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2013 1040ez Form Instructions

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2013 1040ez Form Instructions

2013 1040ez form instructions 21. 2013 1040ez form instructions   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. 2013 1040ez form instructions 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. 2013 1040ez form instructions  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. 2013 1040ez form instructions 5% if either you or your spouse is age 65 or older). 2013 1040ez form instructions Standard mileage rate. 2013 1040ez form instructions  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. 2013 1040ez form instructions See Transportation under What Medical Expenses Are Includible. 2013 1040ez form instructions Introduction This chapter will help you determine the following. 2013 1040ez form instructions What medical expenses are. 2013 1040ez form instructions What expenses you can include this year. 2013 1040ez form instructions How much of the expenses you can deduct. 2013 1040ez form instructions Whose medical expenses you can include. 2013 1040ez form instructions What medical expenses are includible. 2013 1040ez form instructions How to treat reimbursements. 2013 1040ez form instructions How to report the deduction on your tax return. 2013 1040ez form instructions How to report impairment-related work expenses. 2013 1040ez form instructions How to report health insurance costs if you are self-employed. 2013 1040ez form instructions 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. 2013 1040ez form instructions These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. 2013 1040ez form instructions They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. 2013 1040ez form instructions Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. 2013 1040ez form instructions They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. 2013 1040ez form instructions 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. 2013 1040ez form instructions Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. 2013 1040ez form instructions 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. 2013 1040ez form instructions If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions Separate returns. 2013 1040ez form instructions   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. 2013 1040ez form instructions 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. 2013 1040ez form instructions Community property states. 2013 1040ez form instructions   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. 2013 1040ez form instructions Each of you should include half the expenses. 2013 1040ez form instructions If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. 2013 1040ez form instructions If you live in a community property state, and are not filing a joint return, see Publication 555, Community Property. 2013 1040ez form instructions 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. 2013 1040ez form instructions 5% of your AGI if either you or your spouse is age 65 or older)(Form 1040, line 38). 2013 1040ez form instructions Example. 2013 1040ez form instructions You are unmarried and under age 65 and your AGI is $40,000, 10% of which is $4,000. 2013 1040ez form instructions You paid medical expenses of $2,500. 2013 1040ez form instructions You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. 2013 1040ez form instructions 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. 2013 1040ez form instructions There are different rules for decedents and for individuals who are the subject of multiple support agreements. 2013 1040ez form instructions See Support claimed under a multiple support agreement , later. 2013 1040ez form instructions Yourself You can include medical expenses you paid for yourself. 2013 1040ez form instructions Spouse You can include medical expenses you paid for your spouse. 2013 1040ez form instructions 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. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions Mary received medical treatment before she married Bill. 2013 1040ez form instructions Bill paid for the treatment after they married. 2013 1040ez form instructions Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. 2013 1040ez form instructions If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. 2013 1040ez form instructions Mary would include the amounts she paid during the year in her separate return. 2013 1040ez form instructions If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions This year, John paid medical expenses for his wife Louise, who died last year. 2013 1040ez form instructions John married Belle this year and they file a joint return. 2013 1040ez form instructions 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. 2013 1040ez form instructions Dependent You can include medical expenses you paid for your dependent. 2013 1040ez form instructions 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. 2013 1040ez form instructions A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. 2013 1040ez form instructions The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen or national, or a resident of the United States, Canada, or Mexico. 2013 1040ez form instructions If your qualifying child was adopted, see Exception for adopted child , next. 2013 1040ez form instructions 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. 2013 1040ez form instructions Exception for adopted child. 2013 1040ez form instructions   If you are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen or U. 2013 1040ez form instructions S. 2013 1040ez form instructions 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. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen or national or a resident of the United States, Canada, or Mexico. 2013 1040ez form instructions 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. 2013 1040ez form instructions Adopted child. 2013 1040ez form instructions   A legally adopted child is treated as your own child. 2013 1040ez form instructions This includes a child lawfully placed with you for legal adoption. 2013 1040ez form instructions   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. 2013 1040ez form instructions   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. 2013 1040ez form instructions   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. 2013 1040ez form instructions    You may be able to take an adoption credit for other expenses related to an adoption. 2013 1040ez form instructions See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. 2013 1040ez form instructions Child of divorced or separated parents. 2013 1040ez form instructions   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. 2013 1040ez form instructions 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. 2013 1040ez form instructions This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). 2013 1040ez form instructions 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. 2013 1040ez form instructions But see Child of divorced or separated parents , earlier, and Support claimed under a multiple support agreement, next. 2013 1040ez form instructions Support claimed under a multiple support agreement. 2013 1040ez form instructions   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. 2013 1040ez form instructions 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. 2013 1040ez form instructions   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. 2013 1040ez form instructions However, you can include the entire unreimbursed amount you paid for medical expenses. 2013 1040ez form instructions Example. 2013 1040ez form instructions You and your three brothers each provide one-fourth of your mother's total support. 2013 1040ez form instructions Under a multiple support agreement, you treat your mother as your dependent. 2013 1040ez form instructions You paid all of her medical expenses. 2013 1040ez form instructions Your brothers reimbursed you for three-fourths of these expenses. 2013 1040ez form instructions In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. 2013 1040ez form instructions Your brothers cannot include any part of the expenses. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions This includes expenses for the decedent's spouse and dependents as well as for the decedent. 2013 1040ez form instructions 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. 2013 1040ez form instructions The expenses must be paid within the 1-year period beginning with the day after the date of death. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions Amended returns and claims for refund are discussed in chapter 1. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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). 2013 1040ez form instructions This table does not include all possible medical expenses. 2013 1040ez form instructions To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. 2013 1040ez form instructions Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. 2013 1040ez form instructions 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). 2013 1040ez form instructions See Qualified Long-Term Care Insurance Contracts in Publication 502. 2013 1040ez form instructions 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. 2013 1040ez form instructions The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. 2013 1040ez form instructions Note. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions Employer-sponsored health insurance plan. 2013 1040ez form instructions   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. 2013 1040ez form instructions 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. 2013 1040ez form instructions Example. 2013 1040ez form instructions You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. 2013 1040ez form instructions Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. 2013 1040ez form instructions 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. 2013 1040ez form instructions Long-term care services. 2013 1040ez form instructions   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. 2013 1040ez form instructions This amount will be reported as wages in box 1 of your Form W-2. 2013 1040ez form instructions Health reimbursement arrangement (HRA). 2013 1040ez form instructions   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. 2013 1040ez form instructions This is because an HRA is funded solely by the employer. 2013 1040ez form instructions Retired public safety officers. 2013 1040ez form instructions   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. 2013 1040ez form instructions This applies only to distributions that would otherwise be included in income. 2013 1040ez form instructions Medicare A. 2013 1040ez form instructions   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. 2013 1040ez form instructions The payroll tax paid for Medicare A is not a medical expense. 2013 1040ez form instructions   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. 2013 1040ez form instructions In this situation you can include the premiums you paid for Medicare A as a medical expense. 2013 1040ez form instructions Medicare B. 2013 1040ez form instructions   Medicare B is supplemental medical insurance. 2013 1040ez form instructions Premiums you pay for Medicare B are a medical expense. 2013 1040ez form instructions Check the information you received from the Social Security Administration to find out your premium. 2013 1040ez form instructions Medicare D. 2013 1040ez form instructions    Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. 2013 1040ez form instructions You can include as a medical expense premiums you pay for Medicare D. 2013 1040ez form instructions Prepaid insurance premiums. 2013 1040ez form instructions   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). 2013 1040ez form instructions Unused sick leave used to pay premiums. 2013 1040ez form instructions   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. 2013 1040ez form instructions 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. 2013 1040ez form instructions You can include this cost of continuing participation in the health plan as a medical expense. 2013 1040ez form instructions   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. 2013 1040ez form instructions You cannot include this cost of continuing participation in that health plan as a medical expense. 2013 1040ez form instructions Table 21-1. 2013 1040ez form instructions Medical and Dental Expenses Checklist. 2013 1040ez form instructions See Publication 502 for more information about these and other expenses. 2013 1040ez form instructions 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. 2013 1040ez form instructions ) 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. 2013 1040ez form instructions ) 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions , 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions See Nursing home , later. 2013 1040ez form instructions You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. 2013 1040ez form instructions You can include the cost of such lodging while away from home if all of the following requirements are met. 2013 1040ez form instructions The lodging is primarily for and essential to medical care. 2013 1040ez form instructions 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. 2013 1040ez form instructions The lodging is not lavish or extravagant under the circumstances. 2013 1040ez form instructions There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. 2013 1040ez form instructions The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. 2013 1040ez form instructions You can include lodging for a person traveling with the person receiving the medical care. 2013 1040ez form instructions 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. 2013 1040ez form instructions Meals are not included. 2013 1040ez form instructions Nursing home. 2013 1040ez form instructions   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. 2013 1040ez form instructions This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. 2013 1040ez form instructions   Do not include the cost of meals and lodging if the reason for being in the home is personal. 2013 1040ez form instructions You can, however, include in medical expenses the part of the cost that is for medical or nursing care. 2013 1040ez form instructions Transportation Include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. 2013 1040ez form instructions 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. 2013 1040ez form instructions Car expenses. 2013 1040ez form instructions   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use your car for medical reasons. 2013 1040ez form instructions You cannot include depreciation, insurance, general repair, or maintenance expenses. 2013 1040ez form instructions   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. 2013 1040ez form instructions    You can also include parking fees and tolls. 2013 1040ez form instructions You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. 2013 1040ez form instructions Example. 2013 1040ez form instructions In 2013, Bill Jones drove 2,800 miles for medical reasons. 2013 1040ez form instructions He spent $500 for gas, $30 for oil, and $100 for tolls and parking. 2013 1040ez form instructions He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. 2013 1040ez form instructions He figures the actual expenses first. 2013 1040ez form instructions He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. 2013 1040ez form instructions He then figures the standard mileage amount. 2013 1040ez form instructions He multiplies 2,800 miles by 24 cents a mile for a total of $672. 2013 1040ez form instructions He then adds the $100 tolls and parking for a total of $772. 2013 1040ez form instructions 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. 2013 1040ez form instructions Transportation expenses you cannot include. 2013 1040ez form instructions   You cannot include in medical expenses the cost of transportation in the following situations. 2013 1040ez form instructions Going to and from work, even if your condition requires an unusual means of transportation. 2013 1040ez form instructions Travel for purely personal reasons to another city for an operation or other medical care. 2013 1040ez form instructions Travel that is merely for the general improvement of one's health. 2013 1040ez form instructions The costs of operating a specially equipped car for other than medical reasons. 2013 1040ez form instructions 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. 2013 1040ez form instructions (See chapter 32 and Publication 503, Child and Dependent Care Expenses. 2013 1040ez form instructions ) 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions This includes payments from Medicare. 2013 1040ez form instructions 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. 2013 1040ez form instructions Example. 2013 1040ez form instructions You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. 2013 1040ez form instructions The insurance you receive for the hospital and doctors' bills is more than their charges. 2013 1040ez form instructions 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. 2013 1040ez form instructions Health reimbursement arrangement (HRA). 2013 1040ez form instructions   A health reimbursement arrangement is an employer-funded plan that reimburses employees for medical care expenses and allows unused amounts to be carried forward. 2013 1040ez form instructions 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. 2013 1040ez form instructions Other reimbursements. 2013 1040ez form instructions   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. 2013 1040ez form instructions ) 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. 2013 1040ez form instructions   You must, however, reduce your medical expenses by any part of these payments that is designated for medical costs. 2013 1040ez form instructions See How Do You Figure and Report the Deduction on Your Tax Return , later. 2013 1040ez form instructions   For how to treat damages received for personal injury or sickness, see Damages for Personal Injuries , later. 2013 1040ez form instructions You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year. 2013 1040ez form instructions Excess reimbursement. 2013 1040ez form instructions   If you are reimbursed more than your medical expenses, you may have to include the excess in income. 2013 1040ez form instructions You may want to use Figure 21-A to help you decide if any of your reimbursement is taxable. 2013 1040ez form instructions Premiums paid by you. 2013 1040ez form instructions   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. 2013 1040ez form instructions Generally, you do not include the excess reimbursement in your gross income. 2013 1040ez form instructions Premiums paid by you and your employer. 2013 1040ez form instructions   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. 2013 1040ez form instructions   See Publication 502 to figure the amount of the excess reimbursement you must include in gross income. 2013 1040ez form instructions Reimbursement in a later year. 2013 1040ez form instructions   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. 2013 1040ez form instructions   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. 2013 1040ez form instructions 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. 2013 1040ez form instructions Figure 21-A. 2013 1040ez form instructions Is Your Excess Medical Reimbursement Taxable? Please click here for the text description of the image. 2013 1040ez form instructions Figure 21-A. 2013 1040ez form instructions Is Your Excess Medical Reimbursement Taxable? Medical expenses not deducted. 2013 1040ez form instructions   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. 2013 1040ez form instructions 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. 2013 1040ez form instructions However, if the reimbursement is more than the expense, see Excess reimbursement , earlier. 2013 1040ez form instructions Example. 2013 1040ez form instructions For 2013, you were unmarried and under age 65 and you had medical expenses of $500. 2013 1040ez form instructions You cannot deduct the $500 because it is less than 10% of your AGI. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions See Reimbursement in a Later Year , discussed under How Do You Treat Reimbursements, earlier. 2013 1040ez form instructions Future medical expenses. 2013 1040ez form instructions   If you receive an amount in settlement of a damage suit for personal injuries, part of that award may be for future medical expenses. 2013 1040ez form instructions If it is, you must reduce any future medical expenses for these injuries until the amount you received has been completely used. 2013 1040ez form instructions 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. 2013 1040ez form instructions What Tax Form Do You Use? You figure your medical expense deduction on Schedule A (Form 1040). 2013 1040ez form instructions You cannot claim medical expenses on Form 1040A or Form 1040EZ. 2013 1040ez form instructions If you need more information on itemized deductions or you are not sure if you can itemize, see chapter 20. 2013 1040ez form instructions Enter the amount you paid for medical and dental expenses on Schedule A (Form 1040). 2013 1040ez form instructions This should be your expenses that were not reimbursed by insurance or any other sources. 2013 1040ez form instructions Generally, you can deduct only the amount of your medical and dental expenses that is more than 10% of your AGI (7. 2013 1040ez form instructions 5% if either you or your spouse was age 65 or older) shown on line 38, Form 1040. 2013 1040ez form instructions 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. 2013 1040ez form instructions If you take a business deduction for impairment-related work expenses, do not take a medical deduction for the same expenses. 2013 1040ez form instructions 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. 2013 1040ez form instructions Impairment-related expenses defined. 2013 1040ez form instructions   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. 2013 1040ez form instructions Where to report. 2013 1040ez form instructions   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. 2013 1040ez form instructions   If you are an employee, complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. 2013 1040ez form instructions Enter on Schedule A (Form 1040), that part of the amount on Form 2106, or Form 2106-EZ, that is related to your impairment. 2013 1040ez form instructions Enter the amount that is unrelated to your impairment also on Schedule A (Form 1040). 2013 1040ez form instructions Your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. 2013 1040ez form instructions Example. 2013 1040ez form instructions You are blind. 2013 1040ez form instructions You must use a reader to do your work. 2013 1040ez form instructions 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. 2013 1040ez form instructions The reader's services are only for your work. 2013 1040ez form instructions You can deduct your expenses for the reader as business expenses. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions 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. 2013 1040ez form instructions But if any of the following applies, do not use that worksheet. 2013 1040ez form instructions You had more than one source of income subject to self-employment tax. 2013 1040ez form instructions You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. 2013 1040ez form instructions You are using amounts paid for qualified long-term care insurance to figure the deduction. 2013 1040ez form instructions If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction. 2013 1040ez form instructions Note. 2013 1040ez form instructions 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. 2013 1040ez form instructions If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, from the total insurance premiums you paid. 2013 1040ez form instructions 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. 2013 1040ez form instructions Where to report. 2013 1040ez form instructions    You take this deduction on Form 1040. 2013 1040ez form instructions 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. 2013 1040ez form instructions 5% if either you or your spouse was age 65 or older). 2013 1040ez form instructions 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. 2013 1040ez form instructions Prev  Up  Next   Home   More Online Publications
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The 2013 1040ez Form Instructions

2013 1040ez form instructions 4. 2013 1040ez form instructions   Foreign Earned Income and Housing: Exclusion – Deduction Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Qualifies for the Exclusions and the Deduction? RequirementsTax Home in Foreign Country Bona Fide Residence Test Physical Presence Test Waiver of Time Requirements U. 2013 1040ez form instructions S. 2013 1040ez form instructions Travel Restrictions Foreign Earned Income Foreign Earned Income ExclusionLimit on Excludable Amount Choosing the Exclusion Foreign Housing Exclusion and DeductionHousing Amount Foreign Housing Exclusion Foreign Housing Deduction Married Couples Form 2555 and Form 2555-EZForm 2555-EZ Form 2555 Topics - This chapter discusses: Who qualifies for the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, The requirements that must be met to claim either exclusion or the deduction, How to figure the foreign earned income exclusion, and How to figure the foreign housing exclusion and the foreign housing deduction. 2013 1040ez form instructions Useful Items - You may want to see: Publication 519 U. 2013 1040ez form instructions S. 2013 1040ez form instructions Tax Guide for Aliens 570 Tax Guide for Individuals With Income from U. 2013 1040ez form instructions S. 2013 1040ez form instructions Possessions 596 Earned Income Credit (EIC) Form (and Instructions) 1040X Amended U. 2013 1040ez form instructions S. 2013 1040ez form instructions Individual Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion See chapter 7 for information about getting these publications and forms. 2013 1040ez form instructions Who Qualifies for the Exclusions and the Deduction? If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. 2013 1040ez form instructions If you are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. 2013 1040ez form instructions However, you may qualify to exclude from income up to $97,600 of your foreign earnings. 2013 1040ez form instructions In addition, you can exclude or deduct certain foreign housing amounts. 2013 1040ez form instructions See Foreign Earned Income Exclusion and Foreign Housing Exclusion and Deduction, later. 2013 1040ez form instructions You also may be entitled to exclude from income the value of meals and lodging provided to you by your employer. 2013 1040ez form instructions See Exclusion of Meals and Lodging, later. 2013 1040ez form instructions Requirements To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements. 2013 1040ez form instructions Your tax home must be in a foreign country. 2013 1040ez form instructions You must have foreign earned income. 2013 1040ez form instructions You must be one of the following. 2013 1040ez form instructions A U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 2013 1040ez form instructions A U. 2013 1040ez form instructions S. 2013 1040ez form instructions resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 2013 1040ez form instructions A U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen or a U. 2013 1040ez form instructions S. 2013 1040ez form instructions resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. 2013 1040ez form instructions See Publication 519 to find out if you are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions resident alien for tax purposes and whether you keep that alien status when you temporarily work abroad. 2013 1040ez form instructions If you are a nonresident alien married to a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen or resident alien, and both you and your spouse choose to treat you as a resident alien, you are a resident alien for tax purposes. 2013 1040ez form instructions For information on making the choice, see the discussion in chapter 1 under Nonresident Alien Spouse Treated as a Resident . 2013 1040ez form instructions Waiver of minimum time requirements. 2013 1040ez form instructions   The minimum time requirements for bona fide residence and physical presence can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. 2013 1040ez form instructions This is fully explained under Waiver of Time Requirements , later. 2013 1040ez form instructions   See Figure 4-A and information in this chapter to determine if you are eligible to claim either exclusion or the deduction. 2013 1040ez form instructions Tax Home in Foreign Country To qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, your tax home must be in a foreign country throughout your period of bona fide residence or physical presence abroad. 2013 1040ez form instructions Bona fide residence and physical presence are explained later. 2013 1040ez form instructions Tax Home Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. 2013 1040ez form instructions Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. 2013 1040ez form instructions Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. 2013 1040ez form instructions If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. 2013 1040ez form instructions If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work. 2013 1040ez form instructions You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. 2013 1040ez form instructions However, your abode is not necessarily in the United States while you are temporarily in the United States. 2013 1040ez form instructions Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. 2013 1040ez form instructions “Abode” has been variously defined as one's home, habitation, residence, domicile, or place of dwelling. 2013 1040ez form instructions It does not mean your principal place of business. 2013 1040ez form instructions “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home. 2013 1040ez form instructions ” The location of your abode often will depend on where you maintain your economic, family, and personal ties. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. 2013 1040ez form instructions You return to your family residence in the United States during your off periods. 2013 1040ez form instructions You are considered to have an abode in the United States and do not satisfy the tax home test in the foreign country. 2013 1040ez form instructions You cannot claim either of the exclusions or the housing deduction. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions For several years, you were a marketing executive with a producer of machine tools in Toledo, Ohio. 2013 1040ez form instructions In November of last year, your employer transferred you to London, England, for a minimum of 18 months to set up a sales operation for Europe. 2013 1040ez form instructions Before you left, you distributed business cards showing your business and home addresses in London. 2013 1040ez form instructions You kept ownership of your home in Toledo but rented it to another family. 2013 1040ez form instructions You placed your car in storage. 2013 1040ez form instructions In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London. 2013 1040ez form instructions Shortly after moving, you leased a car and you and your spouse got British driving licenses. 2013 1040ez form instructions Your entire family got library cards for the local public library. 2013 1040ez form instructions You and your spouse opened bank accounts with a London bank and secured consumer credit. 2013 1040ez form instructions You joined a local business league and both you and your spouse became active in the neighborhood civic association and worked with a local charity. 2013 1040ez form instructions Your abode is in London for the time you live there. 2013 1040ez form instructions You satisfy the tax home test in the foreign country. 2013 1040ez form instructions Please click here for the text description of the image. 2013 1040ez form instructions Figure 4–A Can I Claim the Exclusion or Deduction? Temporary or Indefinite Assignment The location of your tax home often depends on whether your assignment is temporary or indefinite. 2013 1040ez form instructions If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away-from-home expenses (for travel, meals, and lodging), but you would not qualify for the foreign earned income exclusion. 2013 1040ez form instructions If your new work assignment is for an indefinite period, your new place of employment becomes your tax home and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. 2013 1040ez form instructions If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. 2013 1040ez form instructions If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. 2013 1040ez form instructions If you expect it to last for more than 1 year, it is indefinite. 2013 1040ez form instructions If you expect it to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. 2013 1040ez form instructions Once your expectation changes, it is indefinite. 2013 1040ez form instructions Foreign Country To meet the bona fide residence test or the physical presence test, you must live in or be present in a foreign country. 2013 1040ez form instructions A foreign country includes any territory under the sovereignty of a government other than that of the United States. 2013 1040ez form instructions The term “foreign country” includes the country's airspace and territorial waters, but not international waters and the airspace above them. 2013 1040ez form instructions It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. 2013 1040ez form instructions The term “foreign country” does not include Antarctica or U. 2013 1040ez form instructions S. 2013 1040ez form instructions possessions such as Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U. 2013 1040ez form instructions S. 2013 1040ez form instructions Virgin Islands, and Johnston Island. 2013 1040ez form instructions For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, the terms “foreign,” “abroad,” and “overseas” refer to areas outside the United States and those areas listed or described in the previous sentence. 2013 1040ez form instructions American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residence or presence in a U. 2013 1040ez form instructions S. 2013 1040ez form instructions possession does not qualify you for the foreign earned income exclusion. 2013 1040ez form instructions You may, however, qualify for an exclusion of your possession income on your U. 2013 1040ez form instructions S. 2013 1040ez form instructions return. 2013 1040ez form instructions American Samoa. 2013 1040ez form instructions   There is a possession exclusion available to individuals who are bona fide residents of American Samoa for the entire tax year. 2013 1040ez form instructions Gross income from sources within American Samoa may be eligible for this exclusion. 2013 1040ez form instructions Income that is effectively connected with the conduct of a trade or business within American Samoa also may be eligible for this exclusion. 2013 1040ez form instructions Use Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, to figure the exclusion. 2013 1040ez form instructions Guam and the Commonwealth of the Northern Mariana Islands. 2013 1040ez form instructions   An exclusion will be available to residents of Guam and the Commonwealth of the Northern Mariana Islands if, and when, new implementation agreements take effect between the United States and those possessions. 2013 1040ez form instructions   For more information, see Publication 570. 2013 1040ez form instructions Puerto Rico and U. 2013 1040ez form instructions S. 2013 1040ez form instructions Virgin Islands Residents of Puerto Rico and the U. 2013 1040ez form instructions S. 2013 1040ez form instructions Virgin Islands cannot claim the foreign earned income exclusion or the foreign housing exclusion. 2013 1040ez form instructions Puerto Rico. 2013 1040ez form instructions   Generally, if you are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen who is a bona fide resident of Puerto Rico for the entire tax year, you are not subject to U. 2013 1040ez form instructions S. 2013 1040ez form instructions tax on income from Puerto Rican sources. 2013 1040ez form instructions This does not include amounts paid for services performed as an employee of the United States. 2013 1040ez form instructions However, you are subject to U. 2013 1040ez form instructions S. 2013 1040ez form instructions tax on your income from sources outside Puerto Rico. 2013 1040ez form instructions In figuring your U. 2013 1040ez form instructions S. 2013 1040ez form instructions tax, you cannot deduct expenses allocable to income not subject to tax. 2013 1040ez form instructions Bona Fide Residence Test You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 2013 1040ez form instructions You can use the bona fide residence test to qualify for the exclusions and the deduction only if you are either: A U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen, or A U. 2013 1040ez form instructions S. 2013 1040ez form instructions resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect. 2013 1040ez form instructions You do not automatically acquire bona fide resident status merely by living in a foreign country or countries for 1 year. 2013 1040ez form instructions If you go to a foreign country to work on a particular job for a specified period of time, you ordinarily will not be regarded as a bona fide resident of that country even though you work there for 1 tax year or longer. 2013 1040ez form instructions The length of your stay and the nature of your job are only two of the factors to be considered in determining whether you meet the bona fide residence test. 2013 1040ez form instructions Bona fide residence. 2013 1040ez form instructions   To meet the bona fide residence test, you must have established a bona fide residence in a foreign country. 2013 1040ez form instructions   Your bona fide residence is not necessarily the same as your domicile. 2013 1040ez form instructions Your domicile is your permanent home, the place to which you always return or intend to return. 2013 1040ez form instructions Example. 2013 1040ez form instructions You could have your domicile in Cleveland, Ohio, and a bona fide residence in Edinburgh, Scotland, if you intend to return eventually to Cleveland. 2013 1040ez form instructions The fact that you go to Scotland does not automatically make Scotland your bona fide residence. 2013 1040ez form instructions If you go there as a tourist, or on a short business trip, and return to the United States, you have not established bona fide residence in Scotland. 2013 1040ez form instructions But if you go to Scotland to work for an indefinite or extended period and you set up permanent quarters there for yourself and your family, you probably have established a bona fide residence in a foreign country, even though you intend to return eventually to the United States. 2013 1040ez form instructions You are clearly not a resident of Scotland in the first instance. 2013 1040ez form instructions However, in the second, you are a resident because your stay in Scotland appears to be permanent. 2013 1040ez form instructions If your residency is not as clearly defined as either of these illustrations, it may be more difficult to decide whether you have established a bona fide residence. 2013 1040ez form instructions Determination. 2013 1040ez form instructions   Questions of bona fide residence are determined according to each individual case, taking into account factors such as your intention, the purpose of your trip, and the nature and length of your stay abroad. 2013 1040ez form instructions   To meet the bona fide residence test, you must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 2013 1040ez form instructions The IRS decides whether you are a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555. 2013 1040ez form instructions IRS cannot make this determination until you file Form 2555. 2013 1040ez form instructions Statement to foreign authorities. 2013 1040ez form instructions   You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities: Hold that you are not subject to their income tax laws as a resident, or Have not made a final decision on your status. 2013 1040ez form instructions Special agreements and treaties. 2013 1040ez form instructions   An income tax exemption provided in a treaty or other international agreement will not in itself prevent you from being a bona fide resident of a foreign country. 2013 1040ez form instructions Whether a treaty prevents you from becoming a bona fide resident of a foreign country is determined under all provisions of the treaty, including specific provisions relating to residence or privileges and immunities. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen employed in the United Kingdom by a U. 2013 1040ez form instructions S. 2013 1040ez form instructions employer under contract with the U. 2013 1040ez form instructions S. 2013 1040ez form instructions Armed Forces. 2013 1040ez form instructions You are not subject to the North Atlantic Treaty Status of Forces Agreement. 2013 1040ez form instructions You may be a bona fide resident of the United Kingdom. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen in the United Kingdom who qualifies as an “employee” of an armed service or as a member of a “civilian component” under the North Atlantic Treaty Status of Forces Agreement. 2013 1040ez form instructions You are not a bona fide resident of the United Kingdom. 2013 1040ez form instructions Example 3. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen employed in Japan by a U. 2013 1040ez form instructions S. 2013 1040ez form instructions employer under contract with the U. 2013 1040ez form instructions S. 2013 1040ez form instructions Armed Forces. 2013 1040ez form instructions You are subject to the agreement of the Treaty of Mutual Cooperation and Security between the United States and Japan. 2013 1040ez form instructions Being subject to the agreement does not make you a bona fide resident of Japan. 2013 1040ez form instructions Example 4. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen employed as an “official” by the United Nations in Switzerland. 2013 1040ez form instructions You are exempt from Swiss taxation on the salary or wages paid to you by the United Nations. 2013 1040ez form instructions This does not prevent you from being a bona fide resident of Switzerland. 2013 1040ez form instructions Effect of voting by absentee ballot. 2013 1040ez form instructions   If you are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen living abroad, you can vote by absentee ballot in any election held in the United States without risking your status as a bona fide resident of a foreign country. 2013 1040ez form instructions   However, if you give information to the local election officials about the nature and length of your stay abroad that does not match the information you give for the bona fide residence test, the information given in connection with absentee voting will be considered in determining your status, but will not necessarily be conclusive. 2013 1040ez form instructions Uninterrupted period including entire tax year. 2013 1040ez form instructions   To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. 2013 1040ez form instructions An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis. 2013 1040ez form instructions   During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. 2013 1040ez form instructions To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions You arrived with your family in Lisbon, Portugal, on November 1, 2011. 2013 1040ez form instructions Your assignment is indefinite, and you intend to live there with your family until your company sends you to a new post. 2013 1040ez form instructions You immediately established residence there. 2013 1040ez form instructions You spent April of 2012 at a business conference in the United States. 2013 1040ez form instructions Your family stayed in Lisbon. 2013 1040ez form instructions Immediately following the conference, you returned to Lisbon and continued living there. 2013 1040ez form instructions On January 1, 2013, you completed an uninterrupted period of residence for a full tax year (2012), and you meet the bona fide residence test. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions Assume the same facts as in Example 1, except that you transferred back to the United States on December 13, 2012. 2013 1040ez form instructions You would not meet the bona fide residence test because your bona fide residence in the foreign country, although it lasted more than a year, did not include a full tax year. 2013 1040ez form instructions You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test (discussed later). 2013 1040ez form instructions Bona fide resident for part of a year. 2013 1040ez form instructions   Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. 2013 1040ez form instructions Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years. 2013 1040ez form instructions Example. 2013 1040ez form instructions You were a bona fide resident of Singapore from March 1, 2011, through September 14, 2013. 2013 1040ez form instructions On September 15, 2013, you returned to the United States. 2013 1040ez form instructions Since you were a bona fide resident of a foreign country for all of 2012, you were also a bona fide resident of a foreign country from March 1, 2011, through the end of 2011 and from January 1, 2013, through September 14, 2013. 2013 1040ez form instructions Reassignment. 2013 1040ez form instructions   If you are assigned from one foreign post to another, you may or may not have a break in foreign residence between your assignments, depending on the circumstances. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions You were a resident of Pakistan from October 1, 2012, through November 30, 2013. 2013 1040ez form instructions On December 1, 2013, you and your family returned to the United States to wait for an assignment to another foreign country. 2013 1040ez form instructions Your household goods also were returned to the United States. 2013 1040ez form instructions Your foreign residence ended on November 30, 2013, and did not begin again until after you were assigned to another foreign country and physically entered that country. 2013 1040ez form instructions Since you were not a bona fide resident of a foreign country for the entire tax year of 2012 or 2013 you do not meet the bona fide residence test in either year. 2013 1040ez form instructions You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test, discussed later. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions Assume the same facts as in Example 1, except that upon completion of your assignment in Pakistan you were given a new assignment to Turkey. 2013 1040ez form instructions On December 1, 2013, you and your family returned to the United States for a month's vacation. 2013 1040ez form instructions On January 2, 2014, you arrived in Turkey for your new assignment. 2013 1040ez form instructions Because you did not interrupt your bona fide residence abroad, you meet the bona fide residence test. 2013 1040ez form instructions Physical Presence Test You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. 2013 1040ez form instructions The 330 days do not have to be consecutive. 2013 1040ez form instructions Any U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen or resident alien can use the physical presence test to qualify for the exclusions and the deduction. 2013 1040ez form instructions The physical presence test is based only on how long you stay in a foreign country or countries. 2013 1040ez form instructions This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. 2013 1040ez form instructions 330 full days. 2013 1040ez form instructions   Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. 2013 1040ez form instructions You can count days you spent abroad for any reason. 2013 1040ez form instructions You do not have to be in a foreign country only for employment purposes. 2013 1040ez form instructions You can be on vacation. 2013 1040ez form instructions   You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. 2013 1040ez form instructions Exception. 2013 1040ez form instructions   You can be physically present in a foreign country or countries for less than 330 full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest. 2013 1040ez form instructions See Waiver of Time Requirements, later. 2013 1040ez form instructions Full day. 2013 1040ez form instructions   A full day is a period of 24 consecutive hours, beginning at midnight. 2013 1040ez form instructions Travel. 2013 1040ez form instructions    When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total. 2013 1040ez form instructions Example. 2013 1040ez form instructions You leave the United States for France by air on June 10. 2013 1040ez form instructions You arrive in France at 9:00 a. 2013 1040ez form instructions m. 2013 1040ez form instructions on June 11. 2013 1040ez form instructions Your first full day of physical presence in France is June 12. 2013 1040ez form instructions Passing over foreign country. 2013 1040ez form instructions   If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States. 2013 1040ez form instructions Example. 2013 1040ez form instructions You leave the United States by air at 9:30 a. 2013 1040ez form instructions m. 2013 1040ez form instructions on June 10 to travel to Kenya. 2013 1040ez form instructions You pass over western Africa at 11:00 p. 2013 1040ez form instructions m. 2013 1040ez form instructions on June 10 and arrive in Kenya at 12:30 a. 2013 1040ez form instructions m. 2013 1040ez form instructions on June 11. 2013 1040ez form instructions Your first full day in a foreign country is June 11. 2013 1040ez form instructions Change of location. 2013 1040ez form instructions   You can move about from one place to another in a foreign country or to another foreign country without losing full days. 2013 1040ez form instructions If any part of your travel is not within any foreign country and takes less than 24 hours, you are considered to be in a foreign country during that part of travel. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions You leave Ireland by air at 11:00 p. 2013 1040ez form instructions m. 2013 1040ez form instructions on July 6 and arrive in Sweden at 5:00 a. 2013 1040ez form instructions m. 2013 1040ez form instructions on July 7. 2013 1040ez form instructions Your trip takes less than 24 hours and you lose no full days. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions You leave Norway by ship at 10:00 p. 2013 1040ez form instructions m. 2013 1040ez form instructions on July 6 and arrive in Portugal at 6:00 a. 2013 1040ez form instructions m. 2013 1040ez form instructions on July 8. 2013 1040ez form instructions Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. 2013 1040ez form instructions If you remain in Portugal, your next full day in a foreign country is July 9. 2013 1040ez form instructions In United States while in transit. 2013 1040ez form instructions   If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. 2013 1040ez form instructions You are treated as traveling over areas not within any foreign country. 2013 1040ez form instructions    Please click here for the text description of the image. 2013 1040ez form instructions Figure 4-B How to figure the 12-month period. 2013 1040ez form instructions   There are four rules you should know when figuring the 12-month period. 2013 1040ez form instructions Your 12-month period can begin with any day of the month. 2013 1040ez form instructions It ends the day before the same calendar day, 12 months later. 2013 1040ez form instructions Your 12-month period must be made up of consecutive months. 2013 1040ez form instructions Any 12-month period can be used if the 330 days in a foreign country fall within that period. 2013 1040ez form instructions You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. 2013 1040ez form instructions You can choose the 12-month period that gives you the greatest exclusion. 2013 1040ez form instructions In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions You are a construction worker who works on and off in a foreign country over a 20-month period. 2013 1040ez form instructions You might pick up the 330 full days in a 12-month period only during the middle months of the time you work in the foreign country because the first few and last few months of the 20-month period are broken up by long visits to the United States. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions You work in New Zealand for a 20-month period from January 1, 2012, through August 31, 2013, except that you spend 28 days in February 2012 and 28 days in February 2013 on vacation in the United States. 2013 1040ez form instructions You are present in New Zealand for at least 330 full days during each of the following two 12-month periods: January 1, 2012 – December 31, 2012 and September 1, 2012 – August 31, 2013. 2013 1040ez form instructions By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. 2013 1040ez form instructions See Figure 4-B, on the previous page. 2013 1040ez form instructions Waiver of Time Requirements Both the bona fide residence test and the physical presence test contain minimum time requirements. 2013 1040ez form instructions The minimum time requirements can be waived, however, if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. 2013 1040ez form instructions You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. 2013 1040ez form instructions To qualify for the waiver, you must actually have your tax home in the foreign country and be a bona fide resident of, or be physically present in, the foreign country on or before the beginning date of the waiver. 2013 1040ez form instructions Early in 2014, the IRS will publish in the Internal Revenue Bulletin a list of the only countries that qualify for the waiver for 2013 and the effective dates. 2013 1040ez form instructions If you left one of the countries on or after the date listed for each country, you can meet the bona fide residence test or physical presence test for 2013 without meeting the minimum time requirement. 2013 1040ez form instructions However, in figuring your exclusion, the number of your qualifying days of bona fide residence or physical presence includes only days of actual residence or presence within the country. 2013 1040ez form instructions U. 2013 1040ez form instructions S. 2013 1040ez form instructions Travel Restrictions If you are present in a foreign country in violation of U. 2013 1040ez form instructions S. 2013 1040ez form instructions law, you will not be treated as a bona fide resident of a foreign country or as physically present in a foreign country while you are in violation of the law. 2013 1040ez form instructions Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income. 2013 1040ez form instructions Your housing expenses within that country (or outside that country for housing your spouse or dependents) while you are in violation of the law cannot be included in figuring your foreign housing amount. 2013 1040ez form instructions For 2013, the only country to which travel restrictions applied was Cuba. 2013 1040ez form instructions The restrictions applied for the entire year. 2013 1040ez form instructions However, individuals working at the U. 2013 1040ez form instructions S. 2013 1040ez form instructions Naval Base at Guantanamo Bay in Cuba are not in violation of U. 2013 1040ez form instructions S. 2013 1040ez form instructions law. 2013 1040ez form instructions Personal service income earned by individuals at the base is eligible for the foreign earned income exclusion provided the other requirements are met. 2013 1040ez form instructions Foreign Earned Income To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income. 2013 1040ez form instructions Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements. 2013 1040ez form instructions Your tax home is in a foreign country. 2013 1040ez form instructions You meet either the bona fide residence test or the physical presence test. 2013 1040ez form instructions To determine whether your tax home is in a foreign country, see Tax Home in Foreign Country, earlier. 2013 1040ez form instructions To determine whether you meet either the bona fide residence test or the physical presence test, see Bona Fide Residence Test and Physical Presence Test, earlier. 2013 1040ez form instructions Foreign earned income does not include the following amounts. 2013 1040ez form instructions The value of meals and lodging that you exclude from your income because the meals and lodging were furnished for the convenience of your employer. 2013 1040ez form instructions Pension or annuity payments you receive, including social security benefits (see Pensions and annuities, later). 2013 1040ez form instructions Pay you receive as an employee of the U. 2013 1040ez form instructions S. 2013 1040ez form instructions Government. 2013 1040ez form instructions (See U. 2013 1040ez form instructions S. 2013 1040ez form instructions Government Employees, later. 2013 1040ez form instructions ) Amounts you include in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualified annuity contract. 2013 1040ez form instructions Any unallowable moving expense deduction that you choose to recapture as explained under Moving Expense Attributable to Foreign Earnings in 2 Years in chapter 5. 2013 1040ez form instructions Payments you receive after the end of the tax year following the tax year in which you performed the services that earned the income. 2013 1040ez form instructions Earned income. 2013 1040ez form instructions   This is pay for personal services performed, such as wages, salaries, or professional fees. 2013 1040ez form instructions The list that follows classifies many types of income into three categories. 2013 1040ez form instructions The column headed Variable Income lists income that may fall into either the earned income category, the unearned income category, or partly into both. 2013 1040ez form instructions For more information on earned and unearned income, see Earned and Unearned Income, later. 2013 1040ez form instructions Earned Income Unearned Income Variable Income Salaries and wages Dividends Business profits Commissions Interest Royalties Bonuses Capital gains Rents Professional fees Gambling winnings Scholarships and fellowships Tips Alimony     Social security benefits     Pensions     Annuities     In addition to the types of earned income listed, certain noncash income and allowances or reimbursements are considered earned income. 2013 1040ez form instructions Noncash income. 2013 1040ez form instructions   The fair market value of property or facilities provided to you by your employer in the form of lodging, meals, or use of a car is earned income. 2013 1040ez form instructions Allowances or reimbursements. 2013 1040ez form instructions   Earned income includes allowances or reimbursements you receive, such as the following amounts. 2013 1040ez form instructions    Cost-of-living allowances. 2013 1040ez form instructions Overseas differential. 2013 1040ez form instructions Family allowance. 2013 1040ez form instructions Reimbursement for education or education allowance. 2013 1040ez form instructions Home leave allowance. 2013 1040ez form instructions Quarters allowance. 2013 1040ez form instructions Reimbursement for moving or moving allowance (unless excluded from income as discussed later in Reimbursement of employee expenses under Earned and Unearned Income). 2013 1040ez form instructions Source of Earned Income The source of your earned income is the place where you perform the services for which you received the income. 2013 1040ez form instructions Foreign earned income is income you receive for working in a foreign country. 2013 1040ez form instructions Where or how you are paid has no effect on the source of the income. 2013 1040ez form instructions For example, income you receive for work done in Austria is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City. 2013 1040ez form instructions Example. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen, a bona fide resident of Canada, and working as a mining engineer. 2013 1040ez form instructions Your salary is $76,800 per year. 2013 1040ez form instructions You also receive a $6,000 cost-of-living allowance, and a $6,000 education allowance. 2013 1040ez form instructions Your employment contract did not indicate that you were entitled to these allowances only while outside the United States. 2013 1040ez form instructions Your total income is $88,800. 2013 1040ez form instructions You work a 5-day week, Monday through Friday. 2013 1040ez form instructions After subtracting your vacation, you have a total of 240 workdays in the year. 2013 1040ez form instructions You worked in the United States during the year for 6 weeks (30 workdays). 2013 1040ez form instructions The following shows how to figure the part of your income that is for work done in Canada during the year. 2013 1040ez form instructions   Number of days worked in Canada during the year (210) × Total income ($88,800) = $77,700     Number of days of work during the year for which payment was made (240)   Your foreign source earned income is $77,700. 2013 1040ez form instructions Earned and Unearned Income Earned income was defined earlier as pay for personal services performed. 2013 1040ez form instructions Some types of income are not easily identified as earned or unearned income. 2013 1040ez form instructions Some of these types of income are further explained here. 2013 1040ez form instructions Income from a sole proprietorship or partnership. 2013 1040ez form instructions   Income from a business in which capital investment is an important part of producing the income may be unearned income. 2013 1040ez form instructions If you are a sole proprietor or partner and your personal services are also an important part of producing the income, the part of the income that represents the value of your personal services will be treated as earned income. 2013 1040ez form instructions Capital a factor. 2013 1040ez form instructions   If capital investment is an important part of producing income, no more than 30% of your share of the net profits of the business is earned income. 2013 1040ez form instructions   If you have no net profits, the part of your gross profit that represents a reasonable allowance for personal services actually performed is considered earned income. 2013 1040ez form instructions Because you do not have a net profit, the 30% limit does not apply. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen and meet the bona fide residence test. 2013 1040ez form instructions You invest in a partnership based in Cameroon that is engaged solely in selling merchandise outside the United States. 2013 1040ez form instructions You perform no services for the partnership. 2013 1040ez form instructions At the end of the tax year, your share of the net profits is $80,000. 2013 1040ez form instructions The entire $80,000 is unearned income. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions Assume that in Example 1 you spend time operating the business. 2013 1040ez form instructions Your share of the net profits is $80,000; 30% of your share of the profits is $24,000. 2013 1040ez form instructions If the value of your services for the year is $15,000, your earned income is limited to the value of your services, $15,000. 2013 1040ez form instructions Capital not a factor. 2013 1040ez form instructions   If capital is not an income-producing factor and personal services produce the business income, the 30% rule does not apply. 2013 1040ez form instructions The entire amount of business income is earned income. 2013 1040ez form instructions Example. 2013 1040ez form instructions You and Lou Green are management consultants and operate as equal partners in performing services outside the United States. 2013 1040ez form instructions Because capital is not an income- producing factor, all the income from the partnership is considered earned income. 2013 1040ez form instructions Income from a corporation. 2013 1040ez form instructions   The salary you receive from a corporation is earned income only if it represents a reasonable allowance as compensation for work you do for the corporation. 2013 1040ez form instructions Any amount over what is considered a reasonable salary is unearned income. 2013 1040ez form instructions Example 1. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen and an officer and stockholder of a corporation in Honduras. 2013 1040ez form instructions You perform no work or service of any kind for the corporation. 2013 1040ez form instructions During the tax year you receive a $10,000 “salary” from the corporation. 2013 1040ez form instructions The $10,000 clearly is not for personal services and is unearned income. 2013 1040ez form instructions Example 2. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen and work full time as secretary-treasurer of your corporation. 2013 1040ez form instructions During the tax year you receive $100,000 as salary from the corporation. 2013 1040ez form instructions If $80,000 is a reasonable allowance as pay for the work you did, then $80,000 is earned income. 2013 1040ez form instructions Stock options. 2013 1040ez form instructions   You may have earned income if you disposed of stock that you got by exercising a stock option granted to you under an employee stock purchase plan. 2013 1040ez form instructions   If your gain on the disposition of stock you got by exercising an option is treated as capital gain, your gain is unearned income. 2013 1040ez form instructions   However, if you disposed of the stock less than 2 years after you were granted the option or less than 1 year after you got the stock, part of the gain on the disposition may be earned income. 2013 1040ez form instructions It is considered received in the year you disposed of the stock and earned in the year you performed the services for which you were granted the option. 2013 1040ez form instructions Any part of the earned income that is due to work you did outside the United States is foreign earned income. 2013 1040ez form instructions   See Publication 525, Taxable and Nontaxable Income, for a discussion of the treatment of stock options. 2013 1040ez form instructions Pensions and annuities. 2013 1040ez form instructions    For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, amounts received as pensions or annuities are unearned income. 2013 1040ez form instructions Royalties. 2013 1040ez form instructions   Royalties from the leasing of oil and mineral lands and patents generally are a form of rent or dividends and are unearned income. 2013 1040ez form instructions   Royalties received by a writer are earned income if they are received: For the transfer of property rights of the writer in the writer's product, or Under a contract to write a book or series of articles. 2013 1040ez form instructions Rental income. 2013 1040ez form instructions   Generally, rental income is unearned income. 2013 1040ez form instructions If you perform personal services in connection with the production of rent, up to 30% of your net rental income can be considered earned income. 2013 1040ez form instructions Example. 2013 1040ez form instructions Larry Smith, a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen living in Australia, owns and operates a rooming house in Sydney. 2013 1040ez form instructions If he is operating the rooming house as a business that requires capital and personal services, he can consider up to 30% of net rental income as earned income. 2013 1040ez form instructions On the other hand, if he just owns the rooming house and performs no personal services connected with its operation, except perhaps making minor repairs and collecting rents, none of his net income from the house is considered earned income. 2013 1040ez form instructions It is all unearned income. 2013 1040ez form instructions Professional fees. 2013 1040ez form instructions   If you are engaged in a professional occupation (such as a doctor or lawyer), all fees received in the performance of these services are earned income. 2013 1040ez form instructions Income of an artist. 2013 1040ez form instructions   Income you receive from the sale of paintings you created is earned income. 2013 1040ez form instructions Scholarships and fellowships. 2013 1040ez form instructions   Any portion of a scholarship or fellowship grant that is paid to you for teaching, research or other services is considered earned income if you must include it in your gross income. 2013 1040ez form instructions If the payer of the grant is required to provide you with a Form W-2, Wage and Tax Statement, these amounts will be listed as wages. 2013 1040ez form instructions    Certain scholarship and fellowship income may be exempt under other provisions. 2013 1040ez form instructions See Publication 970, Tax Benefits for Education, chapter 1. 2013 1040ez form instructions Use of employer's property or facilities. 2013 1040ez form instructions   If you receive fringe benefits in the form of the right to use your employer's property or facilities, the fair market value of that right is earned income. 2013 1040ez form instructions Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being required to buy or sell, and both having reasonable knowledge of all the necessary facts. 2013 1040ez form instructions Example. 2013 1040ez form instructions You are privately employed and live in Japan all year. 2013 1040ez form instructions You are paid a salary of $6,000 a month. 2013 1040ez form instructions You live rent-free in a house provided by your employer that has a fair rental value of $3,000 a month. 2013 1040ez form instructions The house is not provided for your employer's convenience. 2013 1040ez form instructions You report on the calendar-year, cash basis. 2013 1040ez form instructions You received $72,000 salary from foreign sources plus $36,000 fair rental value of the house, or a total of $108,000 of earned income. 2013 1040ez form instructions Reimbursement of employee expenses. 2013 1040ez form instructions   If you are reimbursed under an accountable plan (defined below) for expenses you incur on your employer's behalf and you have adequately accounted to your employer for the expenses, do not include the reimbursement for those expenses in your earned income. 2013 1040ez form instructions   The expenses for which you are reimbursed are not considered allocable (related) to your earned income. 2013 1040ez form instructions If expenses and reimbursement are equal, there is nothing to allocate to excluded income. 2013 1040ez form instructions If expenses are more than the reimbursement, the unreimbursed expenses are considered to have been incurred in producing earned income and must be divided between your excluded and included income in determining the amount of unreimbursed expenses you can deduct. 2013 1040ez form instructions (See chapter 5. 2013 1040ez form instructions ) If the reimbursement is more than the expenses, no expenses remain to be divided between excluded and included income and the excess reimbursement must be included in earned income. 2013 1040ez form instructions   These rules do not apply to the following individuals. 2013 1040ez form instructions Straight-commission salespersons. 2013 1040ez form instructions Employees who have arrangements with their employers under which taxes are not withheld on a percentage of the commissions because the employers consider that percentage to be attributable to the employees' expenses. 2013 1040ez form instructions Accountable plan. 2013 1040ez form instructions   An accountable plan is a reimbursement or allowance arrangement that includes all three of the following rules. 2013 1040ez form instructions The expenses covered under the plan must have a business connection. 2013 1040ez form instructions The employee must adequately account to the employer for these expenses within a reasonable period of time. 2013 1040ez form instructions The employee must return any excess reimbursement or allowance within a reasonable period of time. 2013 1040ez form instructions Reimbursement of moving expenses. 2013 1040ez form instructions   Reimbursement of moving expenses may be earned income. 2013 1040ez form instructions You must include as earned income: Any reimbursements of, or payments for, nondeductible moving expenses, Reimbursements that are more than your deductible expenses and that you do not return to your employer, Any reimbursements made (or treated as made) under a nonaccountable plan (any plan that does not meet the rules listed above for an accountable plan), even if they are for deductible expenses, and Any reimbursement of moving expenses you deducted in an earlier year. 2013 1040ez form instructions This section discusses reimbursements that must be included in earned income. 2013 1040ez form instructions Publication 521, Moving Expenses, discusses additional rules that apply to moving expense deductions and reimbursements. 2013 1040ez form instructions   The rules for determining when the reimbursement is considered earned or where the reimbursement is considered earned may differ somewhat from the general rules previously discussed. 2013 1040ez form instructions   Although you receive the reimbursement in one tax year, it may be considered earned for services performed, or to be performed, in another tax year. 2013 1040ez form instructions You must report the reimbursement as income on your return in the year you receive it, even if it is considered earned during a different year. 2013 1040ez form instructions Move from U. 2013 1040ez form instructions S. 2013 1040ez form instructions to foreign country. 2013 1040ez form instructions   If you move from the United States to a foreign country, your moving expense reimbursement is generally considered pay for future services to be performed at the new location. 2013 1040ez form instructions The reimbursement is considered earned solely in the year of the move if you qualify for the exclusion for a period that includes at least 120 days during that tax year. 2013 1040ez form instructions   If you are neither a bona fide resident of nor physically present in a foreign country or countries for a period that includes 120 days during the year of the move, a portion of the reimbursement is considered earned in the year of the move and a portion is considered earned in the year following the year of the move. 2013 1040ez form instructions To figure the amount earned in the year of the move, multiply the reimbursement by a fraction. 2013 1040ez form instructions The numerator (top number) is the number of days in your qualifying period that fall within the year of the move, and the denominator (bottom number) is the total number of days in the year of the move. 2013 1040ez form instructions   The difference between the total reimbursement and the amount considered earned in the year of the move is the amount considered earned in the year following the year of the move. 2013 1040ez form instructions The part earned in each year is figured as shown in the following example. 2013 1040ez form instructions Example. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen working in the United States. 2013 1040ez form instructions You were told in October 2012 that you were being transferred to a foreign country. 2013 1040ez form instructions You arrived in the foreign country on December 15, 2012, and you are a bona fide resident for the remainder of 2012 and all of 2013. 2013 1040ez form instructions Your employer reimbursed you $2,000 in January 2013 for the part of the moving expense that you were not allowed to deduct. 2013 1040ez form instructions Because you did not qualify for the exclusion under the bona fide residence test for at least 120 days in 2012 (the year of the move), the reimbursement is considered pay for services performed in the foreign country for both 2012 and 2013. 2013 1040ez form instructions You figure the part of the reimbursement for services performed in the foreign country in 2012 by multiplying the total reimbursement by a fraction. 2013 1040ez form instructions The fraction is the number of days during which you were a bona fide resident in 2012 (the year of the move) divided by 366. 2013 1040ez form instructions The remaining part of the reimbursement is for services performed in the foreign country in 2013. 2013 1040ez form instructions This computation is used only to determine when the reimbursement is considered earned. 2013 1040ez form instructions You would include the amount of the reimbursement in income in 2013, the year you received it. 2013 1040ez form instructions Move between foreign countries. 2013 1040ez form instructions   If you move between foreign countries, any moving expense reimbursement that you must include in income will be considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days in the year of the move. 2013 1040ez form instructions Move to U. 2013 1040ez form instructions S. 2013 1040ez form instructions   If you move to the United States, the moving expense reimbursement that you must include in income is generally considered to be U. 2013 1040ez form instructions S. 2013 1040ez form instructions source income. 2013 1040ez form instructions   However, if under either an agreement between you and your employer or a statement of company policy that is reduced to writing before your move to the foreign country, your employer will reimburse you for your move back to the United States regardless of whether you continue to work for the employer, the includible reimbursement is considered compensation for past services performed in the foreign country. 2013 1040ez form instructions The includible reimbursement is considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days during that year. 2013 1040ez form instructions Otherwise, you treat the includible reimbursement as received for services performed in the foreign country in the year of the move and the year immediately before the year of the move. 2013 1040ez form instructions   See the discussion under Move from U. 2013 1040ez form instructions S. 2013 1040ez form instructions to foreign country , earlier, to figure the amount of the includible reimbursement considered earned in the year of the move. 2013 1040ez form instructions The amount earned in the year before the year of the move is the difference between the total includible reimbursement and the amount earned in the year of the move. 2013 1040ez form instructions Example. 2013 1040ez form instructions You are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions citizen employed in a foreign country. 2013 1040ez form instructions You retired from employment with your employer on March 31, 2013, and returned to the United States after having been a bona fide resident of the foreign country for several years. 2013 1040ez form instructions A written agreement with your employer entered into before you went abroad provided that you would be reimbursed for your move back to the United States. 2013 1040ez form instructions In April 2013, your former employer reimbursed you $4,000 for the part of the cost of your move back to the United States that you were not allowed to deduct. 2013 1040ez form instructions Because you were not a bona fide resident of a foreign country or countries for a period that included at least 120 days in 2013 (the year of the move), the includible reimbursement is considered pay for services performed in the foreign country for both 2013 and 2012. 2013 1040ez form instructions You figure the part of the moving expense reimbursement for services performed in the foreign country for 2013 by multiplying the total includible reimbursement by a fraction. 2013 1040ez form instructions The fraction is the number of days of foreign residence during the year (90) divided by the number of days in the year (365). 2013 1040ez form instructions The remaining part of the includible reimbursement is for services performed in the foreign country in 2012. 2013 1040ez form instructions You report the amount of the includible reimbursement in 2013, the year you received it. 2013 1040ez form instructions    In this example, if you met the physical presence test for a period that included at least 120 days in 2013, the moving expense reimbursement would be considered earned entirely in the year of the move. 2013 1040ez form instructions Storage expense reimbursements. 2013 1040ez form instructions   If you are reimbursed for storage expenses, the reimbursement is for services you perform during the period of time for which the storage expenses are incurred. 2013 1040ez form instructions U. 2013 1040ez form instructions S. 2013 1040ez form instructions Government Employees For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. 2013 1040ez form instructions This includes amounts paid from both appropriated and nonappropriated funds. 2013 1040ez form instructions The following organizations (and other organizations similarly organized and operated under United States Army, Navy, or Air Force regulations) are integral parts of the Armed Forces, agencies, or instrumentalities of the United States. 2013 1040ez form instructions United States Armed Forces exchanges. 2013 1040ez form instructions Commissioned and noncommissioned officers' messes. 2013 1040ez form instructions Armed Forces motion picture services. 2013 1040ez form instructions Kindergartens on foreign Armed Forces installations. 2013 1040ez form instructions Amounts paid by the United States or its agencies to persons who are not their employees may qualify for exclusion or deduction. 2013 1040ez form instructions If you are a U. 2013 1040ez form instructions S. 2013 1040ez form instructions Government employee paid by a U. 2013 1040ez form instructions S. 2013 1040ez form instructions agency that assigned you to a foreign government to perform specific services for which the agency is reimbursed by the foreign government, your pay is from the U. 2013 1040ez form instructions S. 2013 1040ez form instructions Government and does not qualify for exclusion or deduction. 2013 1040ez form instructions If you have questions about whether you are an employee or an independent contractor, get Publication 15-A, Employer's Supplemental Tax Guide. 2013 1040ez form instructions American Institute in Taiwan. 2013 1040ez form instructions   Amounts paid by the American Institute in Taiwan are not foreign earned income for purposes of the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. 2013 1040ez form instructions If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. 2013 1040ez form instructions S. 2013 1040ez form instructions tax up to the amount that equals tax-exempt allowances received by civilian employees of the U. 2013 1040ez form instructions S. 2013 1040ez form instructions Government. 2013 1040ez form instructions Allowances. 2013 1040ez form instructions   Cost-of-living and foreign-area allowances paid under certain acts of Congress to U. 2013 1040ez form instructions S. 2013 1040ez form instructions civilian officers and employees stationed in Alaska and Hawaii or elsewhere outside the 48 contiguous states and the District of Columbia can be excluded from gross income. 2013 1040ez form instructions Post differentials are wages that must be included in gross income, regardless of the act of Congress under which they are paid. 2013 1040ez form instructions More information. 2013 1040ez form instructions   Publication 516, U. 2013 1040ez form instructions S. 2013 1040ez form instructions Government Civilian Employees Stationed Abroad, has more information for U. 2013 1040ez form instructions S. 2013 1040ez form instructions Government employees abroad. 2013 1040ez form instructions Exclusion of Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. 2013 1040ez form instructions The meals are furnished: On the business premises of your employer, and For the convenience of your employer. 2013 1040ez form instructions The lodging is furnished: On the business premises of your employer, For the convenience of your employer, and As a condition of your employment. 2013 1040ez form instructions If these conditions are met, do not include the value of the meals or lodging in your income, even if a law or your employment contract says that they are provided as compensation. 2013 1040ez form instructions Amounts you do not include in income because of these rules are not foreign earned income. 2013 1040ez form instructions If you receive a Form W-2, excludable amounts should not be included in the total reported in box 1 as wages. 2013 1040ez form instructions Family. 2013 1040ez form instructions   Your family, for this purpose, includes only your spouse and your dependents. 2013 1040ez form instructions Lodging. 2013 1040ez form instructions   The value of lodging includes the cost of heat, electricity, gas, water, sewer service, and similar items needed to make the lodging fit to live in. 2013 1040ez form instructions Business premises of employer. 2013 1040ez form instructions   Generally, the business premises of your employer is wherever you work. 2013 1040ez form instructions For example, if you work as a housekeeper, meals and lodging provided in your employer's home are provided on the business premises of your employer. 2013 1040ez form instructions Similarly, meals provided to cowhands while herding cattle on land leased or owned by their employer are considered provided on the premises of their employer. 2013 1040ez form instructions Convenience of employer. 2013 1040ez form instructions   Whether meals or lodging are provided for your employer's convenience must be determined from all the facts and circumstances. 2013 1040ez form instructions Meals furnished at no charge are considered provided for your employer's convenience if there is a good business reason for providing them, other than to give you more pay. 2013 1040ez form instructions   On the other hand, if your employer provides meals to you or your family as a means of giving you more pay, and there is no other business reason for providing them, their value is extra income to you because they are not furnished for the convenience of your employer. 2013 1040ez form instructions Condition of employment. 2013 1040ez form instructions   Lodging is provided as a condition of employment if you must accept the lodging to properly carry out the duties of your job. 2013 1040ez form instructions You must accept lodging to properly carry out your duties if, for example, you must be available for duty at all times or you could not perform your duties if the lodging was not furnished. 2013 1040ez form instructions Foreign camps. 2013 1040ez form instructions   If the lodging is in a camp located in a foreign country, the camp is considered part of your employer's business premises. 2013 1040ez form instructions The camp must be: Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance, Located as close as reasonably possible in the area where you work, and Provided in a common area or enclave that is not available to the general public for lodging or accommodations and that normally houses at least ten employees. 2013 1040ez form instructions Foreign Earned Income Exclusion If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income. 2013 1040ez form instructions Foreign earned income was defined earlier in this chapter. 2013 1040ez form instructions You also can choose to exclude from your income a foreign housing amount. 2013 1040ez form instructions This is explained later under Foreign Housing Exclusion. 2013 1040ez form instructions If you choose to exclude a foreign housing amount, you must figure the foreign housing exclusion before you figure the foreign earned income exclusion. 2013 1040ez form instructions Your foreign earned income exclusion is limited to your foreign earned income minus your foreign housing exclusion. 2013 1040ez form instructions If you choose to exclude foreign earned income, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. 2013 1040ez form instructions This includes any expenses, losses, and other normally deductible items allocable to the excluded income. 2013 1040ez form instructions For more information about deductions and credits, see chapter 5 . 2013 1040ez form instructions Limit on Excludable Amount You may be able to exclude up to $97,600 of your foreign earned income in 2013. 2013 1040ez form instructions You cannot exclude more than the smaller of: $97,600, or Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later). 2013 1040ez form instructions If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. 2013 1040ez form instructions You do not both need to meet the same test. 2013 1040ez form instructions Together, you and your spouse can exclude as much as $195,200. 2013 1040ez form instructions Paid in year following work. 2013 1040ez form instructions   Generally, you are considered to have earned income in the year in which you do the work for which you receive the income, even if you work in one year but are not paid until the following year. 2013 1040ez form instructions If you report your income on a cash basis, you report the income on your return for the year you receive it. 2013 1040ez form instructions If you work one year, but are not paid for that work until the next year, the amount you can exclude in the year you are paid is the amount you could have excluded in the year you did the work if you had been paid in that year. 2013 1040ez form instructions For an exception to this general rule, see Year-end payroll period, later. 2013 1040ez form instructions Example. 2013 1040ez form instructions You were a bona fide resident of Brazil for all of 2012 and 2013. 2013 1040ez form instructions You report your income on the cash basis. 2013 1040ez form instructions In 2012, you were paid $84,200 for work you did in Brazil during that year. 2013 1040ez form instructions You excluded all of the $84,200 from your income in 2012. 2013 1040ez form instructions In 2013, you were paid $117,300 for your work in Brazil. 2013 1040ez form instructions $18,800 was for work you did in 2012 and $98,500 was for work you did in 2013. 2013 1040ez form instructions You can exclude $10,900 of the $18,800 from your income in 2013. 2013 1040ez form instructions This is the $95,100 maximum exclusion in 2012 minus the $84,200 actually excluded that year. 2013 1040ez form instructions You must include the remaining $7,900 in income in 2013 because you could not have excluded that income in 2012 if you had received it that year. 2013 1040ez form instructions You can exclude $97,600 of the $98,500 you were paid for work you did in 2013 from your 2013 income. 2013 1040ez form instructions Your total foreign earned income exclusion for 2013 is $108,500 ($10,900 for work you did in 2012 and $97,600 for work you did in 2013). 2013 1040ez form instructions You would include in your 2013 income $8,800 ($7,900 for the work you did in 2012 and $900 for the work you did in 2013). 2013 1040ez form instructions Year-end payroll period. 2013 1040ez form instructions   There is an exception to the general rule that income is considered earned in the year you do the work for which you receive the income. 2013 1040ez form instructions If you are a cash-basis taxpayer, any salary or wage payment you receive after the end of the year in which you do the work for which you receive the pay is considered earned entirely in the year you receive it if all four of the following apply. 2013 1040ez form instructions The period for which the payment is made is a normal payroll period of your employer that regularly applies to you. 2013 1040ez form instructions The payroll period includes the last day of your tax year (December 31 if you figure your taxes on a calendar-year basis). 2013 1040ez form instructions The payroll period is not longer than 16 days. 2013 1040ez form instructions The payday comes at the same time in relation to the payroll period that it would normally come and it comes before the end of the next payroll period. 2013 1040ez form instructions Example. 2013 1040ez form instructions You are paid twice a month. 2013 1040ez form instructions For the normal payroll period that begins on the first of the month and ends on the fifteenth of the month, you are paid on the sixteenth day of the month. 2013 1040ez form instructions For the normal payroll period that begins on the sixteenth of the month and ends on the last day of the month, you are paid on the first day of the following month. 2013 1040ez form instructions Because all of the above conditions are met, the pay you received on January 1, 2013, is considered earned in 2013. 2013 1040ez form instructions Income earned over more than 1 year. 2013 1040ez form instructions   Regardless of when you actually receive income, you must apply it to the year in which you earned it in figuring your excludable amount for that year. 2013 1040ez form instructions For example, a bonus may be based on work you did over several years. 2013 1040ez form instructions You determine the amount of the bonus that is considered earned in a particular year in two steps. 2013 1040ez form instructions Divide the bonus by the number of calendar months in the period when you did the work that resulted in the bonus. 2013 1040ez form instructions Multiply the result of (1) by the number of months you did the work during the year. 2013 1040ez form instructions This is the amount that is subject to the exclusion limit for that tax year. 2013 1040ez form instructions Income received more than 1 year after it was earned. 2013 1040ez form instructions   You cannot exclude income you receive after the end of the year following the year you do the work to earn it. 2013 1040ez form instructions Example. 2013 1040ez form instructions   You were a bona fide resident of Sweden for 2011, 2012, and 2013. 2013 1040ez form instructions You report your income on the cash basis. 2013 1040ez form instructions In 2011, you were paid $69,000 for work you did in Sweden that year and in 2012 you were paid $74,000 for that year's work in Sweden. 2013 1040ez form instructions You excluded all the income on your 2011 and 2012 returns. 2013 1040ez form instructions   In 2013, you were paid $92,000; $82,000 for your work in Sweden during 2013, and $10,000 for work you did in Sweden in 2011. 2013 1040ez form instructions You cannot exclude any of the $10,000 for work done in 2011 because you received it after the end of the year following the year in which you earned it. 2013 1040ez form instructions You must include the $10,000 in income. 2013 1040ez form instructions You can exclude all of the $82,000 received for work you did in 2013. 2013 1040ez form instructions Community income. 2013 1040ez form instructions   The maximum exclusion applies separately to the earnings of spouses. 2013 1040ez form instructions Ignore any community property laws when you figure your limit on the foreign earned income exclusion. 2013 1040ez form instructions Part-year exclusion. 2013 1040ez form instructions   If the period for which you qualify for the foreign earned income exclusion includes only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. 2013 1040ez form instructions The number of qualifying days is the number of days in the year within the period on which you both: Have your tax home in a foreign country, and Meet either the bona fide residence test or the physical presence test. 2013 1040ez form instructions   For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. 2013 1040ez form instructions To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year. 2013 1040ez form instructions Example. 2013 1040ez form instructions You report your income on the calendar-year basis and you qualified for the foreign earned income exclusion under the bona fide residence test for 75 days in 2013. 2013 1040ez form instructions You can exclude a maximum of 75/365 of $97,600, or $20,055, of your foreign earned income for 2013. 2013 1040ez form instructions If you qualify under the bona fide residence test for all of 2014, you can exclude your foreign earned income up to the 2014 limit. 2013 1040ez form instructions Physical presence test. 2013 1040ez form instructions   Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. 2013 1040ez form instructions If you qualify for the foreign earned income exclusion under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year. 2013 1040ez form instructions Example. 2013 1040ez form instructions You are physically present and have your tax home in a foreign country for a 16-month period from June 1, 2012, through September 30, 2013, except for 16 days in December 2012 when you were on vacation in the United States. 2013 1040ez form instructions You figure the maximum exclusion for 2012 as follows. 2013 1040ez form instructions Beginning with June 1, 2012, count forward 330 full days. 2013 1040ez form instructions Do not count the 16 days you spent in the United States. 2013 1040ez form instructions The 330th day, May 12, 2013, is the last day of a 12-month period. 2013 1040ez form instructions Count backward 12 months from May 11, 2013, to find the first day of this 12-month period, May 12, 2012. 2013 1040ez form instructions This 12-month period runs from May 12, 2012, through May 11, 2013. 2013 1040ez form instructions Count the total days during 2012 that fall within this 12-month period. 2013 1040ez form instructions This is 234 days (May 12, 2012 – December 31, 2012). 2013 1040ez form instructions Multiply $95,100 (the maximum exclusion for 2012) by the fraction 234/366 to find your maximum exclusion for 2012 ($60,802). 2013 1040ez form instructions You figure the maximum exclusion for 2013 in the opposite manner. 2013 1040ez form instructions Beginning with your last full day, September 30, 2013, count backward 330 full days. 2013 1040ez form instructions Do not count the 16 days you spent in the United States. 2013 1040ez form instructions That day, October 20, 2012, is the first day of a 12-month period. 2013 1040ez form instructions Count forward 12 months from October 20, 2012, to find the last day of this 12-month period, October 19, 2013. 2013 1040ez form instructions This 12-month period runs from October 20, 2012, through October 19, 2013. 2013 1040ez form instructions Count the total days during 2013 that fall within this 12-month period. 2013 1040ez form instructions This is 292 days (January 1, 2013 – October 19, 2013). 2013 1040ez form instructions Multiply $97,600, the maximum limit, by the fraction 292/365 to find your maximum exclusion for 2013 ($78,080). 2013 1040ez form instructions Choosing the Exclusion The foreign earned income exclusion is voluntary. 2013 1040ez form instructions You can choose the exclusion by completing the appropriate parts of Form 2555. 2013 1040ez form instructions When You Can Choose the Exclusion Your initial choice of the exclusion on Form 2555 or Form 2555-EZ generally must be made with one of the following returns. 2013 1040ez form instructions A return filed by the due date (including any extensions). 2013 1040ez form instructions A return amending a timely-filed return. 2013 1040ez form instructions Amended returns generally must be filed by the later of 3 years after the filing date of the original return or 2 years after the tax is paid. 2013 1040ez form instructions A return filed within 1 year from the original due date of the return (determined without regard to any extensions). 2013 1040ez form instructions Filing after the above periods. 2013 1040ez form instructions   You can choose the exclusion on a return filed after the periods described above if you owe no federal income tax after taking into account the exclusion. 2013 1040ez form instructions If you owe federal income tax after taking into account the exclusion, you can choose the exclusion on a return filed after the periods described earlier if you file before the IRS discovers that you failed to choose the exclusion. 2013 1040ez form instructions Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1. 2013 1040ez form instructions 911-7(a)(2)(i)(D). 2013 1040ez form instructions ” If you owe federal income tax after taking into account the foreign earned income exclusion and the IRS discovered that you failed to choose the exclusion, you may still be able to choose the exclusion. 2013 1040ez form instructions You must request a private letter ruling under Income Tax Regulation 301. 2013 1040ez form instructions 9100-3 and Revenue Procedure 2013-1, 2013-1 I. 2013 1040ez form instructions R. 2013 1040ez form instructions B. 2013 1040ez form instructions 1, available at www. 2013 1040ez form instructions irs. 2013 1040ez form instructions gov/irb/2013-01_IRB/ar06. 2013 1040ez form instructions html. 2013 1040ez form instructions Effect of Choosing the Exclusion Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it. 2013 1040ez form instructions Foreign tax credit or deduction. 2013 1040ez form instructions