of their Schedule B (Form 1040A or 1040) on line 3 of the worksheet instead of the amount from line 8a of their Form 1040. Tax slayer On line 3 of the worksheet, they enter $40,500 ($38,000 + $2,500). Tax slayer Filled-in Worksheet 1. Tax slayer Figuring Your Taxable Benefits Before you begin: • If you are married filing separately and you lived apart from your spouse for all of 2013, enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. Tax slayer • Do not use this worksheet if you repaid benefits in 2013 and your total repayments (box 4 of Forms SSA-1099 and RRB-1099) were more than your gross benefits for 2013 (box 3 of Forms SSA-1099 and RRB-1099). Tax slayer None of your benefits are taxable for 2013. Tax slayer For more information, see Repayments More Than Gross Benefits. Tax slayer • If you are filing Form 8815, Exclusion of Interest From Series EE and I U. Tax slayer S. Tax slayer Savings Bonds Issued After 1989, do not include the amount from line 8a of Form 1040 or Form 1040A on line 3 of this worksheet. Tax slayer Instead, include the amount from Schedule B (Form 1040A or 1040), line 2. Tax slayer 1. Tax slayer Enter the total amount from box 5 of ALL your Forms SSA-1099 and RRB-1099. Tax slayer Also enter this amount on Form 1040, line 20a, or Form 1040A, line 14a $10,000 2. Tax slayer Enter one-half of line 1 5,000 3. Tax slayer Combine the amounts from:     Form 1040: Lines 7, 8a, 9a, 10 through 14, 15b, 16b, 17 through 19, and 21. Tax slayer     Form 1040A: Lines 7, 8a, 9a, 10, 11b, 12b, and 13 40,500 4. Tax slayer Enter the amount, if any, from Form 1040 or 1040A, line 8b -0-       5. Tax slayer Enter the total of any exclusions/adjustments for: Adoption benefits (Form 8839, line 28), Foreign earned income or housing (Form 2555, lines 45 and 50, or Form 2555-EZ, line 18), and Certain income of bona fide residents of American Samoa (Form 4563, line 15) or Puerto Rico -0-       6. Tax slayer Combine lines 2, 3, 4, and 5 45,500 7. Tax slayer Form 1040 filers: Enter the amount from Form 1040, lines 23 through 32, and any write-in adjustments you entered on the dotted line next to line 36. Tax slayer     Form 1040A filers: Enter the amount from Form 1040A, lines 16 and 17 -0- 8. Tax slayer Is the amount on line 7 less than the amount on line 6?     No. Tax slayer None of your social security benefits are taxable. Tax slayer Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. Tax slayer   Yes. Tax slayer Subtract line 7 from line 6 45,500 9. Tax slayer If you are: Married filing jointly, enter $32,000 Single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013, enter $25,000 32,000   Note. Tax slayer If you are married filing separately and you lived with your spouse at any time in 2013, skip lines 9 through 16; multiply line 8 by 85% (. Tax slayer 85) and enter the result on line 17. Tax slayer Then go to line 18. Tax slayer   10. Tax slayer Is the amount on line 9 less than the amount on line 8?     No. Tax slayer None of your benefits are taxable. Tax slayer Enter -0- on Form 1040, line 20b, or on Form 1040A, line 14b. Tax slayer If you are married filing separately and you lived apart from your spouse for all of 2013, be sure you entered “D” to the right of the word “benefits” on Form 1040, line 20a, or on Form 1040A, line 14a. Tax slayer     Yes. Tax slayer Subtract line 9 from line 8 13,500 11. Tax slayer Enter $12,000 if married filing jointly; $9,000 if single, head of household, qualifying widow(er), or married filing separately and you lived apart from your spouse for all of 2013 12,000 12. Tax slayer Subtract line 11 from line 10. Tax slayer If zero or less, enter -0- 1,500 13. Tax slayer Enter the smaller of line 10 or line 11 12,000 14. Tax slayer Enter one-half of line 13 6,000 15. Tax slayer Enter the smaller of line 2 or line 14 5,000 16. Tax slayer Multiply line 12 by 85% (. Tax slayer 85). Tax slayer If line 12 is zero, enter -0- 1,275 17. Tax slayer Add lines 15 and 16 6,275 18. Tax slayer Multiply line 1 by 85% (. Tax slayer 85) 8,500 19. Tax slayer Taxable benefits. Tax slayer Enter the smaller of line 17 or line 18. Tax slayer Also enter this amount on Form 1040, line 20b, or Form 1040A, line 14b $6,275 More than 50% of Joe's net benefits are taxable because the income on line 8 of the worksheet ($45,500) is more than $44,000. Tax slayer Joe and Betty enter $10,000 on Form 1040, line 20a, and $6,275 on Form 1040, line 20b. Tax slayer Deductions Related to Your Benefits You may be entitled to deduct certain amounts related to the benefits you receive. Tax slayer Disability payments. Tax slayer   You may have received disability payments from your employer or an insurance company that you included as income on your tax return in an earlier year. Tax slayer If you received a lump-sum payment from SSA or RRB, and you had to repay the employer or insurance company for the disability payments, you can take an itemized deduction for the part of the payments you included in gross income in the earlier year. Tax slayer If the amount you repay is more than $3,000, you may be able to claim a tax credit instead. Tax slayer Claim the deduction or credit in the same way explained under Repayments More Than Gross Benefits , later. Tax slayer Legal expenses. Tax slayer   You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax. Tax slayer   Legal expenses for collecting the taxable part of your benefits are deductible as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Tax slayer Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. Tax slayer If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. Tax slayer Do not use a worksheet in this case. Tax slayer If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. Tax slayer If you have any questions about this negative figure, contact your local SSA office or your local RRB field office. Tax slayer Joint return. Tax slayer   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5, but your spouse's does not, subtract the amount in box 5 of your form from the amount in box 5 of your spouse's form. Tax slayer You do this to get your net benefits when figuring if your combined benefits are taxable. Tax slayer Example. Tax slayer John and Mary file a joint return for 2013. Tax slayer John received Form SSA-1099 showing $3,000 in box 5. Tax slayer Mary also received Form SSA-1099 and the amount in box 5 was ($500). Tax slayer John and Mary will use $2,500 ($3,000 minus $500) as the amount of their net benefits when figuring if any of their combined benefits are taxable. Tax slayer Repayment of benefits received in an earlier year. Tax slayer   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. Tax slayer Deduction $3,000 or less. Tax slayer   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. Tax slayer Claim it on Schedule A (Form 1040), line 23. Tax slayer Deduction more than $3,000. Tax slayer    If this deduction is more than $3,000, you should figure your tax two ways: Figure your tax for 2013 with the itemized deduction included on Schedule A, line 28. Tax slayer Figure your tax for 2013 in the following steps. Tax slayer Figure the tax without the itemized deduction included on Schedule A, line 28. Tax slayer For each year after 1983 for which part of the negative figure represents a repayment of benefits, refigure your taxable benefits as if your total benefits for the year were reduced by that part of the negative figure. Tax slayer Then refigure the tax for that year. Tax slayer Subtract the total of the refigured tax amounts in (b) from the total of your actual tax amounts. Tax slayer Subtract the result in (c) from the result in (a). Tax slayer Compare the tax figured in methods (1) and (2). Tax slayer Your tax for 2013 is the smaller of the two amounts. Tax slayer If method (1) results in less tax, take the itemized deduction on Schedule A (Form 1040), line 28. Tax slayer If method (2) results in less tax, claim a credit for the amount from step 2(c) above on Form 1040, line 71. Tax slayer Check box d and enter “I. Tax slayer R. Tax slayer C. Tax slayer 1341” in the space next to that box. Tax slayer If both methods produce the same tax, deduct the repayment on Schedule A (Form 1040), line 28. Tax slayer Prev  Up  Next   Home   More Online Publications
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Seniors & Retirees

1040 Central
1040 Central has been updated for the last few weeks of Filing Season 2014.

Tax Scams/Consumer Alerts
The IRS urges taxpayers not to fall victim to tax scams. If it sounds too good to be true, it probably is.

Tax Counseling for the Elderly
The Tax Counseling for the Elderly Program provides free tax help to people aged 60 and older.

Tips for Seniors in Preparing their Taxes
Check here for tips on common pitfalls for seniors to watch for when preparing their individual tax returns.

Life Events That May Have Tax Consequences for Seniors and Retirees
Some events in the lives of seniors and retirees may affect their tax responsibilities. This page contains links to more information.

Are Your Social Security Benefits Taxable?
How much, if any, of your social security benefits are taxable depends on your total income and marital status.

Frequently Asked Questions for Seniors
This page highlights places to go for answers to questions frequently asked by seniors.

Products for Older Americans
This page contains links to several IRS products of interest to older Americans.

Page Last Reviewed or Updated: 28-Mar-2014

The Tax Slayer

Tax slayer Car Expenses Table of Contents Introduction Depreciation of CarSpecial Depreciation Allowance Depreciation Limit Amended Return Election Not To Claim Special Allowance If you purchased a car after September 10, 2001, for use in your business (or as an employee) and figure your deductible expenses using the actual car expense method, new law contains provisions that may affect your depreciation deduction for that car. Tax slayer Publication 463, Travel, Entertainment, Gift, and Car Expenses, contains information on figuring depreciation on your car. Tax slayer However, Publication 463 does not contain the new provisions because it was printed before the law was enacted. Tax slayer The new provisions are in the Supplement to Publication 463, which is reprinted below. Tax slayer Supplement to Publication 463 Travel, Entertainment, Gift, and Car Expenses   Introduction This supplemental publication is for taxpayers who purchased a car for business purposes after September 10, 2001, and figure their deductible expenses, including a deduction for depreciation, using the actual car expense method. Tax slayer After Publication 463 was printed, the Job Creation and Worker Assistance Act of 2002 was signed into law by the President. Tax slayer Certain provisions of this new law may reduce your taxes for 2001. Tax slayer The new law contains the following provisions. Tax slayer A new depreciation deduction, the special depreciation allowance. Tax slayer An increase in the limit on depreciation for any car for which you claim the new special depreciation allowance. Tax slayer If you have already filed your 2001 return, you may wish to file an amended return to claim any of these benefits. Tax slayer See Amended Return, later. Tax slayer Depreciation of Car If you used the actual car expense method to figure your deduction for a car you own and use in your business (or as an employee), you generally can claim a depreciation deduction. Tax slayer However, there is a limit on the depreciation deduction you can take for your car each year. Tax slayer See Depreciation Limit later. Tax slayer Special Depreciation Allowance The new law allows you to claim a special depreciation allowance. Tax slayer This special allowance is a deduction equal to 30% of the depreciable basis of qualified property. Tax slayer You figure the amount of the special depreciation allowance after any section 179 deduction you choose to claim, but before figuring your regular depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS). Tax slayer See Depreciation Deduction under Actual Car Expenses in chapter 4 of Publication 463 for information about MACRS. Tax slayer You can claim the special depreciation allowance only for the year the qualified property is placed in service. Tax slayer Qualified property. Tax slayer   Qualified property includes a car (any four-wheeled vehicle, including a truck or van not more than 6,000 pounds, that is made primarily for use on public streets, roads, and highways) that meets all of the following requirements. Tax slayer You bought it new. Tax slayer You bought it after September 10, 2001. Tax slayer (But a car is not qualified property if a binding written contract for you to buy the car was in effect before September 11, 2001. Tax slayer ) You began using it for business after September 10, 2001, and used it more than 50% in a qualified business use. Tax slayer Example. Tax slayer Bob bought a new car on October 15, 2001, for $20,000 and placed it in service immediately, using it 75% for business. Tax slayer Bob's car is qualified property. Tax slayer Bob chooses not to take a section 179 deduction for the car. Tax slayer He does claim the new special depreciation allowance. Tax slayer Bob first must figure the car's depreciable basis, which is $15,000 ($20,000 × . Tax slayer 75). Tax slayer He then figures the special depreciation allowance of $4,500 ($15,000 × . Tax slayer 30). Tax slayer The remaining depreciable basis of $10,500 ($15,000 - $4,500) is depreciated using MACRS (200% declining balance method, half-year convention) and results in a deduction of $2,100 ($10,500 × . Tax slayer 20), for a total depreciation deduction for 2001 of $6,600 ($4,500 + $2,100). Tax slayer However, Bob's depreciation deduction is limited to $5,745 ($7,660 × . Tax slayer 75), as discussed next. Tax slayer Depreciation Limit The limit on your depreciation deduction for 2001 is increased to $7,660 for a car that is qualified property (defined above) and for which you claim the special depreciation allowance. Tax slayer The limit is increased to $23,080 if the car is an electric car. Tax slayer The section 179 deduction is treated as depreciation for purposes of this limit. Tax slayer If you use a car less than 100% in your business or work, the limit is $7,660 (or $23,080 for an electric car) multiplied by the percentage of business and investment use during the year. Tax slayer For cars that do not qualify for (or for which you choose not to claim) the special depreciation allowance, the limit remains $3,060 ($9,280 for electric cars). Tax slayer Amended Return If you filed your 2001 calendar year return before June 1, 2002, and did not claim the new special depreciation allowance for a qualified car, you can claim it by filing an amended return on Form 1040X, Amended U. Tax slayer S. Tax slayer Individual Income Tax Return, by April 15, 2003. Tax slayer At the top of the Form 1040X, print “Filed pursuant to Revenue Procedure 2002–33. Tax slayer ” If you are an employee, attach Form 2106, Employee Business Expenses (revised March 2002). Tax slayer If you are self-employed, attach Form 4562, Depreciation and Amortization (revised March 2002). Tax slayer Or, you can claim the special depreciation allowance by filing Form 3115, Application for Change in Accounting Method, with your 2002 return. Tax slayer For details, see Revenue Procedure 2002–33. Tax slayer (But, filing Form 1040X for 2001 enables you to claim the special allowance earlier than attaching Form 3115 to your 2002 return. Tax slayer ) You cannot claim the special depreciation allowance on an amended return (or by using Form 3115) if you made, or are treated as having made, the election not to claim it described later. Tax slayer Example. Tax slayer The facts are the same as in the previous example except that Bob filed his original 2001 income tax return on April 15, 2002, and claimed a $3,000 ($20,000 x . Tax slayer 75 x . Tax slayer 20) depreciation deduction for his new car using MACRS. Tax slayer Bob now wishes to claim the special depreciation allowance for his new car on an amended 2001 return. Tax slayer Bob, who is an employee, files Form 1040X, by April 15, 2003, with an updated Form 2106 (revised March 2002) attached, increasing his total depreciation deduction to $5,745, as figured in the earlier example. Tax slayer Bob's new filled-in Form 2106 is shown later. Tax slayer Election Not To Claim Special Allowance You can elect not to claim the special depreciation allowance for a car by making a statement attached to, or written on, your return indicating that you are electing not to claim the special depreciation allowance for 5-year property. Tax slayer As a general rule, you must make this election by the due date (including extensions) of your return. Tax slayer You can have an automatic extension of 6 months from the due date of your return (excluding extensions) to make the election with an amended return. Tax slayer To get this extension, you must have filed your original return by the due date (including extensions). Tax slayer At the top of the statement, print “Filed pursuant to section 301. Tax slayer 9100–2. Tax slayer ” If you elect not to claim the special depreciation allowance for a car, you cannot claim it for any other 5-year property placed in service during the same year. Tax slayer Unless you elect (or are treated as electing) not to claim the special depreciation allowance, you must reduce the car's adjusted basis by the amount of the allowance, even if the allowance was not claimed. Tax slayer Deemed election for return filed before June 1, 2002. Tax slayer   If you did not make the election not to claim the special depreciation allowance in the time and manner described above, you will still be treated as electing not to claim it if all of the following apply. Tax slayer You filed your 2001 return before June 1, 2002. Tax slayer You claimed depreciation on your return but did not claim the special depreciation allowance. Tax slayer You did not file an amended 2001 return by April 15, 2003, or a Form 3115 with your 2002 return, to claim the special depreciation allowance. Tax slayer Form 2106, Page 1, for Bob Smith Form 2106, Page 2, for Bob Smith Prev  Up  Next   Home   More Online Publications