File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Electronic State Tax Filing

1040a 2011 Tax FormTurbotax 2009E File 2011 Tax Return In 2013Free Tax CalculatorCan You Still E File 2010 Tax ReturnsFree Tax ExtensionsUs Irs Tax Forms1040x Amended Tax Return FormHrblockIrs Form 1040 Ez InstructionsTax Extension For UnemployedFederal 1040ez Forms And Instructions 20131040nr 2011How To Refile A Tax ReturnI Need Tax Instruction Booklet For 1040ezFiling State Tax ReturnsIrs EfileIrs Gov Irs FormsFree Tax HelpTax Form 1040ezState Income TaxE File IrsHow To File My 2012 Tax ReturnHow To Complete A 1040xHow To Do Your Taxes1040ez Forms 2013How Do I File My 2011 Taxes LateIrs Tax Forms For 2009Can Unemployed People File TaxesFree State Tax Return OnlineH&rblockFree Military TaxesHow Do I Efile My State TaxesWww Freefilefillableforms Com Ffa Freefileforms HtmFile 2012 Tax Return FreeMyfreetaxes ReviewForm 1040Hand R Block OnlineAmend My Taxes OnlineDo Unemployed People File Taxes

Electronic State Tax Filing

Electronic state tax filing Internal Revenue Bulletin:  2009-17  April 27, 2009  Rev. Electronic state tax filing Proc. Electronic state tax filing 2009-24 Table of Contents SECTION 1. Electronic state tax filing PURPOSE SECTION 2. Electronic state tax filing BACKGROUND SECTION 3. Electronic state tax filing SCOPE SECTION 4. Electronic state tax filing APPLICATION. Electronic state tax filing 01 In General. Electronic state tax filing . Electronic state tax filing 02 Limitations on Depreciation Deductions for Certain Automobiles. Electronic state tax filing . Electronic state tax filing 03 Inclusions in Income of Lessees of Passenger Automobiles. Electronic state tax filing SECTION 5. Electronic state tax filing EFFECTIVE DATE SECTION 6. Electronic state tax filing DRAFTING INFORMATION SECTION 1. Electronic state tax filing PURPOSE . Electronic state tax filing 01 This revenue procedure provides: (1) limitations on depreciation deductions for owners of passenger automobiles first placed in service by the taxpayer during calendar year 2009, including a separate table of limitations on depreciation deductions for trucks and vans; and (2) the amounts to be included in income by lessees of passenger automobiles first leased by the taxpayer during calendar year 2009, including a separate table of inclusion amounts for lessees of trucks and vans. Electronic state tax filing . Electronic state tax filing 02 The tables detailing these depreciation limitations and lessee inclusion amounts reflect the automobile price inflation adjustments required by § 280F(d)(7) of the Internal Revenue Code. Electronic state tax filing SECTION 2. Electronic state tax filing BACKGROUND . Electronic state tax filing 01 For owners of passenger automobiles, § 280F(a) imposes dollar limitations on the depreciation deduction for the year that the passenger automobile is placed in service by the taxpayer and each succeeding year. Electronic state tax filing Section 280F(d)(7) requires the amounts allowable as depreciation deductions to be increased by a price inflation adjustment amount for passenger automobiles placed in service after 1988. Electronic state tax filing The method of calculating this price inflation amount for trucks and vans placed in service in or after calendar year 2003 uses a different CPI “automobile component” (the “new trucks” component) than that used in the price inflation amount calculation for other passenger automobiles (the “new cars” component), resulting in somewhat higher depreciation deductions for trucks and vans. Electronic state tax filing This change reflects the higher rate of price inflation that trucks and vans have been subject to since 1988. Electronic state tax filing . Electronic state tax filing 02 Section 168(k)(1)(A) provides a 50 percent additional first year depreciation deduction for certain new property acquired by a taxpayer after December 31, 2007, and before January 1, 2010, if no written binding contract for the acquisition of the property existed before January 1, 2008. Electronic state tax filing Section 168(k)(2)(F)(i) increases the first year depreciation allowed under § 280F(a)(1)(A) by $8,000 for passenger automobiles to which the 50 percent additional first year depreciation deduction applies. Electronic state tax filing . Electronic state tax filing 03 Section 168(k)(2)(D)(i) provides that the 50 percent additional first year depreciation deduction does not apply to any property required to be depreciated under the alternative depreciation system of § 168(g), including property described in § 280F(b)(1). Electronic state tax filing Section 168(k)(2)(D)(iii) permits a taxpayer to elect to not claim the 50 percent additional first year depreciation deduction for any class of property. Electronic state tax filing Section 168(k)(4) permits a corporation to elect to not claim the 50 percent additional first year depreciation deduction for all eligible qualified property (that is extension property or that is not extension property, as applicable) and instead to increase the business credit limitation under § 38(c) or the alternative minimum tax credit limitation under § 53(c). Electronic state tax filing Accordingly, this revenue procedure provides tables for passenger automobiles for which the 50 percent additional depreciation deduction applies and tables for passenger automobiles for which the 50 percent additional first year depreciation deduction does not apply, including passenger automobiles in a class of property for which the taxpayer “elects out” of the 50 percent additional first year depreciation deduction or passenger automobiles that are eligible qualified property to which the § 168(k)(4) election applies. Electronic state tax filing . Electronic state tax filing 04 For leased passenger automobiles, § 280F(c) requires a reduction in the deduction allowed to the lessee of the passenger automobile. Electronic state tax filing The reduction must be substantially equivalent to the limitations on the depreciation deductions imposed on owners of passenger automobiles. Electronic state tax filing Under § 1. Electronic state tax filing 280F-7(a) of the Income Tax Regulations, this reduction requires a lessee to include in gross income an inclusion amount determined by applying a formula to the amount obtained from a table. Electronic state tax filing One table applies to lessees of trucks and vans and another table applies to all other passenger automobiles. Electronic state tax filing Each table shows inclusion amounts for a range of fair market values for each taxable year after the passenger automobile is first leased. Electronic state tax filing SECTION 3. Electronic state tax filing SCOPE . Electronic state tax filing 01 The limitations on depreciation deductions in section 4. Electronic state tax filing 02(2) of this revenue procedure apply to passenger automobiles (other than leased passenger automobiles) that are placed in service by the taxpayer in calendar year 2009, and continue to apply for each taxable year that the passenger automobile remains in service. Electronic state tax filing . Electronic state tax filing 02 The tables in section 4. Electronic state tax filing 03 of this revenue procedure apply to leased passenger automobiles for which the lease term begins during calendar year 2009. Electronic state tax filing Lessees of these passenger automobiles must use these tables to determine the inclusion amount for each taxable year during which the passenger automobile is leased. Electronic state tax filing See Rev. Electronic state tax filing Proc. Electronic state tax filing 2002-14, 2002-1 C. Electronic state tax filing B. Electronic state tax filing 450, for passenger automobiles first leased before January 1, 2003, Rev. Electronic state tax filing Proc. Electronic state tax filing 2003-75, 2003-2 C. Electronic state tax filing B. Electronic state tax filing 1018, for passenger automobiles first leased during calendar year 2003, Rev. Electronic state tax filing Proc. Electronic state tax filing 2004-20, 2004-1 C. Electronic state tax filing B. Electronic state tax filing 642, for passenger automobiles first leased during calendar year 2004, Rev. Electronic state tax filing Proc. Electronic state tax filing 2005-13, 2005-1 C. Electronic state tax filing B. Electronic state tax filing 759, for passenger automobiles first leased during calendar year 2005, Rev. Electronic state tax filing Proc. Electronic state tax filing 2006-18, 2006-1 C. Electronic state tax filing B. Electronic state tax filing 645, for passenger automobiles first leased during calendar year 2006, Rev. Electronic state tax filing Proc. Electronic state tax filing 2007-30, 2007-1 C. Electronic state tax filing B. Electronic state tax filing 1104, for passenger automobiles first leased during calendar year 2007, and Rev. Electronic state tax filing Proc. Electronic state tax filing 2008-22, 2008-12 I. Electronic state tax filing R. Electronic state tax filing B. Electronic state tax filing 658, for passenger automobiles first leased during calendar year 2008. Electronic state tax filing SECTION 4. Electronic state tax filing APPLICATION . Electronic state tax filing 01 In General. Electronic state tax filing (1) Limitations on depreciation deductions for certain automobiles. Electronic state tax filing The limitations on depreciation deductions for passenger automobiles placed in service by the taxpayer for the first time during calendar year 2009 are in Tables 1 through 4 in section 4. Electronic state tax filing 02(2) of this revenue procedure. Electronic state tax filing (2) Inclusions in income of lessees of passenger automobiles. Electronic state tax filing A taxpayer first leasing a passenger automobile during calendar year 2009 must determine the inclusion amount that is added to gross income using Tables 5 and 6 in section 4. Electronic state tax filing 03 of this revenue procedure. Electronic state tax filing In addition, the taxpayer must follow the procedures of § 1. Electronic state tax filing 280F-7(a). Electronic state tax filing . Electronic state tax filing 02 Limitations on Depreciation Deductions for Certain Automobiles. Electronic state tax filing (1) Amount of the inflation adjustment. Electronic state tax filing (a) Passenger automobiles (other than trucks or vans). Electronic state tax filing Under § 280F(d)(7)(B)(i), the automobile price inflation adjustment for any calendar year is the percentage (if any) by which the CPI automobile component for October of the preceding calendar year exceeds the CPI automobile component for October 1987. Electronic state tax filing The term “CPI automobile component” is defined in § 280F(d)(7)(B)(ii) as the “automobile component” of the Consumer Price Index for all Urban Consumers published by the Department of Labor. Electronic state tax filing The new car component of the CPI was 115. Electronic state tax filing 2 for October 1987 and 134. Electronic state tax filing 837 for October 2008. Electronic state tax filing The October 2008 index exceeded the October 1987 index by 19. Electronic state tax filing 637. Electronic state tax filing The Internal Revenue Service has, therefore, determined that the automobile price inflation adjustment for 2009 for passenger automobiles (other than trucks and vans) is 17. Electronic state tax filing 05 percent (19. Electronic state tax filing 637/115. Electronic state tax filing 2 x 100%). Electronic state tax filing This adjustment is applicable to all passenger automobiles (other than trucks and vans) that are first placed in service in calendar year 2009. Electronic state tax filing The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0. Electronic state tax filing 1705, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to passenger automobiles (other than trucks and vans) for calendar year 2009. Electronic state tax filing (b) Trucks and vans. Electronic state tax filing To determine the dollar limitations applicable to trucks and vans first placed in service during calendar year 2009, the new truck component of the CPI is used instead of the new car component. Electronic state tax filing The new truck component of the CPI was 112. Electronic state tax filing 4 for October 1987 and 133. Electronic state tax filing 640 for October 2008. Electronic state tax filing The October 2008 index exceeded the October 1987 index by 21. Electronic state tax filing 24. Electronic state tax filing The Service has, therefore, determined that the automobile price inflation adjustment for 2009 for trucks and vans is 18. Electronic state tax filing 90 percent (21. Electronic state tax filing 24/112. Electronic state tax filing 4 x 100%). Electronic state tax filing This adjustment is applicable to all trucks and vans that are first placed in service in calendar year 2009. Electronic state tax filing The dollar limitations in § 280F(a) therefore must be multiplied by a factor of 0. Electronic state tax filing 1890, and the resulting increases, after rounding to the nearest $100, are added to the 1988 limitations to give the depreciation limitations applicable to trucks and vans. Electronic state tax filing (2) Amount of the limitation. Electronic state tax filing For passenger automobiles placed in service by the taxpayer in calendar year 2009, Tables 1 through 4 contain the dollar amount of the depreciation limitation for each taxable year. Electronic state tax filing Use Table 1 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a passenger automobile (other than a truck or van) in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a passenger automobile that is eligible qualified property to which the § 168(k)(4) election applies. Electronic state tax filing Use Table 2 for a passenger automobile (other than a truck or van) placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. Electronic state tax filing Use Table 3 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction does not apply, including a truck or van in a class of property for which the taxpayer elects out of the 50 percent additional first year depreciation deduction or a truck or van that is eligible qualified property to which the § 168(k)(4) election applies. Electronic state tax filing Use Table 4 for a truck or van placed in service by the taxpayer in calendar year 2009, for which the 50 percent additional first year depreciation deduction applies. Electronic state tax filing REV. Electronic state tax filing PROC. Electronic state tax filing 2009-24 TABLE 1 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $2,960 2nd Tax Year $4,800 3rd Tax Year $2,850 Each Succeeding Year $1,775 REV. Electronic state tax filing PROC. Electronic state tax filing 2009-24 TABLE 2 DEPRECIATION LIMITATIONS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $10,960 2nd Tax Year $4,800 3rd Tax Year $2,850 Each Succeeding Year $1,775 REV. Electronic state tax filing PROC. Electronic state tax filing 2009-24 TABLE 3 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION DOES NOT APPLY Tax Year Amount 1st Tax Year $3,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 REV. Electronic state tax filing PROC. Electronic state tax filing 2009-24 TABLE 4 DEPRECIATION LIMITATIONS FOR TRUCKS AND VANS PLACED IN SERVICE BY THE TAXPAYER IN CALENDAR YEAR 2009, FOR WHICH THE 50 PERCENT ADDITIONAL FIRST YEAR DEPRECIATION DEDUCTION APPLIES Tax Year Amount 1st Tax Year $11,060 2nd Tax Year $4,900 3rd Tax Year $2,950 Each Succeeding Year $1,775 . Electronic state tax filing 03 Inclusions in Income of Lessees of Passenger Automobiles. Electronic state tax filing The inclusion amounts for passenger automobiles first leased in calendar year 2009 are calculated under the procedures described in § 1. Electronic state tax filing 280F-7(a). Electronic state tax filing Lessees of passenger automobiles other than trucks and vans should use Table 5 of this revenue procedure in applying these procedures, while lessees of trucks and vans should use Table 6 of this revenue procedure. Electronic state tax filing REV. Electronic state tax filing PROC. Electronic state tax filing 2009-24 TABLE 5 DOLLAR AMOUNTS FOR PASSENGER AUTOMOBILES (THAT ARE NOT TRUCKS OR VANS) WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2009 Fair Market Value of Passenger Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th & Later $18,500 $19,000 9 19 28 34 38 19,000 19,500 10 21 32 38 43 19,500 20,000 11 24 36 42 48 20,000 20,500 12 27 39 46 54 20,500 21,000 13 29 43 51 58 21,000 21,500 15 31 47 55 64 21,500 22,000 16 34 50 60 68 22,000 23,000 17 38 56 66 76 23,000 24,000 20 42 64 75 86 24,000 25,000 22 47 71 84 96 25,000 26,000 24 52 78 93 107 26,000 27,000 26 58 85 101 117 27,000 28,000 29 62 93 110 127 28,000 29,000 31 67 100 119 138 29,000 30,000 33 72 108 128 147 30,000 31,000 35 77 115 137 157 31,000 32,000 38 82 122 146 167 32,000 33,000 40 87 129 155 178 33,000 34,000 42 92 137 163 188 34,000 35,000 44 97 144 172 199 35,000 36,000 47 102 151 181 208 36,000 37,000 49 107 159 189 219 37,000 38,000 51 112 166 199 228 38,000 39,000 53 117 173 208 239 39,000 40,000 56 122 180 216 250 40,000 41,000 58 127 188 225 259 41,000 42,000 60 132 195 234 269 42,000 43,000 62 137 203 242 280 43,000 44,000 65 141 210 252 290 44,000 45,000 67 146 218 260 300 45,000 46,000 69 151 225 269 311 46,000 47,000 71 157 232 278 320 47,000 48,000 74 161 240 286 331 48,000 49,000 76 166 247 296 340 49,000 50,000 78 171 255 304 351 50,000 51,000 80 176 262 313 361 51,000 52,000 83 181 269 322 371 52,000 53,000 85 186 276 331 381 53,000 54,000 87 191 284 339 392 54,000 55,000 89 196 291 349 401 55,000 56,000 92 201 298 357 412 56,000 57,000 94 206 306 365 423 57,000 58,000 96 211 313 375 432 58,000 59,000 98 216 320 384 442 59,000 60,000 101 221 327 393 452 60,000 62,000 104 228 339 406 467 62,000 64,000 109 238 353 424 488 64,000 66,000 113 248 368 441 509 66,000 68,000 118 258 382 459 529 68,000 70,000 122 268 397 476 550 70,000 72,000 127 277 413 493 570 72,000 74,000 131 288 427 511 590 74,000 76,000 136 297 442 529 610 76,000 78,000 140 307 457 546 631 78,000 80,000 145 317 471 564 651 80,000 85,000 152 335 497 595 686 85,000 90,000 164 359 534 639 737 90,000 95,000 175 384 570 683 789 95,000 100,000 186 409 607 727 839 100,000 110,000 203 446 662 793 916 110,000 120,000 226 495 736 881 1,018 120,000 130,000 248 545 809 970 1,119 130,000 140,000 271 594 883 1,058 1,220 140,000 150,000 293 644 956 1,146 1,322 150,000 160,000 316 693 1,030 1,234 1,424 160,000 170,000 338 743 1,103 1,322 1,526 170,000 180,000 361 792 1,177 1,410 1,628 180,000 190,000 383 842 1,250 1,498 1,730 190,000 200,000 406 891 1,324 1,586 1,831 200,000 210,000 428 941 1,397 1,675 1,932 210,000 220,000 451 990 1,471 1,762 2,035 220,000 230,000 473 1,040 1,544 1,851 2,136 230,000 240,000 496 1,089 1,618 1,939 2,238 240,000 And up 518 1,139 1,691 2,027 2,340 REV. Electronic state tax filing PROC. Electronic state tax filing 2009-24 TABLE 6 DOLLAR AMOUNTS FOR TRUCKS AND VANS WITH A LEASE TERM BEGINNING IN CALENDAR YEAR 2009 Fair Market Value of Electric Automobile Tax Year During Lease Over Not Over 1st 2nd 3rd 4th 5th and Later $18,500 $19,000 8 17 25 30 35 19,000 19,500 9 19 29 35 40 19,500 20,000 10 22 33 38 45 20,000 20,500 11 25 36 43 50 20,500 21,000 12 27 40 48 55 21,000 21,500 13 30 43 52 60 21,500 22,000 15 32 47 56 66 22,000 23,000 16 36 52 64 72 23,000 24,000 18 41 60 72 83 24,000 25,000 21 45 68 81 93 25,000 26,000 23 50 75 90 103 26,000 27,000 25 56 82 98 114 27,000 28,000 27 61 89 107 124 28,000 29,000 30 65 97 116 134 29,000 30,000 32 70 104 125 144 30,000 31,000 34 75 112 134 154 31,000 32,000 36 80 119 143 164 32,000 33,000 39 85 126 151 175 33,000 34,000 41 90 134 160 184 34,000 35,000 43 95 141 169 195 35,000 36,000 45 100 148 178 205 36,000 37,000 48 105 155 187 215 37,000 38,000 50 110 163 195 226 38,000 39,000 52 115 170 204 236 39,000 40,000 55 120 177 213 246 40,000 41,000 57 125 185 221 256 41,000 42,000 59 130 192 231 266 42,000 43,000 61 135 199 240 276 43,000 44,000 64 139 207 249 286 44,000 45,000 66 144 215 257 296 45,000 46,000 68 149 222 266 307 46,000 47,000 70 155 229 274 317 47,000 48,000 73 159 237 283 327 48,000 49,000 75 164 244 292 338 49,000 50,000 77 169 251 301 348 50,000 51,000 79 174 259 310 357 51,000 52,000 82 179 266 318 368 52,000 53,000 84 184 273 328 378 53,000 54,000 86 189 281 336 388 54,000 55,000 88 194 288 345 399 55,000 56,000 91 199 295 354 408 56,000 57,000 93 204 302 363 419 57,000 58,000 95 209 310 371 429 58,000 59,000 97 214 317 381 439 59,000 60,000 100 219 324 389 450 60,000 62,000 103 226 336 402 465 62,000 64,000 107 236 351 420 485 64,000 66,000 112 246 365 438 505 66,000 68,000 116 256 380 455 526 68,000 70,000 121 266 394 473 546 70,000 72,000 125 276 409 491 566 72,000 74,000 130 286 423 509 586 74,000 76,000 134 296 438 526 607 76,000 78,000 139 305 454 543 627 78,000 80,000 143 316 467 561 648 80,000 85,000 151 333 493 592 684 85,000 90,000 163 357 531 635 735 90,000 95,000 174 382 567 680 785 95,000 100,000 185 407 604 724 836 100,000 110,000 202 444 659 790 912 110,000 120,000 225 493 733 878 1,014 120,000 130,000 247 543 806 966 1,116 130,000 140,000 270 592 880 1,054 1,218 140,000 150,000 292 642 953 1,143 1,319 150,000 160,000 315 691 1,027 1,230 1,421 160,000 170,000 337 741 1,100 1,319 1,522 170,000 180,000 360 790 1,174 1,407 1,624 180,000 190,000 382 840 1,247 1,495 1,726 190,000 200,000 405 889 1,321 1,583 1,828 200,000 210,000 427 939 1,394 1,671 1,930 210,000 220,000 450 988 1,468 1,759 2,031 220,000 230,000 472 1,038 1,541 1,847 2,134 230,000 240,000 495 1,087 1,615 1,935 2,235 240,000 and up 517 1,137 1,688 2,024 2,336 SECTION 5. Electronic state tax filing EFFECTIVE DATE This revenue procedure applies to passenger automobiles (other than leased passenger automobiles) that are first placed in service by a taxpayer during calendar year 2009, and to leased passenger automobiles that are first leased by a taxpayer during calendar year 2009. Electronic state tax filing SECTION 6. Electronic state tax filing DRAFTING INFORMATION The principal author of this revenue procedure is Bernard P. Electronic state tax filing Harvey of the Office of Associate Chief Counsel (Income Tax & Accounting). Electronic state tax filing For further information regarding this revenue procedure, contact Mr. Electronic state tax filing Harvey at (202) 622-4930 (not a toll-free call). Electronic state tax filing Prev  Up  Next   Home   More Internal Revenue Bulletins
Español

Travel, Study, and Work in the U.S.

Find resources on visas, green cards, working and studying in the U.S., and more.

The Electronic State Tax Filing

Electronic state tax filing 3. Electronic state tax filing   Investment Expenses Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Limits on DeductionsPassive activity. Electronic state tax filing Other income (nonpassive income). Electronic state tax filing Expenses. Electronic state tax filing Additional information. Electronic state tax filing Interest ExpensesInvestment Interest Limit on Deduction Bond Premium AmortizationSpecial rules to determine amounts payable on a bond. Electronic state tax filing Basis. Electronic state tax filing How To Figure Amortization Choosing To Amortize How To Report Amortization Expenses of Producing IncomeFees to buy or sell. Electronic state tax filing Including mutual fund or REMIC expenses in income. Electronic state tax filing Nondeductible ExpensesUsed as collateral. Electronic state tax filing Short-sale expenses. Electronic state tax filing Expenses for both tax-exempt and taxable income. Electronic state tax filing State income taxes. Electronic state tax filing Nondeductible amount. Electronic state tax filing Basis adjustment. Electronic state tax filing How To Report Investment Expenses When To Report Investment Expenses Topics - This chapter discusses: Limits on Deductions , Interest Expenses , Bond Premium Amortization , Expenses of Producing Income , Nondeductible Expenses , How To Report Investment Expenses , and When To Report Investment Expenses . Electronic state tax filing Useful Items - You may want to see: Publication 535 Business Expenses 925 Passive Activity and At-Risk Rules 929 Tax Rules for Children and Dependents Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 4952 Investment Interest Expense Deduction See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Electronic state tax filing Limits on Deductions Your deductions for investment expenses may be limited by: The at-risk rules, The passive activity loss limits, The limit on investment interest, or The 2% limit on certain miscellaneous itemized deductions. Electronic state tax filing The at-risk rules and passive activity rules are explained briefly in this section. Electronic state tax filing The limit on investment interest is explained later in this chapter under Interest Expenses . Electronic state tax filing The 2% limit is explained later in this chapter under Expenses of Producing Income . Electronic state tax filing At-risk rules. Electronic state tax filing   Special at-risk rules apply to most income-producing activities. Electronic state tax filing These rules limit the amount of loss you can deduct to the amount you risk losing in the activity. Electronic state tax filing Generally, this is the cash and the adjusted basis of property you contribute to the activity. Electronic state tax filing It also includes money you borrow for use in the activity if you are personally liable for repayment or if you use property not used in the activity as security for the loan. Electronic state tax filing For more information, see Publication 925. Electronic state tax filing Passive activity losses and credits. Electronic state tax filing   The amount of losses and tax credits you can claim from passive activities is limited. Electronic state tax filing Generally, you are allowed to deduct passive activity losses only up to the amount of your passive activity income. Electronic state tax filing Also, you can use credits from passive activities only against tax on the income from passive activities. Electronic state tax filing There are exceptions for certain activities, such as rental real estate activities. Electronic state tax filing Passive activity. Electronic state tax filing   A passive activity generally is any activity involving the conduct of any trade or business in which you do not materially participate and any rental activity. Electronic state tax filing However, if you are involved in renting real estate, the activity is not a passive activity if both of the following are true. Electronic state tax filing More than one-half of the personal services you perform during the year in all trades or businesses are performed in real property trades or businesses in which you materially participate. Electronic state tax filing You perform more than 750 hours of services during the year in real property trades or businesses in which you materially participate. Electronic state tax filing  The term “trade or business” generally means any activity that involves the conduct of a trade or business, is conducted in anticipation of starting a trade or business, or involves certain research or experimental expenditures. Electronic state tax filing However, it does not include rental activities or certain activities treated as incidental to holding property for investment. Electronic state tax filing   You are considered to materially participate in an activity if you are involved on a regular, continuous, and substantial basis in the operations of the activity. Electronic state tax filing Other income (nonpassive income). Electronic state tax filing    Generally, you can use losses from passive activities only to offset income from passive activities. Electronic state tax filing You cannot use passive activity losses to offset your other income, such as your wages or your portfolio income. Electronic state tax filing Portfolio income includes gross income from interest, dividends, annuities, or royalties that is not derived in the ordinary course of a trade or business. Electronic state tax filing It also includes gains or losses (not derived in the ordinary course of a trade or business) from the sale or trade of property (other than an interest in a passive activity) producing portfolio income or held for investment. Electronic state tax filing This includes capital gain distributions from mutual funds (and other regulated investment companies) and real estate investment trusts. Electronic state tax filing   You cannot use passive activity losses to offset Alaska Permanent Fund dividends. Electronic state tax filing Expenses. Electronic state tax filing   Do not include in the computation of your passive activity income or loss: Expenses (other than interest) that are clearly and directly allocable to your portfolio income, or Interest expense properly allocable to portfolio income. Electronic state tax filing However, this interest and other expenses may be subject to other limits. Electronic state tax filing These limits are explained in the rest of this chapter. Electronic state tax filing Additional information. Electronic state tax filing   For more information about determining and reporting income and losses from passive activities, see Publication 925. Electronic state tax filing Interest Expenses This section discusses interest expenses you may be able to deduct as an investor. Electronic state tax filing For information on business interest, see chapter 4 of Publication 535. Electronic state tax filing You cannot deduct personal interest expenses other than qualified home mortgage interest, as explained in Publication 936, Home Mortgage Interest Deduction, and interest on certain student loans, as explained in Publication 970. Electronic state tax filing Investment Interest If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Electronic state tax filing You can deduct investment interest subject to the limit discussed later. Electronic state tax filing However, you cannot deduct interest you incurred to produce tax-exempt income. Electronic state tax filing See Tax-exempt income under Nondeductible Expenses, later. Electronic state tax filing You also cannot deduct interest expenses on straddles discussed under Interest expense and carrying charges on straddles , later. Electronic state tax filing Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Electronic state tax filing Investment property. Electronic state tax filing   Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Electronic state tax filing It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Electronic state tax filing Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Electronic state tax filing Partners, shareholders, and beneficiaries. Electronic state tax filing   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Electronic state tax filing Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Electronic state tax filing Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Electronic state tax filing The allocation is not affected by the use of property that secures the debt. Electronic state tax filing Example 1. Electronic state tax filing You borrow $10,000 and use $8,000 to buy stock. Electronic state tax filing You use the other $2,000 to buy items for your home. Electronic state tax filing Since 80% of the debt is used for, and allocated to, investment purposes, 80% of the interest on that debt is investment interest. Electronic state tax filing The other 20% is nondeductible personal interest. Electronic state tax filing Debt proceeds received in cash. Electronic state tax filing   If you receive debt proceeds in cash, the proceeds are generally not treated as investment property. Electronic state tax filing Debt proceeds deposited in account. Electronic state tax filing   If you deposit debt proceeds in an account, that deposit is treated as investment property, regardless of whether the account bears interest. Electronic state tax filing But, if you withdraw the funds and use them for another purpose, you must reallocate the debt to determine the amount considered to be for investment purposes. Electronic state tax filing Example 2. Electronic state tax filing Assume in Example 1 that you borrowed the money on March 1 and immediately bought the stock for $8,000. Electronic state tax filing You did not buy the household items until June 1. Electronic state tax filing You had deposited the $2,000 in the bank. Electronic state tax filing You had no other transactions on the bank account until June. Electronic state tax filing You did not sell the stock, and you made no principal payments on the debt. Electronic state tax filing You paid interest from another account. Electronic state tax filing The $8,000 is treated as being used for an investment purpose. Electronic state tax filing The $2,000 is treated as being used for an investment purpose for the 3-month period. Electronic state tax filing Your total interest expense for 3 months on this debt is investment interest. Electronic state tax filing In June, when you spend the $2,000 for household items, you must begin to allocate 80% of the debt and the interest expense to investment purposes and 20% to personal purposes. Electronic state tax filing Amounts paid within 30 days. Electronic state tax filing   If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. Electronic state tax filing This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account. Electronic state tax filing   If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment. Electronic state tax filing Payments on debt may require new allocation. Electronic state tax filing   As you repay a debt used for more than one purpose, you must reallocate the balance. Electronic state tax filing You must first reduce the amount allocated to personal purposes by the repayment. Electronic state tax filing You then reallocate the rest of the debt to find what part is for investment purposes. Electronic state tax filing Example 3. Electronic state tax filing If, in Example 2 , you repay $500 on November 1, the entire repayment is applied against the amount allocated to personal purposes. Electronic state tax filing The debt balance is now allocated as $8,000 for investment purposes and $1,500 for personal purposes. Electronic state tax filing Until the next reallocation is necessary, 84% ($8,000 ÷ $9,500) of the debt and the interest expense is allocated to investment. Electronic state tax filing Pass-through entities. Electronic state tax filing   If you use borrowed funds to buy an interest in a partnership or S corporation, then the interest on those funds must be allocated based on the assets of the entity. Electronic state tax filing If you contribute to the capital of the entity, you can make the allocation using any reasonable method. Electronic state tax filing Additional allocation rules. Electronic state tax filing   For more information about allocating interest expense, see chapter 4 of Publication 535. Electronic state tax filing When To Deduct Investment Interest If you use the cash method of accounting, you must pay the interest before you can deduct it. Electronic state tax filing If you use an accrual method of accounting, you can deduct interest over the period it accrues, regardless of when you pay it. Electronic state tax filing For an exception, see Unpaid expenses owed to related party under When To Report Investment Expenses, later in this chapter. Electronic state tax filing Example. Electronic state tax filing You borrowed $1,000 on August 26, 2013, payable in 90 days at 12% interest. Electronic state tax filing On November 26, 2013, you paid this with a new note for $1,030, due on February 26, 2014. Electronic state tax filing If you use the cash method of accounting, you cannot deduct any part of the $30 interest on your return for 2013 because you did not actually pay it. Electronic state tax filing If you use an accrual method, you may be able to deduct a portion of the interest on the loans through December 31, 2013, on your return for 2013. Electronic state tax filing Interest paid in advance. Electronic state tax filing   Generally, if you pay interest in advance for a period that goes beyond the end of the tax year, you must spread the interest over the tax years to which it belongs under the OID rules discussed in chapter 1. Electronic state tax filing You can deduct in each year only the interest for that year. Electronic state tax filing Interest on margin accounts. Electronic state tax filing   If you are a cash method taxpayer, you can deduct interest on margin accounts to buy taxable securities as investment interest in the year you paid it. Electronic state tax filing You are considered to have paid interest on these accounts only when you actually pay the broker or when payment becomes available to the broker through your account. Electronic state tax filing Payment may become available to the broker through your account when the broker collects dividends or interest for your account, or sells securities held for you or received from you. Electronic state tax filing   You cannot deduct any interest on money borrowed for personal reasons. Electronic state tax filing Limit on interest deduction for market discount bonds. Electronic state tax filing   The amount you can deduct for interest expense you paid or accrued during the year to buy or carry a market discount bond may be limited. Electronic state tax filing This limit does not apply if you accrue the market discount and include it in your income currently. Electronic state tax filing   Under this limit, the interest is deductible only to the extent it is more than: The total interest and OID includible in gross income for the bond for the year, plus The market discount for the number of days you held the bond during the year. Electronic state tax filing Figure the amount in (2) above using the rules for figuring accrued market discount in chapter 1 under Market Discount Bonds . Electronic state tax filing Interest not deducted due to limit. Electronic state tax filing   In the year you dispose of the bond, you can deduct any interest expense you were not allowed to deduct in earlier years because of the limit. Electronic state tax filing Choosing to deduct disallowed interest expense before the year of disposition. Electronic state tax filing   You can choose to deduct disallowed interest expense in any year before the year you dispose of the bond, up to your net interest income from the bond during the year. Electronic state tax filing The rest of the disallowed interest expense remains deductible in the year you dispose of the bond. Electronic state tax filing Net interest income. Electronic state tax filing   This is the interest income (including OID) from the bond that you include in income for the year, minus the interest expense paid or accrued during the year to purchase or carry the bond. Electronic state tax filing Limit on interest deduction for short-term obligations. Electronic state tax filing   If the current income inclusion rules discussed in chapter 1 under Discount on Short-Term Obligations do not apply to you, the amount you can deduct for interest expense you paid or accrued during the year to buy or carry a short-term obligation is limited. Electronic state tax filing   The interest is deductible only to the extent it is more than: The amount of acquisition discount or OID on the obligation for the tax year, plus The amount of any interest payable on the obligation for the year that is not included in income because of your accounting method (other than interest taken into account in determining the amount of acquisition discount or OID). Electronic state tax filing The method of determining acquisition discount and OID for short-term obligations is discussed in chapter 1 under Discount on Short-Term Obligations . Electronic state tax filing Interest not deducted due to limit. Electronic state tax filing   In the year you dispose of the obligation, or, if you choose, in another year in which you have net interest income from the obligation, you can deduct any interest expense you were not allowed to deduct for an earlier year because of the limit. Electronic state tax filing Follow the same rules provided in the earlier discussion under Limit on interest deduction for market discount bonds , earlier. Electronic state tax filing Limit on Deduction Generally, your deduction for investment interest expense is limited to your net investment income. Electronic state tax filing You can carry over the amount of investment interest you could not deduct because of this limit to the next tax year. Electronic state tax filing The interest carried over is treated as investment interest paid or accrued in that next year. Electronic state tax filing You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Electronic state tax filing Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Electronic state tax filing Investment income. Electronic state tax filing   This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Electronic state tax filing Investment income does not include Alaska Permanent Fund dividends. Electronic state tax filing It also does not include qualified dividends or net capital gain unless you choose to include them. Electronic state tax filing Choosing to include qualified dividends. Electronic state tax filing   Investment income generally does not include qualified dividends, discussed in chapter 1. Electronic state tax filing However, you can choose to include all or part of your qualified dividends in investment income. Electronic state tax filing   You make this choice by completing Form 4952, line 4g, according to its instructions. Electronic state tax filing   If you choose to include any of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Electronic state tax filing Choosing to include net capital gain. Electronic state tax filing    Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Electronic state tax filing However, you can choose to include all or part of your net capital gain in investment income. Electronic state tax filing   You make this choice by completing Form 4952, line 4g, according to its instructions. Electronic state tax filing   If you choose to include any of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Electronic state tax filing   For more information about the capital gains rates, see Capital Gain Tax Rates in chapter 4. Electronic state tax filing    Before making either choice, consider the overall effect on your tax liability. Electronic state tax filing Compare your tax if you make one or both of these choices with your tax if you do not. Electronic state tax filing Investment income of child reported on parent's return. Electronic state tax filing   Investment income includes the part of your child's interest and dividend income you choose to report on your return. Electronic state tax filing If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814. Electronic state tax filing Include it on line 4a of Form 4952. Electronic state tax filing Example. Electronic state tax filing Your 8-year-old son has interest income of $2,200, which you choose to report on your own return. Electronic state tax filing You enter $2,200 on Form 8814, lines 1a and 4, and $200 on lines 6 and 12 and complete Part II. Electronic state tax filing Also enter $200 on Form 1040, line 21. Electronic state tax filing Your investment income includes this $200. Electronic state tax filing Child's qualified dividends. Electronic state tax filing   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Electronic state tax filing However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Electronic state tax filing   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Electronic state tax filing Child's Alaska Permanent Fund dividends. Electronic state tax filing   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Electronic state tax filing To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Electronic state tax filing Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Electronic state tax filing Subtract the result from the amount on Form 8814, line 12. Electronic state tax filing Example. Electronic state tax filing Your 10-year-old child has taxable interest income of $4,000 and Alaska Permanent Fund dividends of $2,000. Electronic state tax filing You choose to report this on your return. Electronic state tax filing You enter $4,000 on Form 8814, line 1a, $2,000 on line 2a, and $6,000 on line 4. Electronic state tax filing You then enter $4,000 on Form 8814, lines 6 and 12, and Form 1040, line 21. Electronic state tax filing You figure the amount of your child's income that you can consider your investment income as follows: $4,000 − ($4,000 × ($2,000 ÷ $6,000)) = $2,667 You include the result, $2,667, on Form 4952, line 4a. Electronic state tax filing Child's capital gain distributions. Electronic state tax filing   If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D (Form 1040), line 13, or Form 1040, line 13) generally does not count as investment income. Electronic state tax filing However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Electronic state tax filing   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Electronic state tax filing Investment expenses. Electronic state tax filing   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Electronic state tax filing Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Electronic state tax filing Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A (Form 1040), line 27. Electronic state tax filing See Expenses of Producing Income , later, for a discussion of the 2% limit. Electronic state tax filing Losses from passive activities. Electronic state tax filing   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Electronic state tax filing See Publication 925 for information about passive activities. Electronic state tax filing Example. Electronic state tax filing Ted is a partner in a partnership that operates a business. Electronic state tax filing However, he does not materially participate in the partnership's business. Electronic state tax filing Ted's interest in the partnership is considered a passive activity. Electronic state tax filing Ted's investment income from interest and dividends (other than qualified dividends) is $10,000. Electronic state tax filing His investment expenses (other than interest) are $3,200 after taking into account the 2% limit on miscellaneous itemized deductions. Electronic state tax filing His investment interest expense is $8,000. Electronic state tax filing Ted also has income from the partnership of $2,000. Electronic state tax filing Ted figures his net investment income and the limit on his investment interest expense deduction in the following way: Total investment income $10,000 Minus: Investment expenses (other than interest) 3,200 Net investment income $6,800 Deductible investment interest expense for the year $6,800 The $2,000 of income from the passive activity is not used in determining Ted's net investment income. Electronic state tax filing His investment interest deduction for the year is limited to $6,800, the amount of his net investment income. Electronic state tax filing Form 4952 Use Form 4952 to figure your deduction for investment interest. Electronic state tax filing See Form 4952 for more information. Electronic state tax filing Exception to use of Form 4952. Electronic state tax filing   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Electronic state tax filing Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Electronic state tax filing You do not have any other deductible investment expenses. Electronic state tax filing You have no carryover of investment interest expense from 2012. Electronic state tax filing   If you meet all of these tests, you can deduct all of your investment interest. Electronic state tax filing    Bond Premium Amortization If you pay a premium to buy a bond, the premium is part of your basis in the bond. Electronic state tax filing If the bond yields taxable interest, you can choose to amortize the premium. Electronic state tax filing This generally means that each year, over the life of the bond, you use a part of the premium to reduce the amount of interest includible in your income. Electronic state tax filing If you make this choice, you must reduce your basis in the bond by the amortization for the year. Electronic state tax filing If the bond yields tax-exempt interest, you must amortize the premium. Electronic state tax filing This amortized amount is not deductible in determining taxable income. Electronic state tax filing However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. Electronic state tax filing Bond premium. Electronic state tax filing   Bond premium is the amount by which your basis in the bond right after you get it is more than the total of all amounts payable on the bond after you get it (other than payments of qualified stated interest). Electronic state tax filing For example, a bond with a maturity value of $1,000 generally would have a $50 premium if you buy it for $1,050. Electronic state tax filing Special rules to determine amounts payable on a bond. Electronic state tax filing   For special rules that apply to determine the amounts payable on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. Electronic state tax filing 171-3. Electronic state tax filing Basis. Electronic state tax filing   In general, your basis for figuring bond premium amortization is the same as your basis for figuring any loss on the sale of the bond. Electronic state tax filing However, you may need to use a different basis for: Convertible bonds, Bonds you got in a trade, and Bonds whose basis has to be determined using the basis of the person who transferred the bond to you. Electronic state tax filing See Regulations section 1. Electronic state tax filing 171-1(e). Electronic state tax filing Dealers. Electronic state tax filing   A dealer in taxable bonds (or anyone who holds them mainly for sale to customers in the ordinary course of a trade or business or who would properly include bonds in inventory at the close of the tax year) cannot claim a deduction for amortizable bond premium. Electronic state tax filing   See section 75 of the Internal Revenue Code for the treatment of bond premium by a dealer in tax-exempt bonds. Electronic state tax filing How To Figure Amortization For bonds issued after September 27, 1985, you must amortize bond premium using a constant yield method on the basis of the bond's yield to maturity, determined by using the bond's basis and compounding at the close of each accrual period. Electronic state tax filing Constant yield method. Electronic state tax filing   Figure the bond premium amortization for each accrual period as follows. Electronic state tax filing Step 1: Determine your yield. Electronic state tax filing   Your yield is the discount rate that, when used in figuring the present value of all remaining payments to be made on the bond (including payments of qualified stated interest), produces an amount equal to your basis in the bond. Electronic state tax filing Figure the yield as of the date you got the bond. Electronic state tax filing It must be constant over the term of the bond and must be figured to at least two decimal places when expressed as a percentage. Electronic state tax filing   If you do not know the yield, consult your broker or tax advisor. Electronic state tax filing Databases available to them are likely to show the yield at the date of purchase. Electronic state tax filing Step 2: Determine the accrual periods. Electronic state tax filing   You can choose the accrual periods to use. Electronic state tax filing They may be of any length and may vary in length over the term of the bond, but each accrual period can be no longer than 1 year and each scheduled payment of principal or interest must occur either on the first or the final day of an accrual period. Electronic state tax filing The computation is simplest if accrual periods are the same as the intervals between interest payment dates. Electronic state tax filing Step 3: Determine the bond premium for the accrual period. Electronic state tax filing   To do this, multiply your adjusted acquisition price at the beginning of the accrual period by your yield. Electronic state tax filing Then subtract the result from the qualified stated interest for the period. Electronic state tax filing   Your adjusted acquisition price at the beginning of the first accrual period is the same as your basis. Electronic state tax filing After that, it is your basis decreased by the amount of bond premium amortized for earlier periods and the amount of any payment previously made on the bond other than a payment of qualified stated interest. Electronic state tax filing Example. Electronic state tax filing On February 1, 2012, you bought a taxable bond for $110,000. Electronic state tax filing The bond has a stated principal amount of $100,000, payable at maturity on February 1, 2019, making your premium $10,000 ($110,000 − $100,000). Electronic state tax filing The bond pays qualified stated interest of $10,000 on February 1 of each year. Electronic state tax filing Your yield is 8. Electronic state tax filing 07439% compounded annually. Electronic state tax filing You choose to use annual accrual periods ending on February 1 of each year. Electronic state tax filing To find your bond premium amortization for the accrual period ending on February 1, 2013, you multiply the adjusted acquisition price at the beginning of the period ($110,000) by your yield. Electronic state tax filing When you subtract the result ($8,881. Electronic state tax filing 83) from the qualified stated interest for the period ($10,000), you find that your bond premium amortization for the period is $1,118. Electronic state tax filing 17. Electronic state tax filing Special rules to figure amortization. Electronic state tax filing   For special rules to figure the bond premium amortization on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. Electronic state tax filing 171-3. Electronic state tax filing Bonds Issued Before September 28, 1985 For these bonds, you can amortize bond premium using any reasonable method. Electronic state tax filing Reasonable methods include: The straight-line method, and The Revenue Ruling 82-10 method. Electronic state tax filing Straight-line method. Electronic state tax filing   Under this method, the amount of your bond premium amortization is the same each month. Electronic state tax filing Divide the number of months you held the bond during the year by the number of months from the beginning of the tax year (or, if later, the date of acquisition) to the date of maturity or earlier call date. Electronic state tax filing Then multiply the result by the bond premium (reduced by any bond premium amortization claimed in earlier years). Electronic state tax filing This gives you your bond premium amortization for the year. Electronic state tax filing Revenue Ruling 82-10 method. Electronic state tax filing   Under this method, the amount of your bond premium amortization increases each month over the life of the bond. Electronic state tax filing This method is explained in Revenue Ruling 82-10, 1982-1 C. Electronic state tax filing B. Electronic state tax filing 46. Electronic state tax filing Choosing To Amortize You choose to amortize the premium on taxable bonds by reporting the amortization for the year on your income tax return for the first tax year you want the choice to apply. Electronic state tax filing You should attach a statement to your return that you are making this choice under section 171. Electronic state tax filing See How To Report Amortization, next. Electronic state tax filing This choice is binding for the year you make it and for later tax years. Electronic state tax filing It applies to all taxable bonds you own in the year you make the choice and also to those you acquire in later years. Electronic state tax filing You can change your decision to amortize bond premium only with the written approval of the IRS. Electronic state tax filing To request approval, use Form 3115. Electronic state tax filing For more information on requesting approval, see section 5 of the Appendix to Revenue Procedure 2011-14 in Internal Revenue Bulletin 2011-4. Electronic state tax filing You can find Revenue Procedure 2011-14 at www. Electronic state tax filing irs. Electronic state tax filing gov/irb/2011-04_IRB/ar08. Electronic state tax filing html. Electronic state tax filing How To Report Amortization Subtract the bond premium amortization from your interest income from these bonds. Electronic state tax filing Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. Electronic state tax filing Under your last entry on line 1, put a subtotal of all interest listed on line 1. Electronic state tax filing Below this subtotal, print “ABP Adjustment,” and the total interest you received. Electronic state tax filing Subtract this amount from the subtotal, and enter the result on line 2. Electronic state tax filing Bond premium amortization more than interest. Electronic state tax filing   If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can deduct the difference as a miscellaneous itemized deduction on Schedule A (Form 1040), line 28. Electronic state tax filing    But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. Electronic state tax filing Any amount you cannot deduct because of this limit can be carried forward to the next accrual period. Electronic state tax filing Pre-1998 election to amortize bond premium. Electronic state tax filing   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Electronic state tax filing Bonds acquired before October 23, 1986. Electronic state tax filing   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit. Electronic state tax filing Bonds acquired after October 22, 1986, but before 1988. Electronic state tax filing    The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you choose to treat it as an offset to interest income on the bond. Electronic state tax filing Expenses of Producing Income You deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Schedule A (Form 1040). Electronic state tax filing To be deductible, these expenses must be ordinary and necessary expenses paid or incurred: To produce or collect income, or To manage property held for producing income. Electronic state tax filing The expenses must be directly related to the income or income-producing property, and the income must be taxable to you. Electronic state tax filing The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. Electronic state tax filing The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income. Electronic state tax filing For information on how to report expenses of producing income, see How To Report Investment Expenses , later. Electronic state tax filing Attorney or accounting fees. Electronic state tax filing   You can deduct attorney or accounting fees that are necessary to produce or collect taxable income. Electronic state tax filing However, in some cases, attorney or accounting fees are part of the basis of property. Electronic state tax filing See Basis of Investment Property in chapter 4. Electronic state tax filing Automatic investment service and dividend reinvestment plans. Electronic state tax filing   A bank may offer its checking account customers an automatic investment service so that, for a charge, each customer can choose to invest a part of the checking account each month in common stock. Electronic state tax filing Or a bank that is a dividend disbursing agent for a number of publicly-owned corporations may set up an automatic dividend reinvestment service. Electronic state tax filing Through that service, cash dividends are reinvested in more shares of stock after the bank deducts a service charge. Electronic state tax filing   A corporation in which you own stock also may have a dividend reinvestment plan. Electronic state tax filing This plan lets you choose to use your dividends to buy more shares of stock in the corporation instead of receiving the dividends in cash. Electronic state tax filing   You can deduct the monthly service charge you pay to a bank to participate in an automatic investment service. Electronic state tax filing If you participate in a dividend reinvestment plan, you can deduct any service charge subtracted from your cash dividends before the dividends are used to buy more shares of stock. Electronic state tax filing Deduct the charges in the year you pay them. Electronic state tax filing Clerical help and office rent. Electronic state tax filing   You can deduct office expenses, such as rent and clerical help, you incurred in connection with your investments and collecting the taxable income on your investments. Electronic state tax filing Cost of replacing missing securities. Electronic state tax filing   To replace your taxable securities that are mislaid, lost, stolen, or destroyed, you may have to post an indemnity bond. Electronic state tax filing You can deduct the premium you pay to buy the indemnity bond and the related incidental expenses. Electronic state tax filing   You may, however, get a refund of part of the bond premium if the missing securities are recovered within a specified time. Electronic state tax filing Under certain types of insurance policies, you can recover some of the expenses. Electronic state tax filing   If you receive the refund in the tax year you pay the amounts, you can deduct only the difference between the expenses paid and the amount refunded. Electronic state tax filing If the refund is made in a later tax year, you must include the refund in income in the year you received it, but only to the extent that the expenses decreased your tax in the year you deducted them. Electronic state tax filing Fees to collect income. Electronic state tax filing   You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock. Electronic state tax filing Fees to buy or sell. Electronic state tax filing   You cannot deduct a fee you pay to a broker to acquire investment property, such as stocks or bonds. Electronic state tax filing You must add the fee to the cost of the property. Electronic state tax filing See Basis of Investment Property in chapter 4. Electronic state tax filing    You cannot deduct any broker's fees, commissions, or option premiums you pay (or that were netted out) in connection with the sale of investment property. Electronic state tax filing They can be used only to figure gain or loss from the sale. Electronic state tax filing See Reporting Capital Gains and Losses , in chapter 4, for more information about the treatment of these sale expenses. Electronic state tax filing Investment counsel and advice. Electronic state tax filing   You can deduct fees you pay for counsel and advice about investments that produce taxable income. Electronic state tax filing This includes amounts you pay for investment advisory services. Electronic state tax filing Safe deposit box rent. Electronic state tax filing   You can deduct rent you pay for a safe deposit box if you use the box to store taxable income-producing stocks, bonds, or other investment-related papers and documents. Electronic state tax filing If you also use the box to store tax-exempt securities or personal items, you can deduct only part of the rent. Electronic state tax filing See Tax-exempt income under Nondeductible Expenses, later, to figure what part you can deduct. Electronic state tax filing State and local transfer taxes. Electronic state tax filing   You cannot deduct the state and local transfer taxes you pay when you buy or sell securities. Electronic state tax filing If you pay these transfer taxes when you buy securities, you must treat them as part of the cost of the property. Electronic state tax filing If you pay these transfer taxes when you sell securities, you must treat them as a reduction in the amount realized. Electronic state tax filing Trustee's commissions for revocable trust. Electronic state tax filing   If you set up a revocable trust and have its income distributed to you, you can deduct the commission you pay the trustee for managing the trust to the extent it is to produce or collect taxable income or to manage property. Electronic state tax filing However, you cannot deduct any part of the commission used for producing or collecting tax-exempt income or for managing property that produces tax-exempt income. Electronic state tax filing   If you are a cash-basis taxpayer and pay the commissions for several years in advance, you must deduct a part of the commission each year. Electronic state tax filing You cannot deduct the entire amount in the year you pay it. Electronic state tax filing Investment expenses from pass-through entities. Electronic state tax filing   If you hold an interest in a partnership, S corporation, real estate mortgage investment conduit (REMIC), or a nonpublicly offered mutual fund, you can deduct your share of that entity's investment expenses. Electronic state tax filing A partnership or S corporation will show your share of these expenses on your Schedule K-1 (Form 1065) or Schedule K-1 (Form 1120S). Electronic state tax filing A nonpublicly offered mutual fund will indicate your share of these expenses in box 5 of Form 1099-DIV (or substitute statement). Electronic state tax filing Publicly-offered mutual funds are discussed later. Electronic state tax filing   If you hold an interest in a REMIC, any expenses relating to your residual interest investment will be shown on Schedule Q (Form 1066), line 3b. Electronic state tax filing Any expenses relating to your regular interest investment will appear in box 5 of Form 1099-INT (or substitute statement) or box 9 of Form 1099-OID (or substitute statement). Electronic state tax filing   Report your share of these investment expenses on Schedule A (Form 1040), subject to the 2% limit, in the same manner as your other investment expenses. Electronic state tax filing Including mutual fund or REMIC expenses in income. Electronic state tax filing   Your share of the investment expenses of a REMIC or a nonpublicly offered mutual fund, as described above, are considered to be indirect deductions through that pass-through entity. Electronic state tax filing You must include in your gross income an amount equal to the expenses allocated to you, whether or not you are able to claim a deduction for those expenses. Electronic state tax filing If you are a shareholder in a nonpublicly offered mutual fund, you must include on your return the full amount of ordinary dividends or other distributions of stock, as shown in box 1a of Form 1099-DIV (or substitute statement). Electronic state tax filing If you are a residual interest holder in a REMIC, you must report as ordinary income on Schedule E (Form 1040) the total amounts shown on Schedule Q (Form 1066), lines 1b and 3b. Electronic state tax filing If you are a REMIC regular interest holder, you must include the amount of any expense allocation you received on Form 1040, line 8a. Electronic state tax filing Publicly-offered mutual funds. Electronic state tax filing   Most mutual funds are publicly offered. Electronic state tax filing These mutual funds, generally, are traded on an established securities exchange. Electronic state tax filing These funds do not pass investment expenses through to you. Electronic state tax filing Instead, the dividend income they report to you in box 1a of Form 1099-DIV (or substitute statement) is already reduced by your share of investment expenses. Electronic state tax filing As a result, you cannot deduct the expenses on your return. Electronic state tax filing   Include the amount from box 1a of Form 1099-DIV (or substitute statement) in your income. Electronic state tax filing    A publicly offered mutual fund is one that: Is continuously offered pursuant to a public offering, Is regularly traded on an established securities market, and Is held by or for no fewer than 500 persons at any time during the year. Electronic state tax filing Contact your mutual fund if you are not sure whether it is publicly offered. Electronic state tax filing Nondeductible Expenses Some expenses that you incur as an investor are not deductible. Electronic state tax filing Stockholders' meetings. Electronic state tax filing   You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you have no interest other than owning stock. Electronic state tax filing This is true even if your purpose in attending is to get information that would be useful in making further investments. Electronic state tax filing Investment-related seminar. Electronic state tax filing   You cannot deduct expenses for attending a convention, seminar, or similar meeting for investment purposes. Electronic state tax filing Single-premium life insurance, endowment, and annuity contracts. Electronic state tax filing   You cannot deduct interest on money you borrow to buy or carry a single-premium life insurance, endowment, or annuity contract. Electronic state tax filing Used as collateral. Electronic state tax filing   If you use a single premium annuity contract as collateral to obtain or continue a mortgage loan, you cannot deduct any interest on the loan that is collateralized by the annuity contract. Electronic state tax filing Figure the amount of interest expense disallowed by multiplying the current interest rate on the mortgage loan by the lesser of the amount of the annuity contract used as collateral or the amount of the loan. Electronic state tax filing Borrowing on insurance. Electronic state tax filing   Generally, you cannot deduct interest on money you borrow to buy or carry a life insurance, endowment, or annuity contract if you plan to systematically borrow part or all of the increases in the cash value of the contract. Electronic state tax filing This rule applies to the interest on the total amount borrowed to buy or carry the contract, not just the interest on the borrowed increases in the cash value. Electronic state tax filing Tax-exempt income. Electronic state tax filing   You cannot deduct expenses you incur to produce tax-exempt income. Electronic state tax filing Nor can you deduct interest on money you borrow to buy tax-exempt securities or shares in a mutual fund or other regulated investment company that distributes only exempt-interest dividends. Electronic state tax filing Short-sale expenses. Electronic state tax filing   The rule disallowing a deduction for interest expenses on tax-exempt securities applies to amounts you pay in connection with personal property used in a short sale or amounts paid by others for the use of any collateral in connection with the short sale. Electronic state tax filing However, it does not apply to the expenses you incur if you deposit cash as collateral for the property used in the short sale and the cash does not earn a material return during the period of the sale. Electronic state tax filing Short sales are discussed in Short Sales in chapter 4. Electronic state tax filing Expenses for both tax-exempt and taxable income. Electronic state tax filing   You may have expenses that are for both tax-exempt and taxable income. Electronic state tax filing If you cannot specifically identify what part of the expenses is for each type of income, you can divide the expenses, using reasonable proportions based on facts and circumstances. Electronic state tax filing You must attach a statement to your return showing how you divided the expenses and stating that each deduction claimed is not based on tax-exempt income. Electronic state tax filing   One accepted method for dividing expenses is to do it in the same proportion that each type of income is to the total income. Electronic state tax filing If the expenses relate in part to capital gains and losses, include the gains, but not the losses, in figuring this proportion. Electronic state tax filing To find the part of the expenses that is for the tax-exempt income, divide your tax-exempt income by the total income and multiply your expenses by the result. Electronic state tax filing Example. Electronic state tax filing You received $6,000 interest; $4,800 was tax-exempt and $1,200 was taxable. Electronic state tax filing In earning this income, you had $500 of expenses. Electronic state tax filing You cannot specifically identify the amount of each expense item that is for each income item, so you must divide your expenses. Electronic state tax filing 80% ($4,800 tax-exempt interest divided by $6,000 total interest) of your expenses is for the tax-exempt income. Electronic state tax filing You cannot deduct $400 (80% of $500) of the expenses. Electronic state tax filing You can deduct $100 (the rest of the expenses) because they are for the taxable interest. Electronic state tax filing State income taxes. Electronic state tax filing   If you itemize your deductions, you can deduct, as taxes, state income taxes on interest income that is exempt from federal income tax. Electronic state tax filing But you cannot deduct, as either taxes or investment expenses, state income taxes on other exempt income. Electronic state tax filing Interest expense and carrying charges on straddles. Electronic state tax filing   You cannot deduct interest and carrying charges allocable to personal property that is part of a straddle. Electronic state tax filing The nondeductible interest and carrying charges are added to the basis of the straddle property. Electronic state tax filing However, this treatment does not apply if: All the offsetting positions making up the straddle either consist of one or more qualified covered call options and the optioned stock, or consist of section 1256 contracts (and the straddle is not part of a larger straddle); or The straddle is a hedging transaction. Electronic state tax filing  For information about straddles, including definitions of the terms used in this discussion, see Straddles in chapter 4. Electronic state tax filing   Interest includes any amount you pay or incur in connection with personal property used in a short sale. Electronic state tax filing However, you must first apply the rules discussed in Payments in lieu of dividends under Short Sales in chapter 4. Electronic state tax filing   To determine the interest on market discount bonds and short-term obligations that are part of a straddle, you must first apply the rules discussed under Limit on interest deduction for market discount bonds and Limit on interest deduction for short-term obligations (both under Interest Expenses, earlier). Electronic state tax filing Nondeductible amount. Electronic state tax filing   Figure the nondeductible interest and carrying charges on straddle property as follows. Electronic state tax filing Add: Interest on indebtedness incurred or continued to buy or carry the personal property, and All other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property. Electronic state tax filing Subtract from the amount in (1): Interest (including OID) includible in gross income for the year on the personal property, Any income from the personal property treated as ordinary income on the disposition of short-term government obligations or as ordinary income under the market discount and short-term bond provisions — see Discount on Debt Instruments in chapter 1, The dividends includible in gross income for the year from the personal property, and Any payment on a loan of the personal property for use in a short sale that is includible in gross income. Electronic state tax filing Basis adjustment. Electronic state tax filing   Add the nondeductible amount to the basis of your straddle property. Electronic state tax filing How To Report Investment Expenses To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). Electronic state tax filing Enter your deductible investment interest expense on Schedule A (Form1040), line 14. Electronic state tax filing Include any deductible short sale expenses. Electronic state tax filing (See Short Sales in chapter 4 for information on these expenses. Electronic state tax filing ) Also attach a completed Form 4952 if you used that form to figure your investment interest expense. Electronic state tax filing Enter the total amount of your other investment expenses (other than interest expenses) on Schedule A (Form 1040), line 23. Electronic state tax filing List the type and amount of each expense on the dotted lines next to line 23. Electronic state tax filing (If necessary, you can show the required information on an attached statement. Electronic state tax filing ) For information on how to report amortizable bond premium, see Bond Premium Amortization , earlier in this chapter. Electronic state tax filing When To Report Investment Expenses If you use the cash method to report income and expenses, you generally deduct your expenses, except for certain prepaid interest, in the year you pay them. Electronic state tax filing If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you pay them. Electronic state tax filing Also see When To Deduct Investment Interest , earlier in this chapter. Electronic state tax filing Unpaid expenses owed to related party. Electronic state tax filing   If you use an accrual method, you cannot deduct interest and other expenses owed to a related cash-basis person until payment is made and the amount is includible in the gross income of that person. Electronic state tax filing The relationship, for purposes of this rule, is determined as of the end of the tax year for which the interest or expense would otherwise be deductible. Electronic state tax filing If a deduction is denied under this rule, this rule will continue to apply even if your relationship with the person ceases to exist before the amount is includible in the gross income of that person. Electronic state tax filing   This rule generally applies to those relationships listed in chapter 4 under Related Party Transactions . Electronic state tax filing It also applies to accruals by partnerships to partners, partners to partnerships, shareholders to S corporations, and S corporations to shareholders. Electronic state tax filing   The postponement of deductions for unpaid expenses and interest under the related party rule does not apply to OID, regardless of when payment is made. Electronic state tax filing This rule also does not apply to loans with below-market interest rates or to certain payments for the use of property and services when the lender or recipient has to include payments periodically in income, even if a payment has not been made. Electronic state tax filing Prev  Up  Next   Home   More Online Publications