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Efile Taxes

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Efile Taxes

Efile taxes 22. Efile taxes   Taxes Table of Contents IntroductionIndian tribal government. Efile taxes Useful Items - You may want to see: Tests To Deduct Any Tax Income TaxesState and Local Income Taxes Foreign Income Taxes General Sales TaxesMotor vehicles. Efile taxes Real Estate TaxesReal estate taxes for prior years. Efile taxes Examples. Efile taxes Form 1099-S. Efile taxes Real Estate-Related Items You Cannot Deduct Personal Property Taxes Taxes and Fees You Cannot Deduct Where To Deduct Introduction This chapter discusses which taxes you can deduct if you itemize deductions on Schedule A (Form 1040). Efile taxes It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. Efile taxes This chapter covers the following topics. Efile taxes Income taxes (federal, state, local, and foreign). Efile taxes General sales taxes (state and local). Efile taxes Real estate taxes (state, local, and foreign). Efile taxes Personal property taxes (state and local). Efile taxes Taxes and fees you cannot deduct. Efile taxes Use Table 22-1 as a guide to determine which taxes you can deduct. Efile taxes The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. Efile taxes Business taxes. Efile taxes   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. Efile taxes For information on these taxes, see Publication 535, Business Expenses. Efile taxes State or local taxes. Efile taxes   These are taxes imposed by the 50 states, U. Efile taxes S. Efile taxes possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. Efile taxes Indian tribal government. Efile taxes   An Indian tribal government recognized by the Secretary of the Treasury as performing substantial government functions will be treated as a state for purposes of claiming a deduction for taxes. Efile taxes Income taxes, real estate taxes, and personal property taxes imposed by that Indian tribal government (or by any of its subdivisions that are treated as political subdivisions of a state) are deductible. Efile taxes General sales taxes. Efile taxes   These are taxes imposed at one rate on retail sales of a broad range of classes of items. Efile taxes Foreign taxes. Efile taxes   These are taxes imposed by a foreign country or any of its political subdivisions. Efile taxes Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 530 Tax Information for Homeowners Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule E (Form 1040) Supplemental Income and Loss 1116 Foreign Tax Credit Tests To Deduct Any Tax The following two tests must be met for you to deduct any tax. Efile taxes The tax must be imposed on you. Efile taxes You must pay the tax during your tax year. Efile taxes The tax must be imposed on you. Efile taxes   In general, you can deduct only taxes imposed on you. Efile taxes   Generally, you can deduct property taxes only if you are an owner of the property. Efile taxes If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. Efile taxes You must pay the tax during your tax year. Efile taxes   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. Efile taxes If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. Efile taxes If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. Efile taxes If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). Efile taxes See Publication 538, Accounting Periods and Methods, for details. Efile taxes    If you use an accrual method of accounting, see Publication 538 for more information. Efile taxes Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. Efile taxes State and Local Income Taxes You can deduct state and local income taxes. Efile taxes However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. Efile taxes See General Sales Taxes , later. Efile taxes Exception. Efile taxes    You cannot deduct state and local income taxes you pay on income that is exempt from federal income tax, unless the exempt income is interest income. Efile taxes For example, you cannot deduct the part of a state's income tax that is on a cost-of-living allowance exempt from federal income tax. Efile taxes What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. Efile taxes Withheld taxes. Efile taxes   You can deduct state and local income taxes withheld from your salary in the year they are withheld. Efile taxes Your Form(s) W-2 will show these amounts. Efile taxes Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. Efile taxes Estimated tax payments. Efile taxes   You can deduct estimated tax payments you made during the year to a state or local government. Efile taxes However, you must have a reasonable basis for making the estimated tax payments. Efile taxes Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. Efile taxes For example, you made an estimated state income tax payment. Efile taxes However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. Efile taxes You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. Efile taxes Refund applied to taxes. Efile taxes   You can deduct any part of a refund of prior-year state or local income taxes that you chose to have credited to your 2013 estimated state or local income taxes. Efile taxes    Do not reduce your deduction by either of the following items. Efile taxes Any state or local income tax refund (or credit) you expect to receive for 2013. Efile taxes Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. Efile taxes   However, part or all of this refund (or credit) may be taxable. Efile taxes See Refund (or credit) of state or local income taxes , later. Efile taxes Separate federal returns. Efile taxes   If you and your spouse file separate state, local, and federal income tax returns, you each can deduct on your federal return only the amount of your own state and local income tax that you paid during the tax year. Efile taxes Joint state and local returns. Efile taxes   If you and your spouse file joint state and local returns and separate federal returns, each of you can deduct on your separate federal return a part of the total state and local income taxes paid during the tax year. Efile taxes You can deduct only the amount of the total taxes that is proportionate to your gross income compared to the combined gross income of you and your spouse. Efile taxes However, you cannot deduct more than the amount you actually paid during the year. Efile taxes You can avoid this calculation if you and your spouse are jointly and individually liable for the full amount of the state and local income taxes. Efile taxes If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. Efile taxes Joint federal return. Efile taxes   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. Efile taxes Contributions to state benefit funds. Efile taxes    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. Efile taxes For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. Efile taxes Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. Efile taxes Alaska Unemployment Compensation Fund. Efile taxes California Nonoccupational Disability Benefit Fund. Efile taxes New Jersey Nonoccupational Disability Benefit Fund. Efile taxes New Jersey Unemployment Compensation Fund. Efile taxes New York Nonoccupational Disability Benefit Fund. Efile taxes Pennsylvania Unemployment Compensation Fund. Efile taxes Rhode Island Temporary Disability Benefit Fund. Efile taxes Washington State Supplemental Workmen's Compensation Fund. Efile taxes    Employee contributions to private or voluntary disability plans are not deductible. Efile taxes Refund (or credit) of state or local income taxes. Efile taxes   If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income on Form 1040, line 10, in the year you receive it. Efile taxes This includes refunds resulting from taxes that were overwithheld, applied from a prior year return, not figured correctly, or figured again because of an amended return. Efile taxes If you did not itemize your deductions in the previous year, do not include the refund in income. Efile taxes If you deducted the taxes in the previous year, include all or part of the refund on Form 1040, line 10, in the year you receive the refund. Efile taxes For a discussion of how much to include, see Recoveries in chapter 12. Efile taxes Foreign Income Taxes Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Efile taxes S. Efile taxes possession. Efile taxes However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Efile taxes S. Efile taxes tax under the foreign earned income exclusion or the foreign housing exclusion. Efile taxes For information on these exclusions, see Publication 54, Tax Guide for U. Efile taxes S. Efile taxes Citizens and Resident Aliens Abroad. Efile taxes For information on the foreign tax credit, see Publication 514. Efile taxes General Sales Taxes You can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A (Form 1040), line 5b. Efile taxes You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. Efile taxes Actual expenses. Efile taxes   Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) if the tax rate was the same as the general sales tax rate. Efile taxes However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. Efile taxes If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. Efile taxes If you use the actual expenses method, you must have receipts to show the general sales taxes paid. Efile taxes Do not include sales taxes paid on items used in your trade or business. Efile taxes Motor vehicles. Efile taxes   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Efile taxes This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. Efile taxes Optional sales tax tables. Efile taxes   Instead of using your actual expenses, you can figure your state and local general sales tax deduction using the state and local sales tax tables in the Instructions for Schedule A (Form 1040). Efile taxes You may also be able to add the state and local general sales taxes paid on certain specified items. Efile taxes   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. Efile taxes Your income is your adjusted gross income plus any nontaxable items such as the following. Efile taxes Tax-exempt interest. Efile taxes Veterans' benefits. Efile taxes Nontaxable combat pay. Efile taxes Workers' compensation. Efile taxes Nontaxable part of social security and railroad retirement benefits. Efile taxes Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. Efile taxes Public assistance payments. Efile taxes If you lived in different states during the same tax year, you must prorate your applicable table amount for each state based on the days you lived in each state. Efile taxes See the Instructions for Schedule A (Form 1040), line 5, for details. Efile taxes Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. Efile taxes You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority. Efile taxes Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Efile taxes They also do not include itemized charges for services (such as trash collection) assessed against specific property or certain people, even if the charge is paid to the taxing authority. Efile taxes For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. Efile taxes Tenant-shareholders in a cooperative housing corporation. Efile taxes   Generally, if you are a tenant-stockholder in a cooperative housing corporation, you can deduct the amount paid to the corporation that represents your share of the real estate taxes the corporation paid or incurred for your dwelling unit. Efile taxes The corporation should provide you with a statement showing your share of the taxes. Efile taxes For more information, see Special Rules for Cooperatives in Publication 530. Efile taxes Division of real estate taxes between buyers and sellers. Efile taxes   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. Efile taxes   The buyer and the seller must divide the real estate taxes according to the number of days in the real property tax year (the period to which the tax is imposed relates) that each owned the property. Efile taxes The seller is treated as paying the taxes up to, but not including, the date of sale. Efile taxes The buyer is treated as paying the taxes beginning with the date of sale. Efile taxes This applies regardless of the lien dates under local law. Efile taxes Generally, this information is included on the settlement statement provided at the closing. Efile taxes    If you (the seller) cannot deduct taxes until they are paid because you use the cash method of accounting, and the buyer of your property is personally liable for the tax, you are considered to have paid your part of the tax at the time of the sale. Efile taxes This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. Efile taxes However, you must also include the amount of that tax in the selling price of the property. Efile taxes The buyer must include the same amount in his or her cost of the property. Efile taxes   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. Efile taxes Worksheet 22-1. Efile taxes Figuring Your Real Estate Tax Deduction 1. Efile taxes Enter the total real estate taxes for the real property tax year   2. Efile taxes Enter the number of days in the real property tax year that you owned the property   3. Efile taxes Divide line 2 by 365 (for leap years, divide line 2 by 366) . Efile taxes 4. Efile taxes Multiply line 1 by line 3. Efile taxes This is your deduction. Efile taxes Enter it on Schedule A (Form 1040), line 6   Note. Efile taxes Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. Efile taxes Your total deduction is the sum of the line 4 amounts for all of the properties. Efile taxes Real estate taxes for prior years. Efile taxes   Do not divide delinquent taxes between the buyer and seller if the taxes are for any real property tax year before the one in which the property is sold. Efile taxes Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. Efile taxes The buyer must add them to the cost of the property. Efile taxes The seller can deduct these taxes paid by the buyer. Efile taxes However, the seller must include them in the selling price. Efile taxes Examples. Efile taxes   The following examples illustrate how real estate taxes are divided between buyer and seller. Efile taxes Example 1. Efile taxes Dennis and Beth White's real property tax year for both their old home and their new home is the calendar year, with payment due August 1. Efile taxes The tax on their old home, sold on May 7, was $620. Efile taxes The tax on their new home, bought on May 3, was $732. Efile taxes Dennis and Beth are considered to have paid a proportionate share of the real estate taxes on the old home even though they did not actually pay them to the taxing authority. Efile taxes On the other hand, they can claim only a proportionate share of the taxes they paid on their new property even though they paid the entire amount. Efile taxes Dennis and Beth owned their old home during the real property tax year for 126 days (January 1 to May 6, the day before the sale). Efile taxes They figure their deduction for taxes on their old home as follows. Efile taxes Worksheet 22-1. Efile taxes Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. Efile taxes Enter the total real estate taxes for the real property tax year $620 2. Efile taxes Enter the number of days in the real property tax year that you owned the property 126 3. Efile taxes Divide line 2 by 365 (for leap years, divide line 2 by 366) . Efile taxes 3452 4. Efile taxes Multiply line 1 by line 3. Efile taxes This is your deduction. Efile taxes Enter it on Schedule A (Form 1040), line 6 $214 Since the buyers of their old home paid all of the taxes, Dennis and Beth also include the $214 in the selling price of the old home. Efile taxes (The buyers add the $214 to their cost of the home. Efile taxes ) Dennis and Beth owned their new home during the real property tax year for 243 days (May 3 to December 31, including their date of purchase). Efile taxes They figure their deduction for taxes on their new home as follows. Efile taxes Worksheet 22-1. Efile taxes Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Efile taxes Enter the total real estate taxes for the real property tax year $732 2. Efile taxes Enter the number of days in the real property tax year that you owned the property 243 3. Efile taxes Divide line 2 by 365 (for leap years, divide line 2 by 366) . Efile taxes 6658 4. Efile taxes Multiply line 1 by line 3. Efile taxes This is your deduction. Efile taxes Enter it on Schedule A (Form 1040), line 6 $487 Since Dennis and Beth paid all of the taxes on the new home, they add $245 ($732 paid less $487 deduction) to their cost of the new home. Efile taxes (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. Efile taxes ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. Efile taxes They will enter this amount on Schedule A (Form 1040), line 6. Efile taxes Example 2. Efile taxes George and Helen Brown bought a new home on May 3, 2013. Efile taxes Their real property tax year for the new home is the calendar year. Efile taxes Real estate taxes for 2012 were assessed in their state on January 1, 2013. Efile taxes The taxes became due on May 31, 2013, and October 31, 2013. Efile taxes The Browns agreed to pay all taxes due after the date of purchase. Efile taxes Real estate taxes for 2012 were $680. Efile taxes They paid $340 on May 31, 2013, and $340 on October 31, 2013. Efile taxes These taxes were for the 2012 real property tax year. Efile taxes The Browns cannot deduct them since they did not own the property until 2013. Efile taxes Instead, they must add $680 to the cost of their new home. Efile taxes In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. Efile taxes The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). Efile taxes They will figure their 2014 deduction for taxes as follows. Efile taxes Worksheet 22-1. Efile taxes Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Efile taxes Enter the total real estate taxes for the real property tax year $752 2. Efile taxes Enter the number of days in the real property tax year that you owned the property 243 3. Efile taxes Divide line 2 by 365 (for leap years, divide line 2 by 366) . Efile taxes 6658 4. Efile taxes Multiply line 1 by line 3. Efile taxes This is your deduction. Efile taxes Claim it on Schedule A (Form 1040), line 6 $501 The remaining $251 ($752 paid less $501 deduction) of taxes paid in 2014, along with the $680 paid in 2013, is added to the cost of their new home. Efile taxes Because the taxes up to the date of sale are considered paid by the seller on the date of sale, the seller is entitled to a 2013 tax deduction of $931. Efile taxes This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. Efile taxes The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. Efile taxes The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. Efile taxes Form 1099-S. Efile taxes   For certain sales or exchanges of real estate, the person responsible for closing the sale (generally the settlement agent) prepares Form 1099-S, Proceeds From Real Estate Transactions, to report certain information to the IRS and to the seller of the property. Efile taxes Box 2 of Form 1099-S is for the gross proceeds from the sale and should include the portion of the seller's real estate tax liability that the buyer will pay after the date of sale. Efile taxes The buyer includes these taxes in the cost basis of the property, and the seller both deducts this amount as a tax paid and includes it in the sales price of the property. Efile taxes   For a real estate transaction that involves a home, any real estate tax the seller paid in advance but that is the liability of the buyer appears on Form 1099-S, box 5. Efile taxes The buyer deducts this amount as a real estate tax, and the seller reduces his or her real estate tax deduction (or includes it in income) by the same amount. Efile taxes See Refund (or rebate) , later. Efile taxes Taxes placed in escrow. Efile taxes   If your monthly mortgage payment includes an amount placed in escrow (put in the care of a third party) for real estate taxes, you may not be able to deduct the total amount placed in escrow. Efile taxes You can deduct only the real estate tax that the third party actually paid to the taxing authority. Efile taxes If the third party does not notify you of the amount of real estate tax that was paid for you, contact the third party or the taxing authority to find the proper amount to show on your return. Efile taxes Tenants by the entirety. Efile taxes   If you and your spouse held property as tenants by the entirety and you file separate federal returns, each of you can deduct only the taxes each of you paid on the property. Efile taxes Divorced individuals. Efile taxes   If your divorce or separation agreement states that you must pay the real estate taxes for a home owned by you and your spouse, part of your payments may be deductible as alimony and part as real estate taxes. Efile taxes See Taxes and insurance in chapter 18 for more information. Efile taxes Ministers' and military housing allowances. Efile taxes   If you are a minister or a member of the uniformed services and receive a housing allowance that you can exclude from income, you still can deduct all of the real estate taxes you pay on your home. Efile taxes Refund (or rebate). Efile taxes   If you received a refund or rebate in 2013 of real estate taxes you paid in 2013, you must reduce your deduction by the amount refunded to you. Efile taxes If you received a refund or rebate in 2013 of real estate taxes you deducted in an earlier year (either as an itemized deduction or an increase to your standard deduction), you generally must include the refund or rebate in income in the year you receive it. Efile taxes However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. Efile taxes For more information, see Recoveries in chapter 12. Efile taxes Table 22-1. Efile taxes Which Taxes Can You Deduct? Type of Tax You Can Deduct You Cannot Deduct Fees and Charges Fees and charges that are expenses of your trade or business or of producing income. Efile taxes Fees and charges that are not expenses of your trade or business or of producing income, such as fees for driver's licenses, car inspections, parking, or charges for water bills (see Taxes and Fees You Cannot Deduct ). Efile taxes     Fines and penalties. Efile taxes Income Taxes State and local income taxes. Efile taxes Federal income taxes. Efile taxes   Foreign income taxes. Efile taxes     Employee contributions to state funds listed under Contributions to state benefit funds . Efile taxes Employee contributions to private or voluntary disability plans. Efile taxes     State and local general sales taxes if you choose to deduct state and local income taxes. Efile taxes General Sales Taxes State and local general sales taxes, including compensating use taxes. Efile taxes State and local income taxes if you choose to deduct state and local general sales taxes. Efile taxes Other Taxes Taxes that are expenses of your trade or business. Efile taxes Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. Efile taxes   Taxes on property producing rent or royalty income. Efile taxes Per capita taxes. Efile taxes   Occupational taxes. Efile taxes See chapter 28. Efile taxes     One-half of self-employment tax paid. Efile taxes   Personal Property Taxes State and local personal property taxes. Efile taxes Customs duties that are not expenses of your trade or business or of producing income. Efile taxes Real Estate Taxes State and local real estate taxes. Efile taxes Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). Efile taxes   Foreign real estate taxes. Efile taxes Taxes for local benefits (with exceptions). Efile taxes See Real Estate-Related Items You Cannot Deduct . Efile taxes   Tenant's share of real estate taxes paid by  cooperative housing corporation. Efile taxes Trash and garbage pickup fees (with exceptions). Efile taxes See Real Estate-Related Items You Cannot Deduct . Efile taxes     Rent increase due to higher real estate taxes. Efile taxes     Homeowners' association charges. Efile taxes Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. Efile taxes Taxes for local benefits. Efile taxes Itemized charges for services (such as trash and garbage pickup fees). Efile taxes Transfer taxes (or stamp taxes). Efile taxes Rent increases due to higher real estate taxes. Efile taxes Homeowners' association charges. Efile taxes Taxes for local benefits. Efile taxes   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. Efile taxes These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. Efile taxes You should increase the basis of your property by the amount of the assessment. Efile taxes   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. Efile taxes If only a part of the taxes is for maintenance, repair, or interest, you must be able to show the amount of that part to claim the deduction. Efile taxes If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. Efile taxes    Taxes for local benefits may be included in your real estate tax bill. Efile taxes If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Efile taxes You should use the rules above to determine if the local benefit tax is deductible. Efile taxes Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Efile taxes Itemized charges for services. Efile taxes    An itemized charge for services assessed against specific property or certain people is not a tax, even if the charge is paid to the taxing authority. Efile taxes For example, you cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged to each homeowner for trash collection), or A flat fee charged for a single service provided by your government (such as a $30 charge for mowing your lawn because it was allowed to grow higher than permitted under your local ordinance). Efile taxes    You must look at your real estate tax bill to determine if any nondeductible itemized charges, such as those listed above, are included in the bill. Efile taxes If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Efile taxes Exception. Efile taxes   Service charges used to maintain or improve services (such as trash collection or police and fire protection) are deductible as real estate taxes if: The fees or charges are imposed at a like rate against all property in the taxing jurisdiction, The funds collected are not earmarked; instead, they are commingled with general revenue funds, and Funds used to maintain or improve services are not limited to or determined by the amount of these fees or charges collected. Efile taxes Transfer taxes (or stamp taxes). Efile taxes   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. Efile taxes If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. Efile taxes If paid by the buyer, they are included in the cost basis of the property. Efile taxes Rent increase due to higher real estate taxes. Efile taxes   If your landlord increases your rent in the form of a tax surcharge because of increased real estate taxes, you cannot deduct the increase as taxes. Efile taxes Homeowners' association charges. Efile taxes   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. Efile taxes Personal Property Taxes Personal property tax is deductible if it is a state or local tax that is: Charged on personal property, Based only on the value of the personal property, and Charged on a yearly basis, even if it is collected more or less than once a year. Efile taxes A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. Efile taxes For example, a yearly tax based on value qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicles or using them on the highways. Efile taxes If the tax is partly based on value and partly based on other criteria, it may qualify in part. Efile taxes Example. Efile taxes Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. Efile taxes You paid $32 based on the value ($1,500) and weight (3,400 lbs. Efile taxes ) of your car. Efile taxes You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. Efile taxes The remaining $17 ($. Efile taxes 50 × 34), based on the weight, is not deductible. Efile taxes Taxes and Fees You Cannot Deduct Many federal, state, and local government taxes are not deductible because they do not fall within the categories discussed earlier. Efile taxes Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. Efile taxes See Table 22-1. Efile taxes Taxes and fees that are generally not deductible include the following items. Efile taxes Employment taxes. Efile taxes This includes social security, Medicare, and railroad retirement taxes withheld from your pay. Efile taxes However, one-half of self-employment tax you pay is deductible. Efile taxes In addition, the social security and other employment taxes you pay on the wages of a household worker may be included in medical expenses that you can deduct or child care expenses that allow you to claim the child and dependent care credit. Efile taxes For more information, see chapters 21 and 32. Efile taxes Estate, inheritance, legacy, or succession taxes. Efile taxes However, you can deduct the estate tax attributable to income in respect of a decedent if you, as a beneficiary, must include that income in your gross income. Efile taxes In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. Efile taxes For more information, see Publication 559, Survivors, Executors, and Administrators. Efile taxes Federal income taxes. Efile taxes This includes income taxes withheld from your pay. Efile taxes Fines and penalties. Efile taxes You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. Efile taxes Gift taxes. Efile taxes License fees. Efile taxes You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). Efile taxes Per capita taxes. Efile taxes You cannot deduct state or local per capita taxes. Efile taxes Many taxes and fees other than those listed above are also nondeductible, unless they are ordinary and necessary expenses of a business or income producing activity. Efile taxes For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. Efile taxes Where To Deduct You deduct taxes on the following schedules. Efile taxes State and local income taxes. Efile taxes    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. Efile taxes Check box a on line 5. Efile taxes General sales taxes. Efile taxes   Sales taxes are deducted on Schedule A (Form 1040), line 5. Efile taxes You must check box b on line 5. Efile taxes If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. Efile taxes Foreign income taxes. Efile taxes   Generally, income taxes you pay to a foreign country or U. Efile taxes S. Efile taxes possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. Efile taxes S. Efile taxes income tax on Form 1040, line 47. Efile taxes To claim the credit, you may have to complete and attach Form 1116. Efile taxes For more information, see chapter 37, the Form 1040 instructions, or Publication 514. Efile taxes Real estate taxes and personal property taxes. Efile taxes    Real estate and personal property taxes are deducted on Schedule A (Form 1040), lines 6 and 7, respectively, unless they are paid on property used in your business, in which case they are deducted on Schedule C, Schedule C-EZ, or Schedule F (Form 1040). Efile taxes Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). Efile taxes Self-employment tax. Efile taxes    Deduct one-half of your self-employment tax on Form 1040, line 27. Efile taxes Other taxes. Efile taxes    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. Efile taxes Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - Controlled Foreign Corporations

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  • Data are taken from Form 5471 - Information Return of U.S. Persons With Respect to Certain Foreign Corporations.
  • For U.S. income tax purposes, a foreign corporation is "controlled" if U.S. shareholders own more than 50% of its outstanding voting stock.
  • Data are also available for the One-Time Dividend Received Deduction reported on Form 8895.

Statistical Tables     SOI Bulletin Articles     Metadata   
 


Statistical Tables

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U.S. Corporations and Their Controlled Foreign Corporations
     Data Presented: Number, Assets, Receipts, Earnings, Taxes, Distributions, Subpart F Income, and Related Party Transactions
     Classified by: Selected NAICS Industrial Sector*
     Tax Years: 2008     2006     2004   
 
     Classified by: Selected Country of Incorporation
     Tax Years: 2008     2006     2004   
 
     Classified by: Selected Country of Incorporation and NAICS Industrial Sector*
     Tax Years: 2008     2006     2004   
 
U.S. Corporations with Total Assets of $500 Million or More and Their 7,500 Largest Controlled Foreign Corporations
     Data Presented: Number, Assets, Receipts, Earnings, Taxes, Distributions, and Subpart F Income
     Classified by: Selected NAICS Industrial Sector*
     Tax Years: 2002   2000   1998   1996   1994   1992   1988
 
     Classified by: Selected Country of Incorporation
     Tax Years: 2002   2000   1998   1996   1994   1992   1988
 
     Classified by: Selected Country of Incorporation and NAICS Industrial Sector*
     Tax Years: 2002   2000   1998   1996   1994   1988


 

U.S. Corporations with Total Assets of $500 Million or More and Their 7,500 Largest Controlled Foreign Corporations
     Data Presented: Number, Assets, Receipts, and Earnings, Standard Industrial Classification (SIC) and North American Industry Classification System (NAICS)
     Classified by: Selected NAICS Industrial Sector
     Tax Year: 1998


*Note:  For Tax Years prior to 1998, industry data are presented by Standard Industry Classification (SIC).  Industry data for Tax Years 1998 to present are presented by North American Industry Classification System (NAICS)


SOI Bulletin Articles

The following are available as PDF files.  A free Adobe® reader is available for download, if needed.

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Page Last Reviewed or Updated: 15-Jan-2014

The Efile Taxes

Efile taxes 7. Efile taxes   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Efile taxes Custodian account for your child. Efile taxes Penalty for failure to supply SSN. Efile taxes Reporting backup withholding. Efile taxes Savings account with parent as trustee. Efile taxes Interest not reported on Form 1099-INT. Efile taxes Nominees. Efile taxes Incorrect amount. Efile taxes Information reporting requirement. Efile taxes Taxable InterestInterest subject to penalty for early withdrawal. Efile taxes Money borrowed to invest in certificate of deposit. Efile taxes U. Efile taxes S. Efile taxes Savings Bonds Education Savings Bond Program U. Efile taxes S. Efile taxes Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Efile taxes How To Report Interest IncomeSchedule B (Form 1040A or 1040). Efile taxes Reporting tax-exempt interest. Efile taxes U. Efile taxes S. Efile taxes savings bond interest previously reported. Efile taxes Reminder Foreign-source income. Efile taxes  If you are a U. Efile taxes S. Efile taxes citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Efile taxes S. Efile taxes law. Efile taxes This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Efile taxes Introduction This chapter discusses the following topics. Efile taxes Different types of interest income. Efile taxes What interest is taxable and what interest is nontaxable. Efile taxes When to report interest income. Efile taxes How to report interest income on your tax return. Efile taxes In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Efile taxes Exceptions to this rule are discussed later in this chapter. Efile taxes You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Efile taxes See Money borrowed to invest in certificate of deposit , later, and chapter 28. Efile taxes Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. Efile taxes S. Efile taxes Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Efile taxes S. Efile taxes Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Efile taxes Recordkeeping. Efile taxes You should keep a list showing sources and interest amounts received during the year. Efile taxes Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Efile taxes Tax on unearned income of certain children. Efile taxes    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Efile taxes If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Efile taxes If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Efile taxes   Some parents can choose to include the child's interest and dividends on the parent's return. Efile taxes If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Efile taxes   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Efile taxes Beneficiary of an estate or trust. Efile taxes   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Efile taxes You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Efile taxes , from the fiduciary. Efile taxes Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Efile taxes Social security number (SSN). Efile taxes   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Efile taxes This includes payers of interest. Efile taxes If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Efile taxes SSN for joint account. Efile taxes   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Efile taxes (For information on who owns the funds in a joint account, see Joint accounts , later. Efile taxes ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Efile taxes This is because only one name and SSN can be shown on Form 1099. Efile taxes   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Efile taxes For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Efile taxes Custodian account for your child. Efile taxes   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Efile taxes For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Efile taxes Penalty for failure to supply SSN. Efile taxes   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Efile taxes See Failure to supply SSN under Penalties in chapter 1. Efile taxes Backup withholding also may apply. Efile taxes Backup withholding. Efile taxes   Your interest income is generally not subject to regular withholding. Efile taxes However, it may be subject to backup withholding to ensure that income tax is collected on the income. Efile taxes Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Efile taxes   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Efile taxes For more information, see Backup Withholding in chapter 4. Efile taxes Reporting backup withholding. Efile taxes   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. Efile taxes The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Efile taxes ” Joint accounts. Efile taxes   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. Efile taxes Income from property given to a child. Efile taxes   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Efile taxes   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Efile taxes Savings account with parent as trustee. Efile taxes   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Efile taxes The savings account legally belongs to the child. Efile taxes The parents are not legally permitted to use any of the funds to support the child. Efile taxes Form 1099-INT. Efile taxes   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Efile taxes This form shows you the interest you received during the year. Efile taxes Keep this form for your records. Efile taxes You do not have to attach it to your tax return. Efile taxes   Report on your tax return the total interest income you receive for the tax year. Efile taxes Interest not reported on Form 1099-INT. Efile taxes   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Efile taxes For example, you may receive distributive shares of interest from partnerships or S corporations. Efile taxes This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Efile taxes , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Efile taxes Nominees. Efile taxes   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Efile taxes   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. Efile taxes Incorrect amount. Efile taxes   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Efile taxes The new Form 1099-INT you receive will be marked “Corrected. Efile taxes ” Form 1099-OID. Efile taxes   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Efile taxes For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Efile taxes Exempt-interest dividends. Efile taxes   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Efile taxes (However, see Information reporting requirement , next. Efile taxes ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Efile taxes You do not reduce your basis for distributions that are exempt-interest dividends. Efile taxes Information reporting requirement. Efile taxes   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Efile taxes This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Efile taxes Note. Efile taxes Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Efile taxes See Alternative Minimum Tax (AMT) in chapter 30 for more information. Efile taxes Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Efile taxes Interest on VA dividends. Efile taxes   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Efile taxes This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Efile taxes Individual retirement arrangements (IRAs). Efile taxes   Interest on a Roth IRA generally is not taxable. Efile taxes Interest on a traditional IRA is tax deferred. Efile taxes You generally do not include it in your income until you make withdrawals from the IRA. Efile taxes See chapter 17. Efile taxes Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Efile taxes The following are some sources of taxable interest. Efile taxes Dividends that are actually interest. Efile taxes   Certain distributions commonly called dividends are actually interest. Efile taxes You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Efile taxes  The “dividends” will be shown as interest income on Form 1099-INT. Efile taxes Money market funds. Efile taxes   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Efile taxes Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Efile taxes Certificates of deposit and other deferred interest accounts. Efile taxes   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Efile taxes You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Efile taxes The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Efile taxes If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Efile taxes Interest subject to penalty for early withdrawal. Efile taxes   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Efile taxes You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Efile taxes See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. Efile taxes Money borrowed to invest in certificate of deposit. Efile taxes   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Efile taxes You must report the total interest you earn on the certificate in your income. Efile taxes If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Efile taxes See Interest Expenses in chapter 3 of Publication 550. Efile taxes Example. Efile taxes You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Efile taxes The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Efile taxes The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Efile taxes The bank also gives you a statement showing that you paid $310 interest for 2013. Efile taxes You must include the $575 in your income. Efile taxes If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Efile taxes Gift for opening account. Efile taxes   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Efile taxes   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Efile taxes For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Efile taxes The value is determined by the cost to the financial institution. Efile taxes Example. Efile taxes You open a savings account at your local bank and deposit $800. Efile taxes The account earns $20 interest. Efile taxes You also receive a $15 calculator. Efile taxes If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Efile taxes You must report $35 interest income on your tax return. Efile taxes Interest on insurance dividends. Efile taxes   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Efile taxes However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Efile taxes Prepaid insurance premiums. Efile taxes   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Efile taxes U. Efile taxes S. Efile taxes obligations. Efile taxes   Interest on U. Efile taxes S. Efile taxes obligations, such as U. Efile taxes S. Efile taxes Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Efile taxes Interest on tax refunds. Efile taxes   Interest you receive on tax refunds is taxable income. Efile taxes Interest on condemnation award. Efile taxes   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Efile taxes Installment sale payments. Efile taxes   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Efile taxes That interest is taxable when you receive it. Efile taxes If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Efile taxes See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Efile taxes Interest on annuity contract. Efile taxes   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Efile taxes Usurious interest. Efile taxes   Usurious interest is interest charged at an illegal rate. Efile taxes This is taxable as interest unless state law automatically changes it to a payment on the principal. Efile taxes Interest income on frozen deposits. Efile taxes   Exclude from your gross income interest on frozen deposits. Efile taxes A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Efile taxes   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Efile taxes If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. Efile taxes   The interest you exclude is treated as credited to your account in the following year. Efile taxes You must include it in income in the year you can withdraw it. Efile taxes Example. Efile taxes $100 of interest was credited on your frozen deposit during the year. Efile taxes You withdrew $80 but could not withdraw any more as of the end of the year. Efile taxes You must include $80 in your income and exclude $20 from your income for the year. Efile taxes You must include the $20 in your income for the year you can withdraw it. Efile taxes Bonds traded flat. Efile taxes   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Efile taxes The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Efile taxes When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Efile taxes Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Efile taxes See Bonds Sold Between Interest Dates , later, for more information. Efile taxes Below-market loans. Efile taxes   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Efile taxes See Below-Market Loans in chapter 1 of Publication 550 for more information. Efile taxes U. Efile taxes S. Efile taxes Savings Bonds This section provides tax information on U. Efile taxes S. Efile taxes savings bonds. Efile taxes It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Efile taxes For other information on U. Efile taxes S. Efile taxes savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Efile taxes O. Efile taxes Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Efile taxes O. Efile taxes Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Efile taxes O. Efile taxes Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Efile taxes treasurydirect. Efile taxes gov/indiv/indiv. Efile taxes htm. Efile taxes Accrual method taxpayers. Efile taxes   If you use an accrual method of accounting, you must report interest on U. Efile taxes S. Efile taxes savings bonds each year as it accrues. Efile taxes You cannot postpone reporting interest until you receive it or until the bonds mature. Efile taxes Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Efile taxes Cash method taxpayers. Efile taxes   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Efile taxes S. Efile taxes savings bonds when you receive it. Efile taxes The cash method of accounting is explained in chapter 1 under Accounting Methods. Efile taxes But see Reporting options for cash method taxpayers , later. Efile taxes Series HH bonds. Efile taxes    These bonds were issued at face value. Efile taxes Interest is paid twice a year by direct deposit to your bank account. Efile taxes If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Efile taxes   Series HH bonds were first offered in 1980 and last offered in August 2004. Efile taxes Before 1980, series H bonds were issued. Efile taxes Series H bonds are treated the same as series HH bonds. Efile taxes If you are a cash method taxpayer, you must report the interest when you receive it. Efile taxes   Series H bonds have a maturity period of 30 years. Efile taxes Series HH bonds mature in 20 years. Efile taxes The last series H bonds matured in 2009. Efile taxes Series EE and series I bonds. Efile taxes   Interest on these bonds is payable when you redeem the bonds. Efile taxes The difference between the purchase price and the redemption value is taxable interest. Efile taxes Series EE bonds. Efile taxes   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Efile taxes   Before July 1980, series E bonds were issued. Efile taxes The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Efile taxes Paper series EE and series E bonds are issued at a discount. Efile taxes The face value is payable to you at maturity. Efile taxes Electronic series EE bonds are issued at their face value. Efile taxes The face value plus accrued interest is payable to you at maturity. Efile taxes As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Efile taxes   Owners of paper series EE bonds can convert them to electronic bonds. Efile taxes These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Efile taxes Series I bonds. Efile taxes   Series I bonds were first offered in 1998. Efile taxes These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Efile taxes The face value plus all accrued interest is payable to you at maturity. Efile taxes Reporting options for cash method taxpayers. Efile taxes   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Efile taxes Method 1. Efile taxes Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Efile taxes (However, see Savings bonds traded , later. Efile taxes )  Note. Efile taxes Series EE bonds issued in 1983 matured in 2013. Efile taxes If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Efile taxes The last series E bonds were issued in 1980 and matured in 2010. Efile taxes If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Efile taxes Method 2. Efile taxes Choose to report the increase in redemption value as interest each year. Efile taxes You must use the same method for all series EE, series E, and series I bonds you own. Efile taxes If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Efile taxes    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Efile taxes To learn how, see Education Savings Bond Program, later. Efile taxes Change from method 1. Efile taxes   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Efile taxes In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Efile taxes   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Efile taxes Change from method 2. Efile taxes   To change from method 2 to method 1, you must request permission from the IRS. Efile taxes Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Efile taxes You have typed or printed the following number at the top: “131. Efile taxes ” It includes your name and social security number under “131. Efile taxes ” It includes the year of change (both the beginning and ending dates). Efile taxes It identifies the savings bonds for which you are requesting this change. Efile taxes It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Efile taxes   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Efile taxes   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Efile taxes On the statement, type or print “Filed pursuant to section 301. Efile taxes 9100-2. Efile taxes ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Efile taxes    By the date you file the original statement with your return, you must also send a signed copy to the address below. Efile taxes   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Efile taxes O. Efile taxes Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Efile taxes   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. Efile taxes In that case, follow the form instructions for an automatic change. Efile taxes No user fee is required. Efile taxes Co-owners. Efile taxes   If a U. Efile taxes S. Efile taxes savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Efile taxes One co-owner's funds used. Efile taxes    If you used your funds to buy the bond, you must pay the tax on the interest. Efile taxes This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Efile taxes Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Efile taxes The co-owner who redeemed the bond is a “nominee. Efile taxes ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. Efile taxes Both co-owners' funds used. Efile taxes   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Efile taxes Community property. Efile taxes   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Efile taxes If you file separate returns, each of you generally must report one-half of the bond interest. Efile taxes For more information about community property, see Publication 555. Efile taxes Table 7-1. Efile taxes   These rules are also shown in Table 7-1. Efile taxes Ownership transferred. Efile taxes   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Efile taxes But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Efile taxes   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Efile taxes Purchased jointly. Efile taxes   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Efile taxes The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Efile taxes This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Efile taxes   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Efile taxes But the new co-owner will report only his or her share of the interest earned after the transfer. Efile taxes   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Efile taxes    Table 7-1. Efile taxes Who Pays the Tax on U. Efile taxes S. Efile taxes Savings Bond Interest IF . Efile taxes . Efile taxes . Efile taxes THEN the interest must be reported by . Efile taxes . Efile taxes . Efile taxes you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Efile taxes you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Efile taxes you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Efile taxes you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Efile taxes If you file separate returns, both you and your spouse generally report one-half of the interest. Efile taxes Example 1. Efile taxes You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Efile taxes The bond was issued to you and your spouse as co-owners. Efile taxes You both postpone reporting interest on the bond. Efile taxes You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Efile taxes At that time neither you nor your spouse has to report the interest earned to the date of reissue. Efile taxes Example 2. Efile taxes You bought a $1,000 series EE savings bond entirely with your own funds. Efile taxes The bond was issued to you and your spouse as co-owners. Efile taxes You both postpone reporting interest on the bond. Efile taxes You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Efile taxes You must report half the interest earned to the date of reissue. Efile taxes Transfer to a trust. Efile taxes   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Efile taxes However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Efile taxes You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Efile taxes   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Efile taxes See Savings bonds traded , later. Efile taxes Decedents. Efile taxes   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Efile taxes This is explained in chapter 1 of Publication 550. Efile taxes Savings bonds traded. Efile taxes   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Efile taxes (You cannot trade series I bonds for series HH bonds. Efile taxes After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Efile taxes ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Efile taxes When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Efile taxes Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Efile taxes Example. Efile taxes You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Efile taxes You reported the $223 as taxable income on your tax return. Efile taxes At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Efile taxes You hold the series HH bonds until maturity, when you receive $2,500. Efile taxes You must report $300 as interest income in the year of maturity. Efile taxes This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Efile taxes (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Efile taxes ) Choice to report interest in year of trade. Efile taxes   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. Efile taxes If you made this choice, it is treated as a change from method 1. Efile taxes See Change from method 1 under Series EE and series I bonds, earlier. Efile taxes Form 1099-INT for U. Efile taxes S. Efile taxes savings bonds interest. Efile taxes   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Efile taxes Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Efile taxes However, your Form 1099-INT may show more interest than you have to include on your income tax return. Efile taxes For example, this may happen if any of the following are true. Efile taxes You chose to report the increase in the redemption value of the bond each year. Efile taxes The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Efile taxes You received the bond from a decedent. Efile taxes The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Efile taxes Ownership of the bond was transferred. Efile taxes The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Efile taxes You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Efile taxes The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Efile taxes (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Efile taxes ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Efile taxes The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Efile taxes (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Efile taxes , for the year of distribution. Efile taxes )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Efile taxes Publication 550 includes examples showing how to report these amounts. Efile taxes    Interest on U. Efile taxes S. Efile taxes savings bonds is exempt from state and local taxes. Efile taxes The Form 1099-INT you receive will indicate the amount that is for U. Efile taxes S. Efile taxes savings bond interest in box 3. Efile taxes Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Efile taxes S. Efile taxes savings bonds during the year if you pay qualified higher educational expenses during the same year. Efile taxes This exclusion is known as the Education Savings Bond Program. Efile taxes You do not qualify for this exclusion if your filing status is married filing separately. Efile taxes Form 8815. Efile taxes   Use Form 8815 to figure your exclusion. Efile taxes Attach the form to your Form 1040 or Form 1040A. Efile taxes Qualified U. Efile taxes S. Efile taxes savings bonds. Efile taxes   A qualified U. Efile taxes S. Efile taxes savings bond is a series EE bond issued after 1989 or a series I bond. Efile taxes The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Efile taxes You must be at least 24 years old before the bond's issue date. Efile taxes For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Efile taxes    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Efile taxes Beneficiary. Efile taxes   You can designate any individual (including a child) as a beneficiary of the bond. Efile taxes Verification by IRS. Efile taxes   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Efile taxes Qualified expenses. Efile taxes   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Efile taxes   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Efile taxes   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Efile taxes Eligible educational institutions. Efile taxes   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. Efile taxes S. Efile taxes Department of Education. Efile taxes Reduction for certain benefits. Efile taxes   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Efile taxes Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Efile taxes Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Efile taxes Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Efile taxes Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Efile taxes Any expense used in figuring the American Opportunity and lifetime learning credits. Efile taxes Amount excludable. Efile taxes   If the total proceeds (interest and principal) from the qualified U. Efile taxes S. Efile taxes savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Efile taxes If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Efile taxes   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Efile taxes The numerator of the fraction is the qualified higher educational expenses you paid during the year. Efile taxes The denominator of the fraction is the total proceeds you received during the year. Efile taxes Example. Efile taxes In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Efile taxes S. Efile taxes savings bond they bought in April 1997. Efile taxes They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Efile taxes In 2013, they paid $4,000 of their daughter's college tuition. Efile taxes They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Efile taxes They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Efile taxes They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Efile taxes Modified adjusted gross income limit. Efile taxes   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. Efile taxes You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. Efile taxes   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. Efile taxes   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Efile taxes If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. Efile taxes   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. Efile taxes Recordkeeping. Efile taxes If you claim the interest exclusion, you must keep a written record of the qualified U. Efile taxes S. Efile taxes savings bonds you redeem. Efile taxes Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Efile taxes You can use Form 8818 to record this information. Efile taxes You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Efile taxes U. Efile taxes S. Efile taxes Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Efile taxes S. Efile taxes Government. Efile taxes Taxation of interest. Efile taxes   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Efile taxes You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Efile taxes   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Efile taxes Treasury bills. Efile taxes   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Efile taxes They are generally issued at a discount in the amount of $100 and multiples of $100. Efile taxes The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Efile taxes Generally, you report this interest income when the bill is paid at maturity. Efile taxes If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. Efile taxes Treasury notes and bonds. Efile taxes   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Efile taxes Maturity periods for Treasury bonds are longer than 10 years. Efile taxes Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Efile taxes Generally, you report this interest for the year paid. Efile taxes For more information, see U. Efile taxes S. Efile taxes Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Efile taxes For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Efile taxes O. Efile taxes Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Efile taxes treasurydirect. Efile taxes gov/indiv/indiv. Efile taxes htm. Efile taxes For information on series EE, series I, and series HH savings bonds, see U. Efile taxes S. Efile taxes Savings Bonds , earlier. Efile taxes Treasury inflation-protected securities (TIPS). Efile taxes   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Efile taxes For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Efile taxes Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. Efile taxes You must report that part of the sales price as interest income for the year of sale. Efile taxes If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Efile taxes When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. Efile taxes See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Efile taxes Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Efile taxes But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Efile taxes For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Efile taxes Annuity. Efile taxes   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. Efile taxes See chapter 10 for information on pension and annuity income from nonqualified plans. Efile taxes State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. Efile taxes Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. Efile taxes Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. Efile taxes For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. Efile taxes Information reporting requirement. Efile taxes   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Efile taxes This is an information reporting requirement only. Efile taxes It does not change tax-exempt interest to taxable interest. Efile taxes Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Efile taxes You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. Efile taxes A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Efile taxes OID is the difference between the stated redemption price at maturity and the issue price. Efile taxes All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Efile taxes Zero coupon bonds are one example of these instruments. Efile taxes The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). Efile taxes See Discount on Short-Term Obligations in chapter 1 of Publication 550. Efile taxes De minimis OID. Efile taxes   You can treat the discount as zero if it is less than one-fourth of 1% (. Efile taxes 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Efile taxes This small discount is known as “de minimis” OID. Efile taxes Example 1. Efile taxes You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Efile taxes One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Efile taxes Because the $20 discount is less than $25, the OID is treated as zero. Efile taxes (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Efile taxes ) Example 2. Efile taxes The facts are the same as in Example 1, except that the bond was issued at $950. Efile taxes The OID is $50. Efile taxes Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. Efile taxes Debt instrument bought after original issue. Efile taxes   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Efile taxes If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Efile taxes See Market Discount Bonds in chapter 1 of Publication 550. Efile taxes Exceptions to reporting OID. Efile taxes   The OID rules discussed in this chapter do not apply to the following debt instruments. Efile taxes Tax-exempt obligations. Efile taxes (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Efile taxes U. Efile taxes S. Efile taxes savings bonds. Efile taxes Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Efile taxes Obligations issued by an individual before March 2, 1984. Efile taxes Loans between individuals if all the following are true. Efile taxes The lender is not in the business of lending money. Efile taxes The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Efile taxes Avoiding any federal tax is not one of the principal purposes of the loan. Efile taxes Form 1099-OID. Efile taxes   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. Efile taxes Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Efile taxes It also will show, in box 2, the stated interest you must include in your income. Efile taxes A copy of Form 1099-OID will be sent to the IRS. Efile taxes Do not file your copy with your return. Efile taxes Keep it for your records. Efile taxes   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Efile taxes But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Efile taxes Form 1099-OID not received. Efile taxes   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Efile taxes gov that list total OID on certain debt instruments and have information that will help you figure OID. Efile taxes For the latest OID tables, go to www. Efile taxes irs. Efile taxes gov and enter “OID tables” in the Search box. Efile taxes If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Efile taxes Nominee. Efile taxes   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. Efile taxes Refiguring OID shown on Form 1099-OID. Efile taxes   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Efile taxes You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Efile taxes The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Efile taxes For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. Efile taxes Refiguring periodic interest shown on Form 1099-OID. Efile taxes   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. Efile taxes Certificates of deposit (CDs). Efile taxes   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. Efile taxes   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Efile taxes , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Efile taxes Bearer CDs. Efile taxes   CDs issued after 1982 generally must be in registered form. Efile taxes Bearer CDs are CDs not in registered form. Efile taxes They are not issued in the depositor's name and are transferable from one individual to another. Efile taxes   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Efile taxes More information. Efile taxes   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Efile taxes When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. Efile taxes Cash method. Efile taxes   Most individual taxpayers use the cash method. Efile taxes If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Efile taxes However, there are special rules for reporting the discount on certain debt instruments. Efile taxes See U. Efile taxes S. Efile taxes Savings Bonds and Original Issue Discount (OID) , earlier. Efile taxes Example. Efile taxes On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Efile taxes You are not in the business of lending money. Efile taxes The note stated that principal and interest would be due on August 31, 2013. Efile taxes In 2013, you received $2,508. Efile taxes 80 ($2,000 principal and $508. Efile taxes 80 interest). Efile taxes If you use the cash method, you must include in income on your 2013 return the $508. Efile taxes 80 interest you received in that year. Efile taxes Constructive receipt. Efile taxes   You constructively receive income when it is credited to your account or made available to you. Efile taxes You do not need to have physical possession of it. Efile taxes For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. Efile taxes This is true even if they are not yet entered in your passbook. Efile taxes   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. Efile taxes Accrual method. Efile taxes   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Efile taxes Interest is earned over the term of the debt instrument. Efile taxes Example. Efile taxes If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Efile taxes You would report the interest as follows: 2011, $80; 2012, $249. Efile taxes 60; and 2013, $179. Efile taxes 20. Efile taxes Coupon bonds. Efile taxes   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Efile taxes It does not matter when you mail the coupon for payment. Efile taxes How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. Efile taxes You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Efile taxes Instead, you must use Form 1040A or Form 1040. Efile taxes Form 1040A. Efile taxes   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Efile taxes Your taxable interest income is more than $1,500. Efile taxes You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Efile taxes You received interest from a seller-financed mortgage, and the buyer used the property as a home. Efile taxes You received a Form 1099-INT for U. Efile taxes S. Efile taxes savings bond interest that includes amounts you reported before 2013. Efile taxes You received, as a nominee, interest that actually belongs to someone else. Efile taxes You received a Form 1099-INT for interest on frozen deposits. Efile taxes You are reporting OID in an amount less than the amount shown on Form 1099-OID. Efile taxes You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Efile taxes You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). Efile taxes List each payer's name and the amount of interest income received from each payer on line 1. Efile taxes If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Efile taxes   You cannot use Form 1040A if you must use Form 1040, as described next. Efile taxes Form 1040. Efile taxes   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. Efile taxes Schedule B (Form 1040A or 1040). Efile taxes   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Efile taxes Your taxable interest income is more than $1,500. Efile taxes You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Efile taxes You received interest from a seller-financed mortgage, and the buyer used the property as a home. Efile taxes You received a Form 1099-INT for U. Efile taxes S. Efile taxes savings bond interest that includes amounts you reported before 2013. Efile taxes You received, as a nominee, interest that actually belongs to someone else. Efile taxes You received a Form 1099-INT for interest on frozen deposits. Efile taxes You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Efile taxes You are reporting OID in an amount less than the amount shown on Form 1099-OID. Efile taxes Statement (2) in the preceding list under Form 1040 is true. Efile taxes In Part I, line 1, list each payer's name and the amount received from each. Efile taxes If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Efile taxes Reporting tax-exempt interest. Efile taxes   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. Efile taxes Add these amounts to any other tax-exempt interest you received. Efile taxes Report the total on line 8b of Form 1040A or 1040. Efile taxes   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Efile taxes Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Efile taxes   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. Efile taxes These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Efile taxes Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Efile taxes    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Efile taxes Form 1099-INT. Efile taxes   Your taxable interest income, except for interest from U. Efile taxes S. Efile taxes savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Efile taxes Add this amount to any other taxable interest income you received. Efile taxes You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Efile taxes Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Efile taxes Your identifying number may be truncated on any paper Form 1099-INT you receive. Efile taxes   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. Efile taxes See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Efile taxes   Box 3 of Form 1099-INT shows the interest income you received from U. Efile taxes S. Efile taxes savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Efile taxes Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. Efile taxes If part of the amount shown in box 3 was previously included in your interest income, see U. Efile taxes S. Efile taxes savings bond interest previously reported , later. Efile taxes   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Efile taxes Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). Efile taxes   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Efile taxes See chapter 28 for more information about investment expenses. Efile taxes   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Efile taxes You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). Efile taxes To take the credit, you may have to file Form 1116, Foreign Tax Credit. Efile taxes For more information, see Publication 514, Foreign Tax Credit for Individuals. Efile taxes U. Efile taxes S. Efile taxes savings bond interest previously reported. Efile taxes   If you received a Form 1099-INT for U. Efile taxes S. Efile taxes savings bond interest, the form may show interest you do not have to report. Efile taxes See Form 1099-INT for U. Efile taxes S. Efile taxes savings bonds interest , earlier, under U. Efile taxes S. Efile taxes Savings Bonds. Efile taxes   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Efile taxes Then follow these steps. Efile taxes Several lines above line 2, enter a subtotal of all interest listed on line 1. Efile taxes Below the subtotal enter “U. Efile taxes S. Efile taxes Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Efile taxes Subtract these amounts from the subtotal and enter the result on line 2. Efile taxes More information. Efile taxes   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Efile taxes Prev  Up  Next   Home   More Online Publications