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File free federal and state taxes online 4. File free federal and state taxes online   Farm Business Expenses Table of Contents What's New for 2013 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Deductible ExpensesReasonable allocation. File free federal and state taxes online Prepaid Farm Supplies Prepaid Livestock Feed Labor Hired Repairs and Maintenance Interest Breeding Fees Fertilizer and Lime Taxes Insurance Rent and Leasing Depreciation Business Use of Your Home Truck and Car Expenses Travel Expenses Marketing Quota Penalties Tenant House Expenses Items Purchased for Resale Other Expenses Domestic Production Activities Deduction Capital ExpensesForestation and reforestation costs. File free federal and state taxes online Nondeductible ExpensesPersonal, Living, and Family Expenses Other Nondeductible Items Losses From Operating a FarmAt-Risk Limits Passive Activity Limits Excess Farm Loss Limit Not-for-Profit FarmingUsing the presumption later. File free federal and state taxes online Category 1. File free federal and state taxes online Category 2. File free federal and state taxes online Category 3. File free federal and state taxes online What's New for 2013 Standard mileage rate. File free federal and state taxes online  For 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for each mile of business use is 56. File free federal and state taxes online 5 cents. File free federal and state taxes online See Truck and Car Expenses , later. File free federal and state taxes online Simplified method for business use of home deduction. File free federal and state taxes online  The IRS now provides a simplified method to determine your expenses for business use of your home. File free federal and state taxes online For more information, see Schedule C (Form 1040), Part II, and its instructions. File free federal and state taxes online Introduction You can generally deduct the current costs of operating your farm. File free federal and state taxes online Current costs are expenses you do not have to capitalize or include in inventory costs. File free federal and state taxes online However, your deduction for the cost of livestock feed and certain other supplies may be limited. File free federal and state taxes online If you have an operating loss, you may not be able to deduct all of it. File free federal and state taxes online Topics - This chapter discusses: Deductible expenses Domestic production activities deduction Capital expenses Nondeductible expenses Losses from operating a farm Not-for-profit farming Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home 925 Passive Activity and At-Risk Rules 936 Home Mortgage Interest Deduction Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch F (Form 1040) Profit or Loss From Farming 1045 Application for Tentative Refund 5213 Election To Postpone Determination as To Whether the Presumption Applies That an Activity Is Engaged in for Profit 8903 Domestic Production Activities Deduction See chapter 16 for information about getting publications and forms. File free federal and state taxes online Deductible Expenses The ordinary and necessary costs of operating a farm for profit are deductible business expenses. File free federal and state taxes online “Ordinary” means what most farmers do and “necessary” means what is useful and helpful in farming. File free federal and state taxes online Schedule F, Part II, lists some common farm expenses that are typically deductible. File free federal and state taxes online This chapter discusses many of these expenses, as well as others not listed on Schedule F. File free federal and state taxes online Reimbursed expenses. File free federal and state taxes online   If the reimbursement is received in the same year that the expense is claimed, reduce the expense by the amount of the reimbursement. File free federal and state taxes online If the reimbursement is received in a year after the expense is claimed, include the reimbursement amount in income. File free federal and state taxes online See Refund or reimbursement under Income From Other Sources in chapter 3. File free federal and state taxes online Personal and business expenses. File free federal and state taxes online   Some expenses you pay during the tax year may be part personal and part business. File free federal and state taxes online These may include expenses for gasoline, oil, fuel, water, rent, electricity, telephone, automobile upkeep, repairs, insurance, interest, and taxes. File free federal and state taxes online   You must allocate these mixed expenses between their business and personal parts. File free federal and state taxes online Generally, the personal part of these expenses is not deductible. File free federal and state taxes online The business portion of the expenses is deductible on Schedule F. File free federal and state taxes online Example. File free federal and state taxes online You paid $1,500 for electricity during the tax year. File free federal and state taxes online You used 1/3 of the electricity for personal purposes and 2/3 for farming. File free federal and state taxes online Under these circumstances, you can deduct $1,000 (2/3 of $1,500) of your electricity expense as a farm business expense. File free federal and state taxes online Reasonable allocation. File free federal and state taxes online   It is not always easy to determine the business and nonbusiness parts of an expense. File free federal and state taxes online There is no method of allocation that applies to all mixed expenses. File free federal and state taxes online Any reasonable allocation is acceptable. File free federal and state taxes online What is reasonable depends on the circumstances in each case. File free federal and state taxes online Prepaid Farm Supplies Prepaid farm supplies include the following items if paid for during the year. File free federal and state taxes online Feed, seed, fertilizer, and similar farm supplies not used or consumed during the year, but not including farm supplies that you would have consumed during the year if not for a fire, storm, flood, other casualty, disease, or drought. File free federal and state taxes online Poultry (including egg-laying hens and baby chicks) bought for use (or for both use and resale) in your farm business. File free federal and state taxes online However, include only the amount that would be deductible in the following year if you had capitalized the cost and deducted it ratably over the lesser of 12 months or the useful life of the poultry. File free federal and state taxes online Poultry bought for resale and not resold during the year. File free federal and state taxes online Deduction limit. File free federal and state taxes online   If you use the cash method of accounting to report your income and expenses, your deduction for prepaid farm supplies in the year you pay for them may be limited to 50% of your other deductible farm expenses for the year (all Schedule F deductions except prepaid farm supplies). File free federal and state taxes online This limit does not apply if you meet one of the exceptions described later. File free federal and state taxes online See Chapter 2 for a discussion of the cash method of accounting. File free federal and state taxes online   If the limit applies, you can deduct the excess cost of farm supplies other than poultry in the year you use or consume the supplies. File free federal and state taxes online The excess cost of poultry bought for use (or for both use and resale) in your farm business is deductible in the year following the year you pay for it. File free federal and state taxes online The excess cost of poultry bought for resale is deductible in the year you sell or otherwise dispose of that poultry. File free federal and state taxes online Example. File free federal and state taxes online You may not qualify for the exception described next. File free federal and state taxes online During 2013, you bought fertilizer ($4,000), feed ($1,000), and seed ($500) for use on your farm in the following year. File free federal and state taxes online Your total prepaid farm supplies expense for 2013 is $5,500. File free federal and state taxes online Your other deductible farm expenses totaled $10,000 for 2013. File free federal and state taxes online Therefore, your deduction for prepaid farm supplies cannot be more than $5,000 (50% of $10,000) for 2013. File free federal and state taxes online The excess prepaid farm supplies expense of $500 ($5,500 − $5,000) is deductible in a later tax year when you use or consume the supplies. File free federal and state taxes online Exceptions. File free federal and state taxes online   This limit on the deduction for prepaid farm supplies expense does not apply if you are a farm-related taxpayer and either of the following apply. File free federal and state taxes online Your prepaid farm supplies expense is more than 50% of your other deductible farm expenses because of a change in business operations caused by unusual circumstances. File free federal and state taxes online Your total prepaid farm supplies expense for the preceding 3 tax years is less than 50% of your total other deductible farm expenses for those 3 tax years. File free federal and state taxes online   You are a farm-related taxpayer if any of the following tests apply. File free federal and state taxes online Your main home is on a farm. File free federal and state taxes online Your principal business is farming. File free federal and state taxes online A member of your family meets (1) or (2). File free federal and state taxes online For this purpose, your family includes your brothers and sisters, half-brothers and half-sisters, spouse, parents, grandparents, children, grandchildren, and aunts and uncles and their children. File free federal and state taxes online    Whether or not the deduction limit for prepaid farm supplies applies, your expenses for prepaid livestock feed may be subject to the rules for advance payment of livestock feed, discussed next. File free federal and state taxes online Prepaid Livestock Feed If you report your income and expenses under the cash method of accounting, you cannot deduct in the year paid the cost of feed your livestock will consume in a later year unless you meet all the following tests. File free federal and state taxes online The payment is for the purchase of feed rather than a deposit. File free federal and state taxes online The prepayment has a business purpose and is not merely for tax avoidance. File free federal and state taxes online Deducting the prepayment does not result in a material distortion of your income. File free federal and state taxes online If you meet all three tests, you can deduct the prepaid feed, subject to the limit on prepaid farm supplies discussed earlier. File free federal and state taxes online If you fail any of these tests, you can deduct the prepaid feed only in the year it is consumed. File free federal and state taxes online This rule does not apply to the purchase of commodity futures contracts. File free federal and state taxes online Payment for the purchase of feed. File free federal and state taxes online   Whether a payment is for the purchase of feed or a deposit depends on the facts and circumstances in each case. File free federal and state taxes online It is for the purchase of feed if you can show you made it under a binding commitment to accept delivery of a specific quantity of feed at a fixed price and you are not entitled, by contract or business custom, to a refund or repurchase. File free federal and state taxes online   The following are some factors that show a payment is a deposit rather than for the purchase of feed. File free federal and state taxes online The absence of specific quantity terms. File free federal and state taxes online The right to a refund of any unapplied payment credit at the end of the contract. File free federal and state taxes online The seller's treatment of the payment as a deposit. File free federal and state taxes online The right to substitute other goods or products for those specified in the contract. File free federal and state taxes online   A provision permitting substitution of ingredients to vary the particular feed mix to meet your livestock's current diet requirements will not suggest a deposit. File free federal and state taxes online Further, a price adjustment to reflect market value at the date of delivery is not, by itself, proof of a deposit. File free federal and state taxes online Business purpose. File free federal and state taxes online   The prepayment has a business purpose only if you have a reasonable expectation of receiving some business benefit from prepaying the cost of livestock feed. File free federal and state taxes online The following are some examples of business benefits. File free federal and state taxes online Fixing maximum prices and securing an assured feed supply. File free federal and state taxes online Securing preferential treatment in anticipation of a feed shortage. File free federal and state taxes online   Other factors considered in determining the existence of a business purpose are whether the prepayment was a condition imposed by the seller and whether that condition was meaningful. File free federal and state taxes online No material distortion of income. File free federal and state taxes online   The following are some factors considered in determining whether deducting prepaid livestock feed materially distorts income. File free federal and state taxes online Your customary business practice in conducting your livestock operations. File free federal and state taxes online The expense in relation to past purchases. File free federal and state taxes online The time of year you made the purchase. File free federal and state taxes online The expense in relation to your income for the year. File free federal and state taxes online Labor Hired You can deduct reasonable wages paid for regular farm labor, piecework, contract labor, and other forms of labor hired to perform your farming operations. File free federal and state taxes online You can pay wages in cash or in noncash items such as inventory, capital assets, or assets used in your business. File free federal and state taxes online The cost of boarding farm labor is a deductible labor cost. File free federal and state taxes online Other deductible costs you incur for farm labor include health insurance, workers' compensation insurance, and other benefits. File free federal and state taxes online If you must withhold social security, Medicare, and income taxes from your employees' cash wages, you can still deduct the full amount of wages before withholding. File free federal and state taxes online See chapter 13 for more information on employment taxes. File free federal and state taxes online Also, deduct the employer's share of the social security and Medicare taxes you must pay on your employees' wages as a farm business expense on Schedule F, line 29. File free federal and state taxes online See Taxes , later. File free federal and state taxes online Property for services. File free federal and state taxes online   If you transfer property to an employee in payment for services, you can deduct as wages paid the fair market value of the property on the date of transfer. File free federal and state taxes online If the employee pays you anything for the property, deduct as wages the fair market value of the property minus the payment by the employee for the property. File free federal and state taxes online   Treat the wages deducted as an amount received for the property. File free federal and state taxes online You may have a gain or loss to report if the property's adjusted basis on the date of transfer is different from its fair market value. File free federal and state taxes online Any gain or loss has the same character the exchanged property had in your hands. File free federal and state taxes online For more information, see chapter 8. File free federal and state taxes online Child as an employee. File free federal and state taxes online   You can deduct reasonable wages or other compensation you pay to your child for doing farmwork if a true employer-employee relationship exists between you and your child. File free federal and state taxes online Include these wages in the child's income. File free federal and state taxes online The child may have to file an income tax return. File free federal and state taxes online These wages may also be subject to social security and Medicare taxes if your child is age 18 or older. File free federal and state taxes online For more information, see Family Employees in chapter 13. File free federal and state taxes online    A Form W-2, Wage and Tax Statement, should be issued to the child employee. File free federal and state taxes online   The fact that your child spends the wages to buy clothes or other necessities you normally furnish does not prevent you from deducting your child's wages as a farm expense. File free federal and state taxes online The amount of wages paid to the child could cause a loss of the dependency exemption depending on how the child uses the money. File free federal and state taxes online Spouse as an employee. File free federal and state taxes online   You can deduct reasonable wages or other compensation you pay to your spouse if a true employer-employee relationship exists between you and your spouse. File free federal and state taxes online Wages you pay to your spouse are subject to social security and Medicare taxes. File free federal and state taxes online For more information, see Family Employees in chapter 13. File free federal and state taxes online Nondeductible Pay You cannot deduct wages paid for certain household work, construction work, and maintenance of your home. File free federal and state taxes online However, those wages may be subject to the employment taxes discussed in chapter 13. File free federal and state taxes online Household workers. File free federal and state taxes online   Do not deduct amounts paid to persons engaged in household work, except to the extent their services are used in boarding or otherwise caring for farm laborers. File free federal and state taxes online Construction labor. File free federal and state taxes online   Do not deduct wages paid to hired help for the construction of new buildings or other improvements. File free federal and state taxes online These wages are part of the cost of the building or other improvement. File free federal and state taxes online You must capitalize them. File free federal and state taxes online Maintaining your home. File free federal and state taxes online   If your farm employee spends time maintaining or repairing your home, the wages and employment taxes you pay for that work are nondeductible personal expenses. File free federal and state taxes online For example, assume you have a farm employee for the entire tax year and the employee spends 5% of the time maintaining your home. File free federal and state taxes online The employee devotes the remaining time to work on your farm. File free federal and state taxes online You cannot deduct 5% of the wages and employment taxes you pay for that employee. File free federal and state taxes online Employment Credits Reduce your deduction for wages by the amount of any employment credits you claim such as the work opportunity credit for qualified tax-exempt organizations hiring qualified veterans (Form 5884-C). File free federal and state taxes online Repairs and Maintenance You can deduct most expenses for the repair and maintenance of your farm property. File free federal and state taxes online Common items of repair and maintenance are repainting, replacing shingles and supports on farm buildings, and periodic or routine maintenance of trucks, tractors, and other farm machinery. File free federal and state taxes online However, repairs to, or overhauls of, depreciable property that substantially prolong the life of the property, increase its value, or adapt it to a different use are capital expenses. File free federal and state taxes online For example, if you repair the barn roof, the cost is deductible. File free federal and state taxes online But if you replace the roof, it is a capital expense. File free federal and state taxes online For more information, see Capital Expenses , later. File free federal and state taxes online Interest You can deduct as a farm business expense interest paid on farm mortgages and other obligations you incur in your farm business. File free federal and state taxes online Cash method. File free federal and state taxes online   If you use the cash method of accounting, you can generally deduct interest paid during the tax year. File free federal and state taxes online You cannot deduct interest paid with funds received from the original lender through another loan, advance, or other arrangement similar to a loan. File free federal and state taxes online You can, however, deduct the interest when you start making payments on the new loan. File free federal and state taxes online For more information, see Cash Method in chapter 2. File free federal and state taxes online Prepaid interest. File free federal and state taxes online   Under the cash method, you generally cannot deduct any interest paid before the year it is due. File free federal and state taxes online Interest paid in advance may be deducted only in the tax year in which it is due. File free federal and state taxes online Accrual method. File free federal and state taxes online   If you use an accrual method of accounting, you can deduct only interest that has accrued during the tax year. File free federal and state taxes online However, you cannot deduct interest owed to a related person who uses the cash method until payment is made and the interest is includible in the gross income of that person. File free federal and state taxes online For more information, see Accrual Method in chapter 2. File free federal and state taxes online Allocation of interest. File free federal and state taxes online   If you use the proceeds of a loan for more than one purpose, you must allocate the interest on that loan to each use. File free federal and state taxes online Allocate the interest to the following categories. File free federal and state taxes online Trade or business interest. File free federal and state taxes online Passive activity interest. File free federal and state taxes online Investment interest. File free federal and state taxes online Portfolio interest. File free federal and state taxes online Personal interest. File free federal and state taxes online   You generally allocate interest on a loan the same way you allocate the loan proceeds. File free federal and state taxes online You allocate loan proceeds by tracing disbursements to specific uses. File free federal and state taxes online The easiest way to trace disbursements to specific uses is to keep the proceeds of a particular loan separate from any other funds. File free federal and state taxes online Secured loan. File free federal and state taxes online   The allocation of loan proceeds and the related interest is generally not affected by the use of property that secures the loan. File free federal and state taxes online Example. File free federal and state taxes online You secure a loan with property used in your farming business. File free federal and state taxes online You use the loan proceeds to buy a car for personal use. File free federal and state taxes online You must allocate interest expense on the loan to personal use (purchase of the car) even though the loan is secured by farm business property. File free federal and state taxes online If the property that secures the loan is your home, you generally do not allocate the loan proceeds or the related interest. File free federal and state taxes online The interest is usually deductible as qualified home mortgage interest, regardless of how the loan proceeds are used. File free federal and state taxes online However, you can choose to treat the loan as not secured by your home. File free federal and state taxes online For more information, see Publication 936. File free federal and state taxes online Allocation period. File free federal and state taxes online   The period for which a loan is allocated to a particular use begins on the date the proceeds are used and ends on the earlier of the following dates. File free federal and state taxes online The date the loan is repaid. File free federal and state taxes online The date the loan is reallocated to another use. File free federal and state taxes online More information. File free federal and state taxes online   For more information on interest, see chapter 4 in Publication 535. File free federal and state taxes online Breeding Fees You can deduct breeding fees as a farm business expense. File free federal and state taxes online However, if you use an accrual method of accounting, you must capitalize breeding fees and allocate them to the cost basis of the calf, foal, etc. File free federal and state taxes online For more information on who must use an accrual method of accounting, see Accrual Method Required under Accounting Methods in chapter 2. File free federal and state taxes online Fertilizer and Lime You can deduct in the year paid or incurred the cost of fertilizer, lime, and other materials applied to farmland to enrich, neutralize, or condition it if the benefits last a year or less. File free federal and state taxes online You can also deduct the cost of applying these materials in the year you pay or incur it. File free federal and state taxes online However, see Prepaid Farm Supplies , earlier, for a rule that may limit your deduction for these materials. File free federal and state taxes online If the benefits of the fertilizer, lime, or other materials last substantially more than one year, you generally capitalize their cost and deduct a part each year the benefits last. File free federal and state taxes online However, you can choose to deduct these expenses in the year paid or incurred. File free federal and state taxes online If you make this choice, you will need IRS approval if you later decide to capitalize the cost of previously deducted items. File free federal and state taxes online If you sell farmland on which fertilizer or lime has been applied and if the selling price of the land includes part or all of the cost of the fertilizer or lime, you report the sale amount attributable to the fertilizer or lime as ordinary income. File free federal and state taxes online Farmland, for these purposes, is land used for producing crops, fruits, or other agricultural products or for sustaining livestock. File free federal and state taxes online It does not include land you have never used previously for producing crops or sustaining livestock. File free federal and state taxes online You cannot deduct initial land preparation costs. File free federal and state taxes online (See Capital Expenses , later. File free federal and state taxes online ) Include government payments you receive for lime or fertilizer in income. File free federal and state taxes online See Fertilizer and Lime under Agricultural Program Payments in chapter 3. File free federal and state taxes online Taxes You can deduct as a farm business expense the real estate and personal property taxes on farm business assets, such as farm equipment, animals, farmland, and farm buildings. File free federal and state taxes online You also can deduct the social security and Medicare taxes you pay to match the amount withheld from the wages of farm employees and any federal unemployment tax you pay. File free federal and state taxes online For information on employment taxes, see chapter 13. File free federal and state taxes online Allocation of taxes. File free federal and state taxes online   The taxes on the part of your farm you use as your home (including the furnishings and surrounding land not used for farming) are nonbusiness taxes. File free federal and state taxes online You may be able to deduct these nonbusiness taxes as itemized deductions on Schedule A (Form 1040). File free federal and state taxes online To determine the nonbusiness part, allocate the taxes between the farm assets and nonbusiness assets. File free federal and state taxes online The allocation can be done from the assessed valuations. File free federal and state taxes online If your tax statement does not show the assessed valuations, you can usually get them from the tax assessor. File free federal and state taxes online State and local general sales taxes. File free federal and state taxes online   State and local general sales taxes on nondepreciable farm business expense items are deductible as part of the cost of those items. File free federal and state taxes online Include state and local general sales taxes imposed on the purchase of assets for use in your farm business as part of the cost you depreciate. File free federal and state taxes online Also treat the taxes as part of your cost if they are imposed on the seller and passed on to you. File free federal and state taxes online State and federal income taxes. File free federal and state taxes online   Individuals cannot deduct state and federal income taxes as farm business expenses. File free federal and state taxes online Individuals can deduct state and local income taxes only as an itemized deduction on Schedule A (Form 1040). File free federal and state taxes online However, you cannot deduct federal income tax. File free federal and state taxes online Highway use tax. File free federal and state taxes online   You can deduct the federal use tax on highway motor vehicles paid on a truck or truck tractor used in your farm business. File free federal and state taxes online For information on the tax itself, including information on vehicles subject to the tax, see the Instructions for Form 2290, Heavy Highway Vehicle Use Tax Return. File free federal and state taxes online Self-employment tax deduction. File free federal and state taxes online   You can deduct as an adjustment to income on Form 1040 one-half of your self-employment tax in figuring your adjusted gross income. File free federal and state taxes online For more information, see chapter 12. File free federal and state taxes online Insurance You generally can deduct the ordinary and necessary cost of insurance for your farm business as a business expense. File free federal and state taxes online This includes premiums you pay for the following types of insurance. File free federal and state taxes online Fire, storm, crop, theft, liability, and other insurance on farm business assets. File free federal and state taxes online Health and accident insurance on your farm employees. File free federal and state taxes online Workers' compensation insurance set by state law that covers any claims for job-related bodily injuries or diseases suffered by employees on your farm, regardless of fault. File free federal and state taxes online Business interruption insurance. File free federal and state taxes online State unemployment insurance on your farm employees (deductible as taxes if they are considered taxes under state law). File free federal and state taxes online Insurance to secure a loan. File free federal and state taxes online   If you take out a policy on your life or on the life of another person with a financial interest in your farm business to get or protect a business loan, you cannot deduct the premiums as a business expense. File free federal and state taxes online In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. File free federal and state taxes online Advance premiums. File free federal and state taxes online   Deduct advance payments of insurance premiums only in the year to which they apply, regardless of your accounting method. File free federal and state taxes online Example. File free federal and state taxes online On June 28, 2013, you paid a premium of $3,000 for fire insurance on your barn. File free federal and state taxes online The policy will cover a period of 3 years beginning on July 1, 2013. File free federal and state taxes online Only the cost for the 6 months in 2013 is deductible as an insurance expense on your 2013 calendar year tax return. File free federal and state taxes online Deduct $500, which is the premium for 6 months of the 36-month premium period, or 6/36 of $3,000. File free federal and state taxes online In both 2014 and 2015, deduct $1,000 (12/36 of $3,000). File free federal and state taxes online Deduct the remaining $500 in 2016. File free federal and state taxes online Had the policy been effective on January 1, 2013, the deductible expense would have been $1,000 for each of the years 2013, 2014, and 2015, based on one-third of the premium used each year. File free federal and state taxes online Business interruption insurance. File free federal and state taxes online   Use and occupancy and business interruption insurance premiums are deductible as a business expense. File free federal and state taxes online This insurance pays for lost profits if your business is shut down due to a fire or other cause. File free federal and state taxes online Report any proceeds in full on Schedule F, Part I. File free federal and state taxes online Self-employed health insurance deduction. File free federal and state taxes online   If you are self-employed, you can deduct as an adjustment to income on Form 1040 your payments for medical, dental, and qualified long-term care insurance coverage for yourself, your spouse, and your dependents when figuring your adjusted gross income on your Form 1040. File free federal and state taxes online Effective March 30, 2010, the insurance can also cover any child of yours under age 27 at the end of 2013, even if the child was not your dependent. File free federal and state taxes online Generally, this deduction cannot be more than the net profit from the business under which the plan was established. File free federal and state taxes online   If you or your spouse is also an employee of another person, you cannot take the deduction for any month in which you are eligible to participate in a subsidized health plan maintained by your employer or your spouse's employer. File free federal and state taxes online   Generally, use the Self-Employed Health Insurance Deduction Worksheet in the Instructions for Form 1040 to figure your deduction. File free federal and state taxes online Include the remaining part of the insurance payment in your medical expenses on Schedule A (Form 1040) if you itemize your deductions. File free federal and state taxes online   For more information, see Deductible Premiums in Publication 535, chapter 6. File free federal and state taxes online Rent and Leasing If you lease property for use in your farm business, you can generally deduct the rent you pay on Schedule F. File free federal and state taxes online However, you cannot deduct rent you pay in crop shares if you deduct the cost of raising the crops as farm expenses. File free federal and state taxes online Advance payments. File free federal and state taxes online   Deduct advance payments of rent only in the year to which they apply, regardless of your accounting method. File free federal and state taxes online Farm home. File free federal and state taxes online   If you rent a farm, do not deduct the part of the rental expense that represents the fair rental value of the farm home in which you live. File free federal and state taxes online Lease or Purchase If you lease a farm building or equipment, you must determine whether or not the agreement must be treated as a conditional sales contract rather than a lease. File free federal and state taxes online If the agreement is treated as a conditional sales contract, the payments under the agreement (so far as they do not represent interest or other charges) are payments for the purchase of the property. File free federal and state taxes online Do not deduct these payments as rent, but capitalize the cost of the property and recover this cost through depreciation. File free federal and state taxes online Conditional sales contract. File free federal and state taxes online   Whether an agreement is a conditional sales contract depends on the intent of the parties. File free federal and state taxes online Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. File free federal and state taxes online No single test, or special combination of tests, always applies. File free federal and state taxes online However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. File free federal and state taxes online The agreement applies part of each payment toward an equity interest you will receive. File free federal and state taxes online You get title to the property after you make a stated amount of required payments. File free federal and state taxes online The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. File free federal and state taxes online You pay much more than the current fair rental value of the property. File free federal and state taxes online You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. File free federal and state taxes online Determine this value when you make the agreement. File free federal and state taxes online You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. File free federal and state taxes online The agreement designates part of the payments as interest, or part of the payments can be easily recognized as interest. File free federal and state taxes online Example. File free federal and state taxes online You lease new farm equipment from a dealer who both sells and leases. File free federal and state taxes online The agreement includes an option to purchase the equipment for a specified price. File free federal and state taxes online The lease payments and the specified option price equal the sales price of the equipment plus interest. File free federal and state taxes online Under the agreement, you are responsible for maintenance, repairs, and the risk of loss. File free federal and state taxes online For federal income tax purposes, the agreement is a conditional sales contract. File free federal and state taxes online You cannot deduct any of the lease payments as rent. File free federal and state taxes online You can deduct interest, repairs, insurance, depreciation, and other expenses related to the equipment. File free federal and state taxes online Motor vehicle leases. File free federal and state taxes online   Special rules apply to lease agreements that have a terminal rental adjustment clause. File free federal and state taxes online In general, this is a clause that provides for a rental price adjustment based on the amount the lessor is able to sell the vehicle for at the end of the lease. File free federal and state taxes online If your rental agreement contains a terminal rental adjustment clause, treat the agreement as a lease if the agreement otherwise qualifies as a lease. File free federal and state taxes online For more information, see Internal Revenue Code (IRC) section 7701(h). File free federal and state taxes online Leveraged leases. File free federal and state taxes online   Special rules apply to leveraged leases of equipment (arrangements in which the equipment is financed by a nonrecourse loan from a third party). File free federal and state taxes online For more information, see Publication 535, chapter 3, and Revenue Procedure 2001-28, which begins on page 1156 of Internal Revenue Bulletin 2001-19 at www. File free federal and state taxes online irs. File free federal and state taxes online gov/pub/irs-irbs/irb01-19. File free federal and state taxes online pdf. File free federal and state taxes online Depreciation If property you acquire to use in your farm business is expected to last more than one year, you generally cannot deduct the entire cost in the year you acquire it. File free federal and state taxes online You must recover the cost over more than one year and deduct part of it each year on Schedule F as depreciation or amortization. File free federal and state taxes online However, you can choose to deduct part or all of the cost of certain qualifying property, up to a limit, as a section 179 deduction in the year you place it in service. File free federal and state taxes online Depreciation, amortization, and the section 179 deduction are discussed in chapter 7. File free federal and state taxes online Business Use of Your Home You can deduct expenses for the business use of your home if you use part of your home exclusively and regularly: As the principal place of business for any trade or business in which you engage, As a place to meet or deal with patients, clients, or customers in the normal course of your trade or business, or In connection with your trade or business, if you are using a separate structure that is not attached to your home. File free federal and state taxes online Your home office will qualify as your principal place of business for deducting expenses for its use if you meet both of the following requirements. File free federal and state taxes online You use it exclusively and regularly for the administrative or management activities of your trade or business. File free federal and state taxes online You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. File free federal and state taxes online If you use part of your home for business, you must divide the expenses of operating your home between personal and business use. File free federal and state taxes online The IRS now provides a simplified method to determine your expenses for business use of your home. File free federal and state taxes online For more information, see Schedule C (Form 1040), Part II, and its instructions. File free federal and state taxes online Deduction limit. File free federal and state taxes online   If your gross income from farming equals or exceeds your total farm expenses (including expenses for the business use of your home), you can deduct all your farm expenses. File free federal and state taxes online But if your gross income from farming is less than your total farm expenses, your deduction for certain expenses for the use of your home in your farming business is limited. File free federal and state taxes online   Your deduction for otherwise nondeductible expenses, such as utilities, insurance, and depreciation (with depreciation taken last), cannot be more than the gross income from farming minus the following expenses. File free federal and state taxes online The business part of expenses you could deduct even if you did not use your home for business (such as deductible mortgage interest, real estate taxes, and casualty and theft losses). File free federal and state taxes online Farm expenses other than expenses that relate to the use of your home. File free federal and state taxes online If you are self-employed, do not include your deduction for half of your self-employment tax. File free federal and state taxes online   Deductions over the current year's limit can be carried over to your next tax year. File free federal and state taxes online They are subject to the deduction limit for the next tax year. File free federal and state taxes online More information. File free federal and state taxes online   See Publication 587 for more information on deducting expenses for the business use of your home. File free federal and state taxes online Telephone expense. File free federal and state taxes online   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. File free federal and state taxes online However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for your farm business, are deductible business expenses. File free federal and state taxes online Cell phone charges for calls relating to your farm business are deductible. File free federal and state taxes online If the cell phone you use for your farm business is part of a family cell phone plan, you must allocate and deduct only the portion of the charges attributable to farm business calls. File free federal and state taxes online Truck and Car Expenses You can deduct the actual cost of operating a truck or car in your farm business. File free federal and state taxes online Only expenses for business use are deductible. File free federal and state taxes online These include such items as gasoline, oil, repairs, license tags, insurance, and depreciation (subject to certain limits). File free federal and state taxes online Standard mileage rate. File free federal and state taxes online   Instead of using actual costs, under certain conditions you can use the standard mileage rate. File free federal and state taxes online The standard mileage rate for each mile of business use is 56. File free federal and state taxes online 5 cents in 2013. File free federal and state taxes online You can use the standard mileage rate for a car or a light truck, such as a van, pickup, or panel truck, you own or lease. File free federal and state taxes online   You cannot use the standard mileage rate if you operate five or more cars or light trucks at the same time. File free federal and state taxes online You are not using five or more vehicles at the same time if you alternate using the vehicles (you use them at different times) for business. File free federal and state taxes online Example. File free federal and state taxes online Maureen owns a car and four pickup trucks that are used in her farm business. File free federal and state taxes online Her farm employees use the trucks and she uses the car for business. File free federal and state taxes online Maureen cannot use the standard mileage rate for the car or the trucks. File free federal and state taxes online This is because all five vehicles are used in Maureen's farm business at the same time. File free federal and state taxes online She must use actual expenses for all vehicles. File free federal and state taxes online Business use percentage. File free federal and state taxes online   You can claim 75% of the use of a car or light truck as business use without any records if you used the vehicle during most of the normal business day directly in connection with the business of farming. File free federal and state taxes online You choose this method of substantiating business use the first year the vehicle is placed in service. File free federal and state taxes online Once you make this choice, you may not change to another method later. File free federal and state taxes online The following are uses directly connected with the business of farming. File free federal and state taxes online Cultivating land. File free federal and state taxes online Raising or harvesting any agricultural or horticultural commodity. File free federal and state taxes online Raising, shearing, feeding, caring for, training, and managing animals. File free federal and state taxes online Driving to the feed or supply store. File free federal and state taxes online   If you keep records and they show that your business use was more than 75%, you may be able to claim more. File free federal and state taxes online See Recordkeeping requirements under Travel Expenses , below. File free federal and state taxes online More information. File free federal and state taxes online   For more information on deductible truck and car expenses, see Publication 463, chapter 4. File free federal and state taxes online If you pay your employees for the use of their truck or car in your farm business, see Reimbursements to employees under Travel Expenses next. File free federal and state taxes online Travel Expenses You can deduct ordinary and necessary expenses you incur while traveling away from home for your farm business. File free federal and state taxes online You cannot deduct lavish or extravagant expenses. File free federal and state taxes online Usually, the location of your farm business is considered your home for tax purposes. File free federal and state taxes online You are traveling away from home if: Your duties require you to be absent from your farm substantially longer than an ordinary work day, and You need to get sleep or rest to meet the demands of your work while away from home. File free federal and state taxes online If you meet these requirements and can prove the time, place, and business purpose of your travel, you can deduct your ordinary and necessary travel expenses. File free federal and state taxes online The following are some types of deductible travel expenses. File free federal and state taxes online Air, rail, bus, and car transportation; Meals and lodging; Dry cleaning and laundry; Telephone and fax; Transportation between your hotel and your temporary work or business meeting location; and Tips for any of the above expenses. File free federal and state taxes online Meals. File free federal and state taxes online   You ordinarily can deduct only 50% of your business-related meals expenses. File free federal and state taxes online You can deduct the cost of your meals while traveling on business only if your business trip is overnight or long enough to require you to stop for sleep or rest to properly perform your duties. File free federal and state taxes online You cannot deduct any of the cost of meals if it is not necessary for you to rest, unless you meet the rules for business entertainment. File free federal and state taxes online For information on entertainment expenses, see Publication 463, chapter 2. File free federal and state taxes online   The expense of a meal includes amounts you spend for your food, beverages, taxes, and tips relating to the meal. File free federal and state taxes online You can deduct either 50% of the actual cost or 50% of a standard meal allowance that covers your daily meal and incidental expenses. File free federal and state taxes online    Recordkeeping requirements. File free federal and state taxes online You must be able to prove your deductions for travel by adequate records or other evidence that will support your own statement. File free federal and state taxes online Estimates or approximations do not qualify as proof of an expense. File free federal and state taxes online   You should keep an account book or similar record, supported by adequate documentary evidence, such as receipts, that together support each element of an expense. File free federal and state taxes online Generally, it is best to record the expense and get documentation of it at the time you pay it. File free federal and state taxes online   If you choose to deduct a standard meal allowance rather than the actual expense, you do not have to keep records to prove amounts spent for meals and incidental items. File free federal and state taxes online However, you must still keep records to prove the actual amount of other travel expenses, and the time, place, and business purpose of your travel. File free federal and state taxes online More information. File free federal and state taxes online   For detailed information on travel, recordkeeping, and the standard meal allowance, see Publication 463. File free federal and state taxes online Reimbursements to employees. File free federal and state taxes online   You generally can deduct reimbursements you pay to your employees for travel and transportation expenses they incur in the conduct of your business. File free federal and state taxes online Employees may be reimbursed under an accountable or nonaccountable plan. File free federal and state taxes online Under an accountable plan, the employee must provide evidence of expenses. File free federal and state taxes online Under a nonaccountable plan, no evidence of expenses is required. File free federal and state taxes online If you reimburse expenses under an accountable plan, deduct them as travel and transportation expenses. File free federal and state taxes online If you reimburse expenses under a nonaccountable plan, you must report the reimbursements as wages on Form W-2 and deduct them as wages. File free federal and state taxes online For more information, see Publication 535, chapter 11. File free federal and state taxes online Marketing Quota Penalties You can deduct as Other expenses on Schedule F penalties you pay for marketing crops in excess of farm marketing quotas. File free federal and state taxes online However, if you do not pay the penalty, but instead the purchaser of your crop deducts it from the payment to you, include in gross income only the amount you received. File free federal and state taxes online Do not take a separate deduction for the penalty. File free federal and state taxes online Tenant House Expenses You can deduct the costs of maintaining houses and their furnishings for tenants or hired help as farm business expenses. File free federal and state taxes online These costs include repairs, utilities, insurance, and depreciation. File free federal and state taxes online The value of a dwelling you furnish to a tenant under the usual tenant-farmer arrangement is not taxable income to the tenant. File free federal and state taxes online Items Purchased for Resale If you use the cash method of accounting, you ordinarily deduct the cost of livestock and other items purchased for resale only in the year of sale. File free federal and state taxes online You deduct this cost, including freight charges for transporting the livestock to the farm, on Schedule F, Part I. File free federal and state taxes online However, see Chickens, seeds, and young plants , below. File free federal and state taxes online Example. File free federal and state taxes online You use the cash method of accounting. File free federal and state taxes online In 2013, you buy 50 steers you will sell in 2014. File free federal and state taxes online You cannot deduct the cost of the steers on your 2013 tax return. File free federal and state taxes online You deduct their cost on your 2014 Schedule F, Part I. File free federal and state taxes online Chickens, seeds, and young plants. File free federal and state taxes online   If you are a cash method farmer, you can deduct the cost of hens and baby chicks bought for commercial egg production, or for raising and resale, as an expense on Schedule F, Part I, in the year paid if you do it consistently and it does not distort income. File free federal and state taxes online You also can deduct the cost of seeds and young plants bought for further development and cultivation before sale as an expense on Schedule F, Part I, when paid if you do this consistently and you do not figure your income on the crop method. File free federal and state taxes online However, see Prepaid Farm Supplies , earlier, for a rule that may limit your deduction for these items. File free federal and state taxes online   If you deduct the cost of chickens, seeds, and young plants as an expense, report their entire selling price as income. File free federal and state taxes online You cannot also deduct the cost from the selling price. File free federal and state taxes online   You cannot deduct the cost of seeds and young plants for Christmas trees and timber as an expense. File free federal and state taxes online Deduct the cost of these seeds and plants through depletion allowances. File free federal and state taxes online For more information, see Depletion in chapter 7. File free federal and state taxes online   The cost of chickens and plants used as food for your family is never deductible. File free federal and state taxes online   Capitalize the cost of plants with a preproductive period of more than 2 years, unless you can elect out of the uniform capitalization rules. File free federal and state taxes online These rules are discussed in chapter 6. File free federal and state taxes online Example. File free federal and state taxes online You use the cash method of accounting. File free federal and state taxes online In 2013, you buy 500 baby chicks to raise for resale in 2014. File free federal and state taxes online You also buy 50 bushels of winter wheat seed in 2013 that you sow in the fall. File free federal and state taxes online Unless you previously adopted the method of deducting these costs in the year you sell the chickens or the harvested crops, you can deduct the cost of both the baby chicks and the seed wheat in 2013. File free federal and state taxes online Election to use crop method. File free federal and state taxes online   If you use the crop method, you can delay deducting the cost of seeds and young plants until you sell them. File free federal and state taxes online You must get IRS approval to use the crop method. File free federal and state taxes online If you follow this method, deduct the cost from the selling price to determine your profit on Schedule F, Part I. File free federal and state taxes online For more information, see Crop method under Special Methods of Accounting in chapter 2. File free federal and state taxes online Choosing a method. File free federal and state taxes online   You can adopt either the crop method or the cash method for deducting the cost in the first year you buy egg-laying hens, pullets, chicks, or seeds and young plants. File free federal and state taxes online   Although you must use the same method for egg-laying hens, pullets, and chicks, you can use a different method for seeds and young plants. File free federal and state taxes online Once you use a particular method for any of these items, use it for those items until you get IRS approval to change your method. File free federal and state taxes online For more information, see Change in Accounting Method in chapter 2. File free federal and state taxes online Other Expenses The following list, while not all-inclusive, shows some expenses you can deduct as other farm expenses on Schedule F, Part II. File free federal and state taxes online These expenses must be for business purposes and  (1) paid, if you use the cash method of accounting, or (2) incurred, if you use an accrual method of accounting. File free federal and state taxes online Accounting fees. File free federal and state taxes online Advertising. File free federal and state taxes online Business travel and meals. File free federal and state taxes online Commissions. File free federal and state taxes online Consultant fees. File free federal and state taxes online Crop scouting expenses. File free federal and state taxes online Dues to cooperatives. File free federal and state taxes online Educational expenses (to maintain and improve farming skills). File free federal and state taxes online Farm-related attorney fees. File free federal and state taxes online Farm magazines. File free federal and state taxes online Ginning. File free federal and state taxes online Insect sprays and dusts. File free federal and state taxes online Litter and bedding. File free federal and state taxes online Livestock fees. File free federal and state taxes online Marketing fees. File free federal and state taxes online Milk assessment. File free federal and state taxes online Recordkeeping expenses. File free federal and state taxes online Service charges. File free federal and state taxes online Small tools expected to last one year or less. File free federal and state taxes online Stamps and stationery. File free federal and state taxes online Subscriptions to professional, technical, and trade journals that deal with farming. File free federal and state taxes online Tying material and containers. File free federal and state taxes online Loan expenses. File free federal and state taxes online   You prorate and deduct loan expenses, such as legal fees and commissions, you pay to get a farm loan over the term of the loan. File free federal and state taxes online Tax preparation fees. File free federal and state taxes online   You can deduct as a farm business expense on Schedule F the cost of preparing that part of your tax return relating to your farm business. File free federal and state taxes online You may be able to deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. File free federal and state taxes online   You also can deduct on Schedule F the amount you pay or incur in resolving tax issues relating to your farm business. File free federal and state taxes online Domestic Production Activities Deduction Generally, you are allowed a deduction for income attributable to domestic production activities. File free federal and state taxes online You can deduct 9% of the lesser of your qualified production activities income or your taxable income (adjusted gross income for individuals) for the tax year. File free federal and state taxes online Your deduction is limited to 50% of the Form W-2 wages you paid for the tax year that are properly allocable to domestic production gross receipts. File free federal and state taxes online For this purpose, Form W-2 wages do not include noncash wages paid for agricultural labor, such as compensation paid as commodities. File free federal and state taxes online Also, excluded from Form W-2 wages are wages paid to your children under age 18 and nontaxable fringe benefits. File free federal and state taxes online Income from cooperatives. File free federal and state taxes online   If you receive a patronage dividend or qualified per-unit retain allocation from a cooperative which is engaged in the manufacturing, production, growth, or extraction in whole or in significant part of any agricultural or horticultural product or in the marketing of agricultural or horticultural products, your income from the cooperative can give rise to a domestic production activities deduction. File free federal and state taxes online This deduction amount is reported on Form 1099-PATR, box 6. File free federal and state taxes online In order for you to qualify for the deduction, the cooperative is required to send you a written notice designating your portion of the domestic production activities deduction. File free federal and state taxes online More information. File free federal and state taxes online   For more information on the domestic production activities deduction, see the Instructions for Form 8903. File free federal and state taxes online Capital Expenses A capital expense is a payment, or a debt incurred, for the acquisition, improvement, or restoration of an asset that is expected to last more than one year. File free federal and state taxes online You include the expense in the basis of the asset. File free federal and state taxes online Uniform capitalization rules also require you to capitalize or include in inventory certain other expenses. File free federal and state taxes online See chapters 2  and 6. File free federal and state taxes online Capital expenses are generally not deductible, but they may be depreciable. File free federal and state taxes online However, you can elect to deduct certain capital expenses, such as the following. File free federal and state taxes online The cost of fertilizer, lime, etc. File free federal and state taxes online (See Fertilizer and Lime under Deductible Expenses , earlier. File free federal and state taxes online ) Soil and water conservation expenses. File free federal and state taxes online (See chapter 5. File free federal and state taxes online ) The cost of property that qualifies for a deduction under section 179. File free federal and state taxes online (See chapter 7. File free federal and state taxes online ) Business start-up costs. File free federal and state taxes online (See Business start-up and organizational costs , later. File free federal and state taxes online ) Forestation and reforestation costs. File free federal and state taxes online (See Forestation and reforestation costs , later. File free federal and state taxes online ) Generally, the costs of the following items, including the costs of material, hired labor, and installation, are capital expenses. File free federal and state taxes online Land and buildings. File free federal and state taxes online Additions, alterations, and improvements to buildings, etc. File free federal and state taxes online Cars and trucks. File free federal and state taxes online Equipment and machinery. File free federal and state taxes online Fences. File free federal and state taxes online Draft, breeding, sport, and dairy livestock. File free federal and state taxes online Repairs to machinery, equipment, trucks, and cars that prolong their useful life, increase their value, or adapt them to different use. File free federal and state taxes online Water wells, including drilling and equipping costs. File free federal and state taxes online Land preparation costs, such as: Clearing land for farming, Leveling and conditioning land, Purchasing and planting trees, Building irrigation canals and ditches, Laying irrigation pipes, Installing drain tile, Modifying channels or streams, Constructing earthen, masonry, or concrete tanks, reservoirs, or dams, and Building roads. File free federal and state taxes online Business start-up and organizational costs. File free federal and state taxes online   You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. File free federal and state taxes online The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. File free federal and state taxes online Any remaining costs must be amortized. File free federal and state taxes online See chapter 7. File free federal and state taxes online   You elect to deduct start-up or organizational costs by claiming the deduction on the income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. File free federal and state taxes online However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File free federal and state taxes online Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File free federal and state taxes online 9100-2” at the top of the amended return. File free federal and state taxes online File the amended return at the same address you filed the original return. File free federal and state taxes online The election applies when figuring taxable income for the current tax year and all subsequent years. File free federal and state taxes online   You can choose to forgo the election by clearly electing to capitalize your start-up or organizational costs on an income tax return filed by the due date (including extensions) for the tax year in which the active trade or business begins. File free federal and state taxes online For more information about start-up and organizational costs, see chapter 7. File free federal and state taxes online Crop production expenses. File free federal and state taxes online   The uniform capitalization rules generally require you to capitalize expenses incurred in producing plants. File free federal and state taxes online However, except for certain taxpayers required to use an accrual method of accounting, the capitalization rules do not apply to plants with a preproductive period of 2 years or less. File free federal and state taxes online For more information, see Uniform Capitalization Rules in chapter 6. File free federal and state taxes online Timber. File free federal and state taxes online   Capitalize the cost of acquiring timber. File free federal and state taxes online Do not include the cost of land in the cost of the timber. File free federal and state taxes online You must generally capitalize direct costs incurred in reforestation. File free federal and state taxes online However, you can elect to deduct some forestation and reforestation costs. File free federal and state taxes online See Forestation and reforestation costs next. File free federal and state taxes online Reforestation costs include the following. File free federal and state taxes online Site preparation costs, such as: Girdling, Applying herbicide, Baiting rodents, and Clearing and controlling brush. File free federal and state taxes online The cost of seed or seedlings. File free federal and state taxes online Labor and tool expenses. File free federal and state taxes online Depreciation on equipment used in planting or seeding. File free federal and state taxes online Costs incurred in replanting to replace lost seedlings. File free federal and state taxes online You can choose to capitalize certain indirect reforestation costs. File free federal and state taxes online   These capitalized amounts are your basis for the timber. File free federal and state taxes online Recover your basis when you sell the timber or take depletion allowances when you cut the timber. File free federal and state taxes online See Depletion in chapter 7. File free federal and state taxes online Forestation and reforestation costs. File free federal and state taxes online   You can elect to deduct up to $10,000 ($5,000 if married filing separately; $0 for a trust) of qualifying reforestation costs paid or incurred after October 22, 2004, for each qualified timber property. File free federal and state taxes online Any remaining costs can be amortized over an 84-month period. File free federal and state taxes online See chapter 7. File free federal and state taxes online If you make an election to deduct or amortize qualifying reforestation costs, you should create and maintain separate timber accounts for each qualified timber property. File free federal and state taxes online The accounts should include all reforestation treatments and the dates they were applied. File free federal and state taxes online Any qualified timber property that is subject to the deduction or amortization election cannot be included in any other timber account for which depletion is allowed. File free federal and state taxes online The timber account should be maintained until the timber is disposed of. File free federal and state taxes online For more information, see Notice 2006-47, 2006-20 I. File free federal and state taxes online R. File free federal and state taxes online B. File free federal and state taxes online 892, available at  www. File free federal and state taxes online irs. File free federal and state taxes online gov/irb/2006-20_IRB/ar11. File free federal and state taxes online html. File free federal and state taxes online   You elect to deduct forestation and reforestation costs by claiming the deduction on the income tax return filed by the due date (including extensions) for the tax year in which the expenses were paid or incurred. File free federal and state taxes online If you are filing Form T (Timber), Forest Activities Schedule, also complete Form T (Timber), Part IV. File free federal and state taxes online If you are not filing Form T (Timber), attach a statement to your return with the following information. File free federal and state taxes online The unique stand identification numbers. File free federal and state taxes online The total number of acres reforested during the tax year. File free federal and state taxes online The nature of the reforestation treatments. File free federal and state taxes online The total amounts of the qualified reforestation expenditures eligible to be amortized or deducted. File free federal and state taxes online   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). File free federal and state taxes online Clearly indicate the election on your amended return and write “Filed pursuant to section 301. File free federal and state taxes online 9100-2” at the top of the amended return. File free federal and state taxes online File the amended return at the same address you filed the original return. File free federal and state taxes online    For more information about forestation and reforestation costs, see chapter 7. File free federal and state taxes online    For more information about timber, see Agriculture Handbook Number 731, Forest Landowners' Guide to the Federal Income Tax. File free federal and state taxes online You can view this publication on the Internet at  www. File free federal and state taxes online fs. File free federal and state taxes online fed. File free federal and state taxes online us/publications. File free federal and state taxes online Christmas tree cultivation. File free federal and state taxes online   If you are in the business of planting and cultivating Christmas trees to sell when they are more than 6 years old, capitalize expenses incurred for planting and stump culture and add them to the basis of the standing trees. File free federal and state taxes online Recover these expenses as part of your adjusted basis when you sell the standing trees or as depletion allowances when you cut the trees. File free federal and state taxes online For more information, see Timber Depletion under Depletion in chapter 7. File free federal and state taxes online   You can deduct as business expenses the costs incurred for shearing and basal pruning of these trees. File free federal and state taxes online Expenses incurred for silvicultural practices, such as weeding or cleaning, and noncommercial thinning are also deductible as business expenses. File free federal and state taxes online   Capitalize the cost of land improvements, such as road grading, ditching, and fire breaks, that have a useful life beyond the tax year. File free federal and state taxes online If the improvements do not have a determinable useful life, add their cost to the basis of the land. File free federal and state taxes online The cost is recovered when you sell or otherwise dispose of it. File free federal and state taxes online If the improvements have a determinable useful life, recover their cost through depreciation. File free federal and state taxes online Capitalize the cost of equipment and other depreciable assets, such as culverts and fences, to the extent you do not use them in planting Christmas trees. File free federal and state taxes online Recover these costs through depreciation. File free federal and state taxes online Nondeductible Expenses You cannot deduct personal expenses and certain other items on your tax return even if they relate to your farm. File free federal and state taxes online Personal, Living, and Family Expenses You cannot deduct certain personal, living, and family expenses as business expenses. File free federal and state taxes online These include rent and insurance premiums paid on property used as your home, life insurance premiums on yourself or your family, the cost of maintaining cars, trucks, or horses for personal use, allowances to minor children, attorneys' fees and legal expenses incurred in personal matters, and household expenses. File free federal and state taxes online Likewise, the cost of purchasing or raising produce or livestock consumed by you or your family is not deductible. File free federal and state taxes online Other Nondeductible Items You cannot deduct the following items on your tax return. File free federal and state taxes online Loss of growing plants, produce, and crops. File free federal and state taxes online   Losses of plants, produce, and crops raised for sale are generally not deductible. File free federal and state taxes online However, you may have a deductible loss on plants with a preproductive period of more than 2 years. File free federal and state taxes online See chapter 11 for more information. File free federal and state taxes online Repayment of loans. File free federal and state taxes online   You cannot deduct the repayment of a loan. File free federal and state taxes online However, if you use the proceeds of a loan for farm business expenses, you can deduct the interest on the loan. File free federal and state taxes online See Interest , earlier. File free federal and state taxes online Estate, inheritance, legacy, succession, and gift taxes. File free federal and state taxes online   You cannot deduct estate, inheritance, legacy, succession, and gift taxes. File free federal and state taxes online Loss of livestock. File free federal and state taxes online   You cannot deduct as a loss the value of raised livestock that die if you deducted the cost of raising them as an expense. File free federal and state taxes online Losses from sales or exchanges between related persons. File free federal and state taxes online   You cannot deduct losses from sales or exchanges of property between you and certain related persons, including your spouse, brother, sister, ancestor, or lineal descendant. File free federal and state taxes online For more information, see chapter 2 of Publication 544, Sales and Other Dispositions of Assets. File free federal and state taxes online Cost of raising unharvested crops. File free federal and state taxes online   You cannot deduct the cost of raising unharvested crops sold with land owned more than one year if you sell both at the same time and to the same person. File free federal and state taxes online Add these costs to the basis of the land to determine the gain or loss on the sale. File free federal and state taxes online For more information, see Section 1231 Gains and Losses in chapter 9. File free federal and state taxes online Cost of unharvested crops bought with land. File free federal and state taxes online   Capitalize the purchase price of land, including the cost allocable to unharvested crops. File free federal and state taxes online You cannot deduct the cost of the crops at the time of purchase. File free federal and state taxes online However, you can deduct this cost in figuring net profit or loss in the tax year you sell the crops. File free federal and state taxes online Cost related to gifts. File free federal and state taxes online   You cannot deduct costs related to your gifts of agricultural products or property held for sale in the ordinary course of your business. File free federal and state taxes online The costs are not deductible in the year of the gift or any later year. File free federal and state taxes online For example, you cannot deduct the cost of raising cattle or the cost of planting and raising unharvested wheat on parcels of land given as a gift to your children. File free federal and state taxes online Club dues and membership fees. File free federal and state taxes online   Generally, you cannot deduct amounts you pay or incur for membership in any club organized for business, pleasure, recreation, or any other social purpose. File free federal and state taxes online This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. File free federal and state taxes online Exception. File free federal and state taxes online   The following organizations will not be treated as a club organized for business, pleasure, recreation, or other social purposes, unless one of its main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. File free federal and state taxes online Boards of trade. File free federal and state taxes online Business leagues. File free federal and state taxes online Chambers of commerce. File free federal and state taxes online Civic or public service organizations. File free federal and state taxes online Professional associations. File free federal and state taxes online Trade associations. File free federal and state taxes online Real estate boards. File free federal and state taxes online Fines and penalties. File free federal and state taxes online   You cannot deduct fines and penalties, except penalties for exceeding marketing quotas, discussed earlier. File free federal and state taxes online Losses From Operating a Farm If your deductible farm expenses are more than your farm income, you have a loss from the operation of your farm. File free federal and state taxes online The amount of the loss you can deduct when figuring your taxable income may be limited. File free federal and state taxes online To figure your deductible loss, you must apply the following limits. File free federal and state taxes online The at-risk limits. File free federal and state taxes online The passive activity limits. File free federal and state taxes online The following discussions explain these limits. File free federal and state taxes online If your deductible loss after applying these limits is more than your other income for the year, you may have a net operating loss. File free federal and state taxes online See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. File free federal and state taxes online If you do not carry on your farming activity to make a profit, your loss deduction may be limited by the not-for-profit rules. File free federal and state taxes online See Not-for-Profit Farming, later. File free federal and state taxes online At-Risk Limits The at-risk rules limit your deduction for losses from most business or income-producing activities, including farming. File free federal and state taxes online These rules limit the losses you can deduct when figuring your taxable income. File free federal and state taxes online The deductible loss from an activity is limited to the amount you have at risk in the activity. File free federal and state taxes online You are at risk in any activity for: The money and adjusted basis of property you contribute to the activity, and Amounts you borrow for use in the activity if: You are personally liable for repayment, or You pledge property (other than property used in the activity) as security for the loan. File free federal and state taxes online You are not at risk, however, for amounts you borrow for use in a farming activity from a person who has an interest in the activity (other than as a creditor) or a person related to someone (other than you) having such an interest. File free federal and state taxes online For more information, see Publication 925. File free federal and state taxes online Passive Activity Limits A passive activity is generally any activity involving the conduct of any trade or business in which you do not materially participate. File free federal and state taxes online Generally, a rental activity is a passive activity. File free federal and state taxes online If you have a passive activity, special rules limit the loss you can deduct in the tax year. File free federal and state taxes online You generally can deduct losses from passive activities only up to income from passive activities. File free federal and state taxes online Credits are similarly limited. File free federal and state taxes online For more information, see Publication 925. File free federal and state taxes online Excess Farm Loss Limit For tax years beginning after 2009, excess farm losses (defined below) are not deductible if you received certain applicable subsidies. File free federal and state taxes online This limit applies to any farming businesses, other than a C corporation, that received a direct or counter-cyclical payment (or any payment in lieu of such payments) under title I of the Food, Conservation, and Energy Act of 2008, or from a Commodity Credit Corporation loan. File free federal and state taxes online Your farming losses are limited to the greater of: $300,000 ($150,000 for a married person filing a separate return), or The total net farm income for the prior five tax years. File free federal and state taxes online Farming losses from casualty losses or losses by reason of disease or drought are disregarded for purposes of figuring this limitation. File free federal and state taxes online Also, the limitation on farm losses should be applied before the passive activity loss rules are applied. File free federal and state taxes online For more details, see IRC section 461(j). File free federal and state taxes online Excess farm loss. File free federal and state taxes online   Generally, an excess farm loss is the amount of your farming loss that exceeds the amount of the limitation (as described above). File free federal and state taxes online This loss can be determined by taking the excess of: The total deductions for the tax year from your farming businesses, over The total gross income or gain for the tax year from your farming businesses, plus the greater of: $300,000 ($150,000 for a married person filing a separate return), or The excess (if any) of the total gross income or gain from your farming businesses for the prior five tax years over the total deductions from your farming businesses for the prior five tax years. File free federal and state taxes online   Excess farm losses that are disallowed can be carried forward to the next tax year and treated as a deduction from that year. File free federal and state taxes online Not-for-Profit Farming If you operate a farm for profit, you can deduct all the ordinary and necessary expenses of carrying on the business of farming on Schedule F. File free federal and state taxes online However, if you do not carry on your farming activity, or other activity you engage or invest in, to make a profit, you report the income from the activity on Form 1040, line 21, and you can deduct expenses of carrying on the activity only if you itemize your deductions on Schedule A (Form 1040). File free federal and state taxes online Also, there is a limit on the deductions you can take. File free federal and state taxes online You cannot use a loss from that activity to offset income from other activities. File free federal and state taxes online Activities you do as a hobby, or mainly for sport or recreation, come under this limit. File free federal and state taxes online An investment activity intended only to produce tax losses for the investors also comes under this limit. File free federal and state taxes online The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. File free federal and state taxes online It does not apply to corporations other than S corporations. File free federal and state taxes online In determining whether you are carrying on your farming activity for profit, all the facts are taken into account. File free federal and state taxes online No one factor alone is decisive. File free federal and state taxes online Among the factors to consider are whether: You operate your farm in a businesslike manner; The time and effort you spend on farming indicate you intend to make it profitable; You depend on income from farming for your livelihood; Your losses are due to circumstances beyond your control or are normal in the start-up phase of farming; You change your methods of operation in an attempt to improve profitability; You, or your advisors, have the knowledge needed to carry on the farming activity as a successful business; You were successful in making a profit in similar activities in the past; You make a profit from farming in some years and the amount of profit you make; and You can expect to make a future profit from the appreciation of the assets used in the farming activity. File free federal and state taxes online Presumption of profit. File free federal and state taxes online   Your farming or other activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year. File free federal and state taxes online Activities that consist primarily of breeding, training, showing, or racing horses are presumed carried on for profit if they produced a profit in at least 2 of the last 7 tax years, including the current year. File free federal and state taxes online The activity must be substantially the same for each year within this period. File free federal and state taxes online You have a profit when the gross income from an activity is more than the deductions for it. File free federal and state taxes online   If a taxpayer dies before the end of the 5-year (or 7-year) period, the period ends on the date of the taxpayer's death. File free federal and state taxes online   If your business or investment activity passes this 3- (or 2-) years-of-profit test, presume it is carried on for profit. File free federal and state taxes online This means the limits discussed here do not apply. File free federal and state taxes online You can take all your business deductions from the activity on Schedule F, even for the years that you have a loss. File free federal and state taxes online You can rely on this presumption in every case, unless the IRS shows it is not valid. File free federal and state taxes online   If you fail the 3- (or 2-) years-of-profit test, you still may be considered to operate your farm for profit by considering the factors listed earlier. File free federal and state taxes online Using the presumption later. File free federal and state taxes online   If you are starting out in farming and do not have 3 (or 2) years showing a profit, you may want to take advantage of this presumption later, after you have had the 5 (or 7) years of experience allowed by the test. File free federal and state taxes online   You can choose to do this by filing Form 5213. File free federal and state taxes online Filing this form postpones any determination that your farming activity is not carried on for profit until 5 (or 7) years have passed since you first started farming. File free federal and state taxes online You must file Form 5213 within 3 years after the due date of your return for the year in which you first carried on the activity, or, if earlier, within 60 days after receiving a written notice from the IRS proposing to disallow deductions attributable to the activity. File free federal and state taxes online   The benefit gained by making this choice is that the IRS will not immediately question whether your farming activity is engaged in for profit. File free federal and state taxes online Accordingly, it will not limit your deductions. File free federal and state taxes online Rather, you will gain time to earn a profit in 3 (or 2) out of the first 5 (or 7) years you carry on the farming activity. File free federal and state taxes online If you show 3 (or 2) years of profit at the end of this period, your deductions are not limited under these rules. File free federal and state taxes online If you do not have 3 (or 2) years of profit (and cannot otherwise show that you operated your farm for profit), the limit applies retroactively to any year in the 5-year (or 7-year) period with a loss. File free federal and state taxes online   Filing Form 5213 automatically extends the period of limitations on any year
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Contact My Local Office in North Dakota

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Bismarck 

4503 Coleman St.
Suite 101
Bismarck, ND  58503 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

**This office will be closed 4/17**

 

Services Provided

(701) 221-5834 
Fargo  657 Second Ave. N.
Fargo, ND 58102 

Monday-Friday - 8:30 a.m. - 4:30 p.m.

 

Services Provided

(701) 232-4710 
Grand Forks  102 N. Fourth St.
Grand Forks, ND 58203 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

**This office will be closed 3/31**

 

Services Provided

(701) 746-5283 
Minot  315 S. Main St.
Suite 316
Minot, ND 58701 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 11:00 a.m. - 12:00 noon)

 

Services Provided

(701) 839-7741 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses).

For information on where to file your tax return please see Where to File Addresses.

The Taxpayer Advocate Service: Call (701) 237-8342 in Fargo or 1-877-777-4778 elsewhere, or see Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104.

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
657 2nd Ave., North
Fargo, ND 58102

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The File Free Federal And State Taxes Online

File free federal and state taxes online Publication 526 - Main Content Table of Contents Organizations That Qualify To Receive Deductible ContributionsTypes of Qualified Organizations Contributions You Can DeductContributions From Which You Benefit Expenses Paid for Student Living With You Out-of-Pocket Expenses in Giving Services Expenses of Whaling Captains Contributions You Cannot DeductContributions to Individuals Contributions to Nonqualified Organizations Contributions From Which You Benefit Value of Time or Services Personal Expenses Appraisal Fees Contributions to Donor-Advised Funds Partial Interest in Property Contributions of PropertyContributions Subject to Special Rules Determining Fair Market Value Giving Property That Has Decreased in Value Giving Property That Has Increased in Value Penalty When To DeductChecks. File free federal and state taxes online Text message. File free federal and state taxes online Credit card. File free federal and state taxes online Pay-by-phone account. File free federal and state taxes online Stock certificate. File free federal and state taxes online Promissory note. File free federal and state taxes online Option. File free federal and state taxes online Borrowed funds. File free federal and state taxes online Conditional gift. File free federal and state taxes online Limits on Deductions50% Limit 30% Limit Special 30% Limit for Capital Gain Property 20% Limit Special 50% Limit for Qualified Conservation Contributions How To Figure Your Deduction When Limits Apply Records To KeepCash Contributions Noncash Contributions Out-of-Pocket Expenses How To ReportReporting expenses for student living with you. File free federal and state taxes online Total deduction over $500. File free federal and state taxes online Deduction over $5,000 for one item. File free federal and state taxes online Vehicle donations. File free federal and state taxes online Clothing and household items not in good used condition. File free federal and state taxes online Easement on building in historic district. File free federal and state taxes online Deduction over $500,000. File free federal and state taxes online How To Get Tax HelpLow Income Taxpayer Clinics Organizations That Qualify To Receive Deductible Contributions You can deduct your contributions only if you make them to a qualified organization. File free federal and state taxes online Most organizations, other than churches and governments, must apply to the IRS to become a qualified organization. File free federal and state taxes online How to check whether an organization can receive deductible charitable contributions. File free federal and state taxes online   You can ask any organization whether it is a qualified organization, and most will be able to tell you. File free federal and state taxes online Or go to IRS. File free federal and state taxes online gov. File free federal and state taxes online Click on “Tools” and then on “Exempt Organizations Select Check” (www. File free federal and state taxes online irs. File free federal and state taxes online gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check). File free federal and state taxes online This online tool will enable you to search for qualified organizations. File free federal and state taxes online You can also call the IRS to find out if an organization is qualified. File free federal and state taxes online Call 1-877-829-5500. File free federal and state taxes online People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. File free federal and state taxes online Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www. File free federal and state taxes online gsa. File free federal and state taxes online gov/fedrelay. File free federal and state taxes online Types of Qualified Organizations Generally, only the following types of organizations can be qualified organizations. File free federal and state taxes online A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). File free federal and state taxes online It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. File free federal and state taxes online Certain organizations that foster national or international amateur sports competition also qualify. File free federal and state taxes online War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico). File free federal and state taxes online Domestic fraternal societies, orders, and associations operating under the lodge system. File free federal and state taxes online (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. File free federal and state taxes online ) Certain nonprofit cemetery companies or corporations. File free federal and state taxes online (Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt. File free federal and state taxes online ) The United States or any state, the District of Columbia, a U. File free federal and state taxes online S. File free federal and state taxes online possession (including Puerto Rico), a political subdivision of a state or U. File free federal and state taxes online S. File free federal and state taxes online possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. File free federal and state taxes online (Your contribution to this type of organization is deductible only if it is to be used solely for public purposes. File free federal and state taxes online ) Example 1. File free federal and state taxes online You contribute cash to your city's police department to be used as a reward for information about a crime. File free federal and state taxes online The city police department is a qualified organization, and your contribution is for a public purpose. File free federal and state taxes online You can deduct your contribution. File free federal and state taxes online Example 2. File free federal and state taxes online You make a voluntary contribution to the social security trust fund, not earmarked for a specific account. File free federal and state taxes online Because the trust fund is part of the U. File free federal and state taxes online S. File free federal and state taxes online Government, you contributed to a qualified organization. File free federal and state taxes online You can deduct your contribution. File free federal and state taxes online Examples. File free federal and state taxes online   The following list gives some examples of qualified organizations. File free federal and state taxes online Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations. File free federal and state taxes online Most nonprofit charitable organizations such as the American Red Cross and the United Way. File free federal and state taxes online Most nonprofit educational organizations, including the Boy Scouts of America, Girl Scouts of America, colleges, and museums. File free federal and state taxes online This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. File free federal and state taxes online However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution, as explained later under Contributions You Cannot Deduct . File free federal and state taxes online Nonprofit hospitals and medical research organizations. File free federal and state taxes online Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. File free federal and state taxes online Nonprofit volunteer fire companies. File free federal and state taxes online Nonprofit organizations that develop and maintain public parks and recreation facilities. File free federal and state taxes online Civil defense organizations. File free federal and state taxes online Canadian charities. File free federal and state taxes online   You may be able to deduct contributions to certain Canadian charitable organizations covered under an income tax treaty with Canada. File free federal and state taxes online To deduct your contribution to a Canadian charity, you generally must have income from sources in Canada. File free federal and state taxes online See Publication 597, Information on the United States-Canada Income Tax Treaty, for information on how to figure your deduction. File free federal and state taxes online Mexican charities. File free federal and state taxes online   Under the U. File free federal and state taxes online S. File free federal and state taxes online -Mexico income tax treaty, a contribution to a Mexican charitable organization may be deductible, but only if and to the extent the contribution would have been treated as a charitable contribution to a public charity created or organized under U. File free federal and state taxes online S. File free federal and state taxes online law. File free federal and state taxes online To deduct your contribution to a Mexican charity, you must have income from sources in Mexico. File free federal and state taxes online The limits described in Limits on Deductions , later, apply and are figured using your income from Mexican sources. File free federal and state taxes online Israeli charities. File free federal and state taxes online   Under the U. File free federal and state taxes online S. File free federal and state taxes online -Israel income tax treaty, a contribution to an Israeli charitable organization is deductible if and to the extent the contribution would have been treated as a charitable contribution if the organization had been created or organized under U. File free federal and state taxes online S. File free federal and state taxes online law. File free federal and state taxes online To deduct your contribution to an Israeli charity, you must have income from sources in Israel. File free federal and state taxes online The limits described in Limits on Deductions , later, apply. File free federal and state taxes online The deduction is also limited to 25% of your adjusted gross income from Israeli sources. File free federal and state taxes online Contributions You Can Deduct Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. File free federal and state taxes online A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. File free federal and state taxes online The contributions must be made to a qualified organization and not set aside for use by a specific person. File free federal and state taxes online If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. File free federal and state taxes online See Contributions of Property , later. File free federal and state taxes online Your deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply. File free federal and state taxes online In addition, the total of your charitable contributions deduction and certain other itemized deductions may be limited. File free federal and state taxes online See Limits on Deductions , later. File free federal and state taxes online Table 1 in this publication gives examples of contributions you can and cannot deduct. File free federal and state taxes online Contributions From Which You Benefit If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. File free federal and state taxes online Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later. File free federal and state taxes online If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. File free federal and state taxes online For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. File free federal and state taxes online Example 1. File free federal and state taxes online You pay $65 for a ticket to a dinner-dance at a church. File free federal and state taxes online Your entire $65 payment goes to the church. File free federal and state taxes online The ticket to the dinner-dance has a fair market value of $25. File free federal and state taxes online When you buy your ticket, you know its value is less than your payment. File free federal and state taxes online To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). File free federal and state taxes online You can deduct $40 as a charitable contribution to the church. File free federal and state taxes online Example 2. File free federal and state taxes online At a fundraising auction conducted by a charity, you pay $600 for a week's stay at a beach house. File free federal and state taxes online The amount you pay is no more than the fair rental value. File free federal and state taxes online You have not made a deductible charitable contribution. File free federal and state taxes online Athletic events. File free federal and state taxes online   If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. File free federal and state taxes online   If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. File free federal and state taxes online Subtract the price of the tickets from your payment. File free federal and state taxes online You can deduct 80% of the remaining amount as a charitable contribution. File free federal and state taxes online Example 1. File free federal and state taxes online You pay $300 a year for membership in a university's athletic scholarship program. File free federal and state taxes online The only benefit of membership is that you have the right to buy one season ticket for a seat in a designated area of the stadium at the university's home football games. File free federal and state taxes online You can deduct $240 (80% of $300) as a charitable contribution. File free federal and state taxes online Example 2. File free federal and state taxes online The facts are the same as in Example 1 except your $300 payment includes the purchase of one season ticket for the stated ticket price of $120. File free federal and state taxes online You must subtract the usual price of a ticket ($120) from your $300 payment. File free federal and state taxes online The result is $180. File free federal and state taxes online Your deductible charitable contribution is $144 (80% of $180). File free federal and state taxes online Charity benefit events. File free federal and state taxes online   If you pay a qualified organization more than fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, you can deduct only the amount that is more than the value of the privileges or other benefits you receive. File free federal and state taxes online   If there is an established charge for the event, that charge is the value of your benefit. File free federal and state taxes online If there is no established charge, the reasonable value of the right to attend the event is the value of your benefit. File free federal and state taxes online Whether you use the tickets or other privileges has no effect on the amount you can deduct. File free federal and state taxes online However, if you return the ticket to the qualified organization for resale, you can deduct the entire amount you paid for the ticket. File free federal and state taxes online    Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. File free federal and state taxes online If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. File free federal and state taxes online Example. File free federal and state taxes online You pay $40 to see a special showing of a movie for the benefit of a qualified organization. File free federal and state taxes online Printed on the ticket is “Contribution–$40. File free federal and state taxes online ” If the regular price for the movie is $8, your contribution is $32 ($40 payment − $8 regular price). File free federal and state taxes online Membership fees or dues. File free federal and state taxes online   You may be able to deduct membership fees or dues you pay to a qualified organization. File free federal and state taxes online However, you can deduct only the amount that is more than the value of the benefits you receive. File free federal and state taxes online   You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. File free federal and state taxes online They are not qualified organizations. File free federal and state taxes online Certain membership benefits can be disregarded. File free federal and state taxes online   Both you and the organization can disregard the following membership benefits if you get them in return for an annual payment of $75 or less. File free federal and state taxes online Any rights or privileges, other than those discussed under Athletic events , earlier, that you can use frequently while you are a member, such as: Free or discounted admission to the organization's facilities or events, Free or discounted parking, Preferred access to goods or services, and Discounts on the purchase of goods and services. File free federal and state taxes online Admission, while you are a member, to events open only to members of the organization if the organization reasonably projects that the cost per person (excluding any allocated overhead) is not more than $10. File free federal and state taxes online 20. File free federal and state taxes online Token items. File free federal and state taxes online   You do not have to reduce your contribution by the value of any benefit you receive if both of the following are true. File free federal and state taxes online You receive only a small item or other benefit of token value. File free federal and state taxes online The qualified organization correctly determines that the value of the item or benefit you received is not substantial and informs you that you can deduct your payment in full. File free federal and state taxes online The organization determines whether the value of an item or benefit is substantial by using Revenue Procedures 90-12 and 92-49 and the inflation adjustment in Revenue Procedure 2012–41. File free federal and state taxes online Written statement. File free federal and state taxes online   A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. File free federal and state taxes online The statement must say you can deduct only the amount of your payment that is more than the value of the goods or services you received. File free federal and state taxes online It must also give you a good faith estimate of the value of those goods or services. File free federal and state taxes online   The organization can give you the statement either when it solicits or when it receives the payment from you. File free federal and state taxes online Exception. File free federal and state taxes online   An organization will not have to give you this statement if one of the following is true. File free federal and state taxes online The organization is: A governmental organization described in (5) under Types of Qualified Organizations , earlier, or An organization formed only for religious purposes, and the only benefit you receive is an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in commercial transactions outside the donative context. File free federal and state taxes online You receive only items whose value is not substantial as described under Token items , earlier. File free federal and state taxes online You receive only membership benefits that can be disregarded, as described under Membership fees or dues , earlier. File free federal and state taxes online Expenses Paid for Student Living With You You may be able to deduct some expenses of having a student live with you. File free federal and state taxes online You can deduct qualifying expenses for a foreign or American student who: Lives in your home under a written agreement between you and a qualified organization (defined later) as part of a program of the organization to provide educational opportunities for the student, Is not your relative (defined later) or dependent (also defined later), and Is a full-time student in the twelfth or any lower grade at a school in the United States. File free federal and state taxes online You can deduct up to $50 a month for each full calendar month the student lives with you. File free federal and state taxes online Any month when conditions (1) through (3) above are met for 15 or more days counts as a full month. File free federal and state taxes online Qualified organization. File free federal and state taxes online   For these purposes, a qualified organization can be any of the organizations described earlier under Types of Qualified Organizations , except those in (4) and (5). File free federal and state taxes online For example, if you are providing a home for a student as part of a state or local government program, you cannot deduct your expenses as charitable contributions. File free federal and state taxes online But see Foster parents under Out-of-Pocket Expenses in Giving Services, later, if you provide the home as a foster parent. File free federal and state taxes online Relative. File free federal and state taxes online   The term “relative” means any of the following persons. File free federal and state taxes online Your child, stepchild, foster child, or a descendant of any of them (for example, your grandchild). File free federal and state taxes online A legally adopted child is considered your child. File free federal and state taxes online Your brother, sister, half brother, half sister, stepbrother, or stepsister. File free federal and state taxes online Your father, mother, grandparent, or other direct ancestor. File free federal and state taxes online Your stepfather or stepmother. File free federal and state taxes online A son or daughter of your brother or sister. File free federal and state taxes online A brother or sister of your father or mother. File free federal and state taxes online Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. File free federal and state taxes online Dependent. File free federal and state taxes online   For this purpose, the term “dependent” means: A person you can claim as a dependent, or A person you could have claimed as a dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. File free federal and state taxes online    Foreign students brought to this country under a qualified international education exchange program and placed in American homes for a temporary period generally are not U. File free federal and state taxes online S. File free federal and state taxes online residents and cannot be claimed as dependents. File free federal and state taxes online Qualifying expenses. File free federal and state taxes online   You may be able to deduct the cost of books, tuition, food, clothing, transportation, medical and dental care, entertainment, and other amounts you actually spend for the well-being of the student. File free federal and state taxes online Expenses that do not qualify. File free federal and state taxes online   You cannot deduct depreciation on your home, the fair market value of lodging, and similar items not considered amounts actually spent by you. File free federal and state taxes online Nor can you deduct general household expenses, such as taxes, insurance, and repairs. File free federal and state taxes online Reimbursed expenses. File free federal and state taxes online   In most cases, you cannot claim a charitable contribution deduction if you are compensated or reimbursed for any part of the costs of having a student live with you. File free federal and state taxes online However, you may be able to claim a charitable contribution deduction for the unreimbursed portion of your expenses if you are reimbursed only for an extraordinary or one-time item, such as a hospital bill or vacation trip, you paid in advance at the request of the student's parents or the sponsoring organization. File free federal and state taxes online Mutual exchange program. File free federal and state taxes online   You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country. File free federal and state taxes online Reporting expenses. File free federal and state taxes online   For a list of what you must file with your return if you deduct expenses for a student living with you, see Reporting expenses for student living with you under How To Report, later. File free federal and state taxes online Out-of-Pocket Expenses in Giving Services Table 2. File free federal and state taxes online Volunteers' Questions and Answers If you volunteer for a qualified organization, the following questions and answers may apply to you. File free federal and state taxes online All of the rules explained in this publication also apply. File free federal and state taxes online See, in particular, Out-of-Pocket Expenses in Giving Services . File free federal and state taxes online Question Answer I volunteer 6 hours a week in the office of a qualified organization. File free federal and state taxes online The receptionist is paid $10 an hour for the same work. File free federal and state taxes online Can I deduct $60 a week for my time? No, you cannot deduct the value of your time or services. File free federal and state taxes online  The office is 30 miles from my home. File free federal and state taxes online Can I deduct any of my car expenses for these trips? Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. File free federal and state taxes online If you do not want to figure your actual costs, you can deduct 14 cents for each mile. File free federal and state taxes online I volunteer as a Red Cross nurse's aide at a hospital. File free federal and state taxes online Can I deduct the cost of the uniforms I must wear? Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering. File free federal and state taxes online I pay a babysitter to watch my children while I volunteer for a qualified organization. File free federal and state taxes online Can I deduct these costs? No, you cannot deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare. File free federal and state taxes online (If you have childcare expenses so you can work for pay, see Publication 503, Child and Dependent Care Expenses. File free federal and state taxes online ) Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. File free federal and state taxes online The amounts must be: Unreimbursed, Directly connected with the services, Expenses you had only because of the services you gave, and Not personal, living, or family expenses. File free federal and state taxes online Table 2 contains questions and answers that apply to some individuals who volunteer their services. File free federal and state taxes online Underprivileged youths selected by charity. File free federal and state taxes online   You can deduct reasonable unreimbursed out-of-pocket expenses you pay to allow underprivileged youths to attend athletic events, movies, or dinners. File free federal and state taxes online The youths must be selected by a charitable organization whose goal is to reduce juvenile delinquency. File free federal and state taxes online Your own similar expenses in accompanying the youths are not deductible. File free federal and state taxes online Conventions. File free federal and state taxes online   If a qualified organization selects you to attend a convention as its representative, you can deduct your unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight for the convention. File free federal and state taxes online However, see Travel , later. File free federal and state taxes online   You cannot deduct personal expenses for sightseeing, fishing parties, theater tickets, or nightclubs. File free federal and state taxes online You also cannot deduct travel, meals and lodging, and other expenses for your spouse or children. File free federal and state taxes online   You cannot deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. File free federal and state taxes online You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention. File free federal and state taxes online Uniforms. File free federal and state taxes online   You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization. File free federal and state taxes online Foster parents. File free federal and state taxes online   You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. File free federal and state taxes online A qualified organization must select the individuals you take into your home for foster care. File free federal and state taxes online   You can deduct expenses that meet both of the following requirements. File free federal and state taxes online They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child. File free federal and state taxes online They are incurred primarily to benefit the qualified organization. File free federal and state taxes online   Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. File free federal and state taxes online For details, see Publication 501, Exemptions, Standard Deduction, and Filing Information. File free federal and state taxes online Example. File free federal and state taxes online You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. File free federal and state taxes online Your unreimbursed expenses are not deductible as charitable contributions. File free federal and state taxes online Church deacon. File free federal and state taxes online   You can deduct as a charitable contribution any unreimbursed expenses you have while in a permanent diaconate program established by your church. File free federal and state taxes online These expenses include the cost of vestments, books, and transportation required in order to serve in the program as either a deacon candidate or an ordained deacon. File free federal and state taxes online Car expenses. File free federal and state taxes online   You can deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, directly related to the use of your car in giving services to a charitable organization. File free federal and state taxes online You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. File free federal and state taxes online   If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. File free federal and state taxes online   You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate. File free federal and state taxes online   You must keep reliable written records of your car expenses. File free federal and state taxes online For more information, see Car expenses under Records To Keep, later. File free federal and state taxes online Travel. File free federal and state taxes online   Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. File free federal and state taxes online This applies whether you pay the expenses directly or indirectly. File free federal and state taxes online You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. File free federal and state taxes online   The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. File free federal and state taxes online Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. File free federal and state taxes online However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses. File free federal and state taxes online Example 1. File free federal and state taxes online You are a troop leader for a tax-exempt youth group and you take the group on a camping trip. File free federal and state taxes online You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. File free federal and state taxes online You participate in the activities of the group and enjoy your time with them. File free federal and state taxes online You oversee the breaking of camp and you transport the group home. File free federal and state taxes online You can deduct your travel expenses. File free federal and state taxes online Example 2. File free federal and state taxes online You sail from one island to another and spend 8 hours a day counting whales and other forms of marine life. File free federal and state taxes online The project is sponsored by a charitable organization. File free federal and state taxes online In most circumstances, you cannot deduct your expenses. File free federal and state taxes online Example 3. File free federal and state taxes online You work for several hours each morning on an archeological dig sponsored by a charitable organization. File free federal and state taxes online The rest of the day is free for recreation and sightseeing. File free federal and state taxes online You cannot take a charitable contribution deduction even though you work very hard during those few hours. File free federal and state taxes online Example 4. File free federal and state taxes online You spend the entire day attending a charitable organization's regional meeting as a chosen representative. File free federal and state taxes online In the evening you go to the theater. File free federal and state taxes online You can claim your travel expenses as charitable contributions, but you cannot claim the cost of your evening at the theater. File free federal and state taxes online Daily allowance (per diem). File free federal and state taxes online   If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income any part of the allowance that is more than your deductible travel expenses. File free federal and state taxes online You may be able to deduct any necessary travel expenses that are more than the allowance. File free federal and state taxes online Deductible travel expenses. File free federal and state taxes online   These include: Air, rail, and bus transportation, Out-of-pocket expenses for your car, Taxi fares or other costs of transportation between the airport or station and your hotel, Lodging costs, and The cost of meals. File free federal and state taxes online Because these travel expenses are not business-related, they are not subject to the same limits as business related expenses. File free federal and state taxes online For information on business travel expenses, see Travel in Publication 463, Travel, Entertainment, Gift, and Car Expenses. File free federal and state taxes online Expenses of Whaling Captains You may be able to deduct as a charitable contribution any reasonable and necessary whaling expenses you pay during the year to carry out sanctioned whaling activities. File free federal and state taxes online The deduction is limited to $10,000 a year. File free federal and state taxes online To claim the deduction, you must be recognized by the Alaska Eskimo Whaling Commission as a whaling captain charged with the responsibility of maintaining and carrying out sanctioned whaling activities. File free federal and state taxes online Sanctioned whaling activities are subsistence bowhead whale hunting activities conducted under the management plan of the Alaska Eskimo Whaling Commission. File free federal and state taxes online Whaling expenses include expenses for: Acquiring and maintaining whaling boats, weapons, and gear used in sanctioned whaling activities, Supplying food for the crew and other provisions for carrying out these activities, and Storing and distributing the catch from these activities. File free federal and state taxes online You must keep records showing the time, place, date, amount, and nature of the expenses. File free federal and state taxes online For details, see Revenue Procedure 2006-50, which is on page 944 of Internal Revenue Bulletin 2006-47 at www. File free federal and state taxes online irs. File free federal and state taxes online gov/pub/irs-irbs/irb06-47. File free federal and state taxes online pdf. File free federal and state taxes online Contributions You Cannot Deduct There are some contributions you cannot deduct and others you can deduct only in part. File free federal and state taxes online You cannot deduct as a charitable contribution: A contribution to a specific individual, A contribution to a nonqualified organization, The part of a contribution from which you receive or expect to receive a benefit, The value of your time or services, Your personal expenses, A qualified charitable distribution from an individual retirement arrangement (IRA), Appraisal fees, Certain contributions to donor-advised funds, or Certain contributions of partial interests in property. File free federal and state taxes online Detailed discussions of these items follow. File free federal and state taxes online Contributions to Individuals You cannot deduct contributions to specific individuals, including the following. File free federal and state taxes online Contributions to fraternal societies made for the purpose of paying medical or burial expenses of members. File free federal and state taxes online Contributions to individuals who are needy or worthy. File free federal and state taxes online You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. File free federal and state taxes online But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person. File free federal and state taxes online Example. File free federal and state taxes online You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. File free federal and state taxes online However, you cannot deduct contributions earmarked for relief of a particular individual or family. File free federal and state taxes online Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses. File free federal and state taxes online Expenses you paid for another person who provided services to a qualified organization. File free federal and state taxes online Example. File free federal and state taxes online Your son does missionary work. File free federal and state taxes online You pay his expenses. File free federal and state taxes online You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services. File free federal and state taxes online Payments to a hospital that are for a specific patient's care or for services for a specific patient. File free federal and state taxes online You cannot deduct these payments even if the hospital is operated by a city, state, or other qualified organization. File free federal and state taxes online Contributions to Nonqualified Organizations You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following. File free federal and state taxes online Certain state bar associations if: The bar is not a political subdivision of a state, The bar has private, as well as public, purposes, such as promoting the professional interests of members, and Your contribution is unrestricted and can be used for private purposes. File free federal and state taxes online Chambers of commerce and other business leagues or organizations. File free federal and state taxes online Civic leagues and associations. File free federal and state taxes online Communist organizations. File free federal and state taxes online Country clubs and other social clubs. File free federal and state taxes online Foreign organizations other than certain Canadian, Israeli, or Mexican charitable organizations. File free federal and state taxes online (See Canadian charities , Mexican charities , and Israeli charities under Organizations That Qualify To Receive Deductible Contributions, earlier. File free federal and state taxes online ) Also, you cannot deduct a contribution you made to any qualifying organization if the contribution is earmarked to go to a foreign organization. File free federal and state taxes online However, certain contributions to a qualified organization for use in a program conducted by a foreign charity may be deductible as long as they are not earmarked to go to the foreign charity. File free federal and state taxes online For the contribution to be deductible, the qualified organization must approve the program as furthering its own exempt purposes and must keep control over the use of the contributed funds. File free federal and state taxes online The contribution is also deductible if the foreign charity is only an administrative arm of the qualified organization. File free federal and state taxes online Homeowners' associations. File free federal and state taxes online Labor unions. File free federal and state taxes online But you may be able to deduct union dues as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit, on Schedule A (Form 1040). File free federal and state taxes online See Publication 529, Miscellaneous Deductions. File free federal and state taxes online Political organizations and candidates. File free federal and state taxes online Contributions From Which You Benefit If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive. File free federal and state taxes online See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. File free federal and state taxes online These contributions include the following. File free federal and state taxes online Contributions for lobbying. File free federal and state taxes online This includes amounts you earmark for use in, or in connection with, influencing specific legislation. File free federal and state taxes online Contributions to a retirement home for room, board, maintenance, or admittance. File free federal and state taxes online Also, if the amount of your contribution depends on the type or size of apartment you will occupy, it is not a charitable contribution. File free federal and state taxes online Costs of raffles, bingo, lottery, etc. File free federal and state taxes online You cannot deduct as a charitable contribution amounts you pay to buy raffle or lottery tickets or to play bingo or other games of chance. File free federal and state taxes online For information on how to report gambling winnings and losses, see Deductions Not Subject to the 2% Limit in Publication 529. File free federal and state taxes online Dues to fraternal orders and similar groups. File free federal and state taxes online However, see Membership fees or dues under Contributions From Which You Benefit, earlier. File free federal and state taxes online Tuition, or amounts you pay instead of tuition. File free federal and state taxes online You cannot deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. File free federal and state taxes online You also cannot deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a “donation. File free federal and state taxes online ” Contributions connected with split-dollar insurance arrangements. File free federal and state taxes online You cannot deduct any part of a contribution to a charitable organization if, in connection with the contribution, the organization directly or indirectly pays, has paid, or is expected to pay any premium on any life insurance, annuity, or endowment contract for which you, any member of your family, or any other person chosen by you (other than a qualified charitable organization) is a beneficiary. File free federal and state taxes online Example. File free federal and state taxes online You donate money to a charitable organization. File free federal and state taxes online The charity uses the money to purchase a cash value life insurance policy. File free federal and state taxes online The beneficiaries under the insurance policy include members of your family. File free federal and state taxes online Even though the charity may eventually get some benefit out of the insurance policy, you cannot deduct any part of the donation. File free federal and state taxes online Qualified Charitable Distributions A qualified charitable distribution (QCD) is a distribution made directly by the trustee of your individual retirement arrangement (IRA), other than a SEP or SIMPLE IRA, to certain qualified organizations. File free federal and state taxes online You must have been at least age 70½ when the distribution was made. File free federal and state taxes online Your total QCDs for the year cannot be more than $100,000. File free federal and state taxes online If all the requirements are met, a QCD is nontaxable, but you cannot claim a charitable contribution deduction for a QCD. File free federal and state taxes online See Publication 590, Individual Retirement Arrangements (IRAs), for more information about QCDs. File free federal and state taxes online Value of Time or Services You cannot deduct the value of your time or services, including: Blood donations to the American Red Cross or to blood banks, and The value of income lost while you work as an unpaid volunteer for a qualified organization. File free federal and state taxes online Personal Expenses You cannot deduct personal, living, or family expenses, such as the following items. File free federal and state taxes online The cost of meals you eat while you perform services for a qualified organization, unless it is necessary for you to be away from home overnight while performing the services. File free federal and state taxes online Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before adoption is final. File free federal and state taxes online However, you may be able to claim a tax credit for these expenses. File free federal and state taxes online Also, you may be able to exclude from your gross income amounts paid or reimbursed by your employer for your adoption expenses. File free federal and state taxes online See Form 8839, Qualified Adoption Expenses, and its instructions, for more information. File free federal and state taxes online You also may be able to claim an exemption for the child. File free federal and state taxes online See Exemptions for Dependents in Publication 501 for more information. File free federal and state taxes online Appraisal Fees You cannot deduct as a charitable contribution any fees you pay to find the fair market value of donated property. File free federal and state taxes online But you can claim them, subject to the 2%-of-adjusted-gross-income limit, as a miscellaneous itemized deduction on Schedule A (Form 1040). File free federal and state taxes online See Deductions Subject to the 2% Limit in Publication 529 for more information. File free federal and state taxes online Contributions to Donor-Advised Funds You cannot deduct a contribution to a donor-advised fund if: The qualified organization that sponsors the fund is a war veterans' organization, a fraternal society, or a nonprofit cemetery company, or You do not have an acknowledgment from that sponsoring organization that it has exclusive legal control over the assets contributed. File free federal and state taxes online There are also other circumstances in which you cannot deduct your contribution to a donor-advised fund. File free federal and state taxes online Generally, a donor-advised fund is a fund or account in which a donor can, because of being a donor, advise the fund how to distribute or invest amounts held in the fund. File free federal and state taxes online For details, see Internal Revenue Code section 170(f)(18). File free federal and state taxes online Partial Interest in Property Generally, you cannot deduct a contribution of less than your entire interest in property. File free federal and state taxes online For details, see Partial Interest in Property under Contributions of Property, later. File free federal and state taxes online Contributions of Property If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. File free federal and state taxes online However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction. File free federal and state taxes online See Giving Property That Has Increased in Value , later. File free federal and state taxes online For information about the records you must keep and the information you must furnish with your return if you donate property, see Records To Keep and How To Report , later. File free federal and state taxes online Contributions Subject to Special Rules Special rules apply if you contribute: Clothing or household items, A car, boat, or airplane, Taxidermy property, Property subject to a debt, A partial interest in property, A fractional interest in tangible personal property, A qualified conservation contribution, A future interest in tangible personal property, Inventory from your business, or A patent or other intellectual property. File free federal and state taxes online These special rules are described next. File free federal and state taxes online Clothing and Household Items You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. File free federal and state taxes online Exception. File free federal and state taxes online   You can take a deduction for a contribution of an item of clothing or a household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return. File free federal and state taxes online Household items. File free federal and state taxes online   Household items include: Furniture and furnishings, Electronics, Appliances, Linens, and Other similar items. File free federal and state taxes online   Household items do not include: Food, Paintings, antiques, and other objects of art, Jewelry and gems, and Collections. File free federal and state taxes online Fair market value. File free federal and state taxes online   To determine the fair market value of these items, use the rules under Determining Fair Market Value , later. File free federal and state taxes online Cars, Boats, and Airplanes The following rules apply to any donation of a qualified vehicle. File free federal and state taxes online A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, A boat, or An airplane. File free federal and state taxes online Deduction more than $500. File free federal and state taxes online   If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of: The gross proceeds from the sale of the vehicle by the organization, or The vehicle's fair market value on the date of the contribution. File free federal and state taxes online If the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value , later. File free federal and state taxes online Form 1098-C. File free federal and state taxes online   You must attach to your return Copy B of the Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement containing the same information as Form 1098-C) you received from the organization. File free federal and state taxes online The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle. File free federal and state taxes online   If you e-file your return, you must: Attach Copy B of Form 1098-C to Form 8453, U. File free federal and state taxes online S. File free federal and state taxes online Individual Income Tax Transmittal for an IRS e-file Return, and mail the forms to the IRS, or Include Copy B of Form 1098-C as a pdf attachment if your software program allows it. File free federal and state taxes online   If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution. File free federal and state taxes online    You must get Form 1098-C (or other statement) within 30 days of the sale of the vehicle. File free federal and state taxes online But if exception 1 or 2 (described later) applies, you must get Form 1098-C (or other statement) within 30 days of your donation. File free federal and state taxes online Filing deadline approaching and still no Form 1098-C. File free federal and state taxes online   If the filing deadline is approaching and you still do not have a Form 1098-C, you have two choices. File free federal and state taxes online Request an automatic 6-month extension of time to file your return. File free federal and state taxes online You can get this extension by filing Form 4868, Application for Automatic Extension of Time To File U. File free federal and state taxes online S. File free federal and state taxes online Individual Income Tax Return. File free federal and state taxes online For more information, see the instructions for Form 4868. File free federal and state taxes online File the return on time without claiming the deduction for the qualified vehicle. File free federal and state taxes online After receiving the Form 1098-C, file an amended return, Form 1040X, Amended U. File free federal and state taxes online S. File free federal and state taxes online Individual Income Tax Return, claiming the deduction. File free federal and state taxes online Attach Copy B of Form 1098-C (or other statement) to the amended return. File free federal and state taxes online Exceptions. File free federal and state taxes online   There are two exceptions to the rules just described for deductions of more than $500. File free federal and state taxes online Exception 1—vehicle used or improved by organization. File free federal and state taxes online   If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. File free federal and state taxes online But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. File free federal and state taxes online The Form 1098-C (or other statement) will show whether this exception applies. File free federal and state taxes online    Exception 2—vehicle given or sold to needy individual. File free federal and state taxes online   If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization's charitable purpose, you generally can deduct the vehicle's fair market value at the time of the contribution. File free federal and state taxes online But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. File free federal and state taxes online The Form 1098-C (or other statement) will show whether this exception applies. File free federal and state taxes online   This exception does not apply if the organization sells the vehicle at auction. File free federal and state taxes online In that case, you cannot deduct the vehicle's fair market value. File free federal and state taxes online Example. File free federal and state taxes online Anita donates a used car to a qualified organization. File free federal and state taxes online She bought it 3 years ago for $9,000. File free federal and state taxes online A used car guide shows the fair market value for this type of car is $6,000. File free federal and state taxes online However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900. File free federal and state taxes online Neither exception 1 nor exception 2 applies. File free federal and state taxes online If Anita itemizes her deductions, she can deduct $2,900 for her donation. File free federal and state taxes online She must attach Form 1098-C and Form 8283 to her return. File free federal and state taxes online Deduction $500 or less. File free federal and state taxes online   If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 do not apply, you can deduct the smaller of: $500, or The vehicle's fair market value on the date of the contribution. File free federal and state taxes online But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. File free federal and state taxes online   If the vehicle's fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation. File free federal and state taxes online The statement must contain the information and meet the tests for an acknowledgment described under Contributions of $250 or More under Records To Keep, later. File free federal and state taxes online Fair market value. File free federal and state taxes online   To determine a vehicle's fair market value, use the rules described under Determining Fair Market Value , later. File free federal and state taxes online Donations of inventory. File free federal and state taxes online   The vehicle donation rules just described do not apply to donations of inventory. File free federal and state taxes online For example, these rules do not apply if you are a car dealer who donates a car you had been holding for sale to customers. File free federal and state taxes online See Inventory , later. File free federal and state taxes online Taxidermy Property If you donate taxidermy property to a qualified organization, your deduction is limited to your basis in the property or its fair market value, whichever is less. File free federal and state taxes online This applies if you prepared, stuffed, or mounted the property or paid or incurred the cost of preparing, stuffing, or mounting the property. File free federal and state taxes online Your basis for this purpose includes only the cost of preparing, stuffing, and mounting the property. File free federal and state taxes online Your basis does not include transportation or travel costs. File free federal and state taxes online It also does not include the direct or indirect costs for hunting or killing an animal, such as equipment costs. File free federal and state taxes online In addition, it does not include the value of your time. File free federal and state taxes online Taxidermy property means any work of art that: Is the reproduction or preservation of an animal, in whole or in part, Is prepared, stuffed, or mounted to recreate one or more characteristics of the animal, and Contains a part of the body of the dead animal. File free federal and state taxes online Property Subject to a Debt If you contribute property subject to a debt (such as a mortgage), you must reduce the fair market value of the property by: Any allowable deduction for interest you paid (or will pay) that is attributable to any period after the contribution, and If the property is a bond, the lesser of: Any allowable deduction for interest you paid (or will pay) to buy or carry the bond that is attributable to any period before the contribution, or The interest, including bond discount, receivable on the bond that is attributable to any period before the contribution, and that is not includible in your income due to your accounting method. File free federal and state taxes online This prevents you from deducting the same amount as both investment interest and a charitable contribution. File free federal and state taxes online If the recipient (or another person) assumes the debt, you must also reduce the fair market value of the property by the amount of the outstanding debt assumed. File free federal and state taxes online The amount of the debt is also treated as an amount realized on the sale or exchange of property for purposes of figuring your taxable gain (if any). File free federal and state taxes online For more information, see Bargain Sales under Giving Property That Has Increased in Value, later. File free federal and state taxes online Partial Interest in Property Generally, you cannot deduct a charitable contribution of less than your entire interest in property. File free federal and state taxes online Right to use property. File free federal and state taxes online   A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. File free federal and state taxes online Example 1. File free federal and state taxes online You own a 10-story office building and donate rent-free use of the top floor to a charitable organization. File free federal and state taxes online Because you still own the building, you have contributed a partial interest in the property and cannot take a deduction for the contribution. File free federal and state taxes online Example 2. File free federal and state taxes online Mandy White owns a vacation home at the beach that she sometimes rents to others. File free federal and state taxes online For a fund-raising auction at her church, she donated the right to use the vacation home for 1 week. File free federal and state taxes online At the auction, the church received and accepted a bid from Lauren Green equal to the fair rental value of the home for 1 week. File free federal and state taxes online Mandy cannot claim a deduction because of the partial interest rule. File free federal and state taxes online Lauren cannot claim a deduction either, because she received a benefit equal to the amount of her payment. File free federal and state taxes online See Contributions From Which You Benefit , earlier. File free federal and state taxes online Exceptions. File free federal and state taxes online   You can deduct a charitable contribution of a partial interest in property only if that interest represents one of the following items. File free federal and state taxes online A remainder interest in your personal home or farm. File free federal and state taxes online A remainder interest is one that passes to a beneficiary after the end of an earlier interest in the property. File free federal and state taxes online Example. File free federal and state taxes online You keep the right to live in your home during your lifetime and give your church a remainder interest that begins upon your death. File free federal and state taxes online You can deduct the value of the remainder interest. File free federal and state taxes online An undivided part of your entire interest. File free federal and state taxes online This must consist of a part of every substantial interest or right you own in the property and must last as long as your interest in the property lasts. File free federal and state taxes online But see Fractional Interest in Tangible Personal Property , later. File free federal and state taxes online Example. File free federal and state taxes online You contribute voting stock to a qualified organization but keep the right to vote the stock. File free federal and state taxes online The right to vote is a substantial right in the stock. File free federal and state taxes online You have not contributed an undivided part of your entire interest and cannot deduct your contribution. File free federal and state taxes online A partial interest that would be deductible if transferred to certain types of trusts. File free federal and state taxes online A qualified conservation contribution (defined later). File free federal and state taxes online For information about how to figure the value of a contribution of a partial interest in property, see Partial Interest in Property Not in Trust in Publication 561. File free federal and state taxes online Fractional Interest in Tangible Personal Property You cannot deduct a charitable contribution of a fractional interest in tangible personal property unless all interests in the property are held immediately before the contribution by: You, or You and the qualifying organization receiving the contribution. File free federal and state taxes online If you make an additional contribution later, the fair market value of that contribution will be determined by using the smaller of: The fair market value of the property at the time of the initial contribution, or The fair market value of the property at the time of the additional contribution. File free federal and state taxes online Tangible personal property is defined later under Future Interest in Tangible Personal Property . File free federal and state taxes online A fractional interest in property is an undivided portion of your entire interest in the property. File free federal and state taxes online Example. File free federal and state taxes online An undivided one-quarter interest in a painting that entitles an art museum to possession of the painting for 3 months of each year is a fractional interest in the property. File free federal and state taxes online Recapture of deduction. File free federal and state taxes online   You must recapture your charitable contribution deduction by including it in your income if both of the following statements are true. File free federal and state taxes online You contributed a fractional interest in tangible personal property after August 17, 2006. File free federal and state taxes online You do not contribute the rest of your interests in the property to the original recipient or, if it no longer exists, another qualified organization on or before the earlier of: The date that is 10 years after the date of the initial contribution, or The date of your death. File free federal and state taxes online   Recapture is also required if the qualified organization has not taken substantial physical possession of the property and used it in a way related to the organization's purpose during the period beginning on the date of the initial contribution and ending on the earlier of: The date that is 10 years after the date of the initial contribution, or The date of your death. File free federal and state taxes online Additional tax. File free federal and state taxes online   If you must recapture your deduction, you must also pay interest and an additional tax equal to 10% of the amount recaptured. File free federal and state taxes online Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. File free federal and state taxes online Qualified organization. File free federal and state taxes online   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charity, or An organization controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. File free federal and state taxes online The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. File free federal and state taxes online   A publicly supported charity is an organization of the type described in (1) under Types of Qualified Organizations , earlier, that normally receives a substantial part of its support, other than income from its exempt activities, from direct or indirect contributions from the general public or from governmental units. File free federal and state taxes online Qualified real property interest. File free federal and state taxes online   This is any of the following interests in real property. File free federal and state taxes online Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). File free federal and state taxes online A remainder interest. File free federal and state taxes online A restriction (granted in perpetuity) on the use that may be made of the real property. File free federal and state taxes online Conservation purposes. File free federal and state taxes online   Your contribution must be made only for one of the following conservation purposes. File free federal and state taxes online Preserving land areas for outdoor recreation by, or for the education of, the general public. File free federal and state taxes online Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. File free federal and state taxes online Preserving open space, including farmland and forest land, if it yields a significant public benefit. File free federal and state taxes online The open space must be preserved either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. File free federal and state taxes online Preserving a historically important land area or a certified historic structure. File free federal and state taxes online Building in registered historic district. File free federal and state taxes online   If a building in a registered historic district is a certified historic structure, a contribution of a qualified real property interest that is an easement or other restriction on the exterior of the building is deductible only if it meets all of the following conditions. File free federal and state taxes online The restriction must preserve the entire exterior of the building (including its front, sides, rear, and height) and must prohibit any change to the exterior of the building that is inconsistent with its historical character. File free federal and state taxes online You and the organization receiving the contribution must enter into a written agreement certifying, under penalty of perjury, that the organization: Is a qualified organization with a purpose of environmental protection, land conservation, open space preservation, or historic preservation, and Has the resources to manage and enforce the restriction and a commitment to do so. File free federal and state taxes online You must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. File free federal and state taxes online   If you claimed the rehabilitation credit for the building for any of the 5 years before the year of the contribution, your charitable deduction is reduced. File free federal and state taxes online For more information, see Form 3468, Investment Credit, and Internal Revenue Code section 170(f)(14). File free federal and state taxes online   If you claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. File free federal and state taxes online See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. File free federal and state taxes online You may be able to deduct the filing fee as a miscellaneous itemized deduction, subject to the 2%-of-adjusted-gross-income limit, on Schedule A (Form 1040). File free federal and state taxes online See Deductions Subject to the 2% Limit in Publication 529 for more information. File free federal and state taxes online More information. File free federal and state taxes online   For information about determining the fair market value of qualified conservation contributions, see Publication 561. File free federal and state taxes online For information about the limits that apply to deductions for this type of contribution, see Limits on Deductions , later. File free federal and state taxes online For more information about qualified conservation contributions, see Regulations section 1. File free federal and state taxes online 170A-14. File free federal and state taxes online Future Interest in Tangible Personal Property You cannot deduct the value of a charitable contribution of a future interest in tangible personal property until all intervening interests in and rights to the actual possession or enjoyment of the property have either expired or been turned over to someone other than yourself, a related person, or a related organization. File free federal and state taxes online But see Fractional Interest in Tangible Personal Property , earlier, and Tangible personal property put to unrelated use , later. File free federal and state taxes online Related persons include your spouse, children, grandchildren, brothers, sisters, and parents. File free federal and state taxes online Related organizations may include a partnership or corporation in which you have an interest, or an estate or trust with which you have a connection. File free federal and state taxes online Tangible personal property. File free federal and state taxes online   This is any property, other than land or buildings, that can be seen or touched. File free federal and state taxes online It includes furniture, books, jewelry, paintings, and cars. File free federal and state taxes online Future interest. File free federal and state taxes online   This is any interest that is to begin at some future time, regardless of whether it is designated as a future interest under state law. File free federal and state taxes online Example. File free federal and state taxes online You own an antique car that you contribute to a museum. File free federal and state taxes online You give up ownership, but retain the right to keep the car in your garage with your personal collection. File free federal and state taxes online Because you keep an interest in the property, you cannot deduct the contribution. File free federal and state taxes online If you turn the car over to the museum in a later year, giving up all rights to its use, possession, and enjoyment, you can take a deduction for the contribution in that later year. File free federal and state taxes online Inventory If you contribute inventory (property you sell in the course of your business), the amount you can deduct is the smaller of its fair market value on the day you contributed it or its basis. File free federal and state taxes online The basis of contributed inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. File free federal and state taxes online You must remove the amount of your charitable contribution deduction from your opening inventory. File free federal and state taxes online It is not part of the cost of goods sold. File free federal and state taxes online If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. File free federal and state taxes online Treat the inventory's cost as you would ordinarily treat it under your method of accounting. File free federal and state taxes online For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. File free federal and state taxes online A special rule applies to certain donations of food inventory. File free federal and state taxes online See Food Inventory, later. File free federal and state taxes online Patents and Other Intellectual Property If you donate intellectual property to a qualified organization, your deduction is limited to the basis of the property or the fair market value of the property, whichever is smaller. File free federal and state taxes online Intellectual property means any of the following: Patents. File free federal and state taxes online Copyrights (other than a copyright described in Internal Revenue Code sections 1221(a)(3) or 1231(b)(1)(C)). File free federal and state taxes online Trademarks. File free federal and state taxes online Trade names. File free federal and state taxes online Trade secrets. File free federal and state taxes online Know-how. File free federal and state taxes online Software (other than software described in Internal Revenue Code section 197(e)(3)(A)(i)). File free federal and state taxes online Other similar property or applications or registrations of such property. File free federal and state taxes online Additional deduction based on income. File free federal and state taxes online   You may be able to claim additional charitable contribution deductions in the year of the contribution and years following, based on the income, if any, from the donated property. File free federal and state taxes online   The following table shows the percentage of income from the property that you can deduct for each of your tax years ending on or after the date of the contribution. File free federal and state taxes online In the table, “tax year 1,” for example, means your first tax year ending on or after the date of the contribution. File free federal and state taxes online However, you can take the additional deduction only to the extent the total of the amounts figured using this table is more than the amount of the deduction claimed for the original donation of the property. File free federal and state taxes online   After the legal life of the intellectual property ends, or after the 10th anniversary of the donation, whichever is earlier, no additional deduction is allowed. File free federal and state taxes online The additional deductions cannot be taken for intellectual property donated to certain private foundations. File free federal and state taxes online Tax year Deductible percentage 1 100% 2 100% 3 90% 4 80% 5 70% 6 60% 7 50% 8 40% 9 30% 10 20% 11 10% 12 10% Reporting requirements. File free federal and state taxes online   You must inform the organization at the time of the donation that you intend to treat the donation as a contribution subject to the provisions just discussed. File free federal and state taxes online   The organization is required to file an information return showing the income from the property, with a copy to you. File free federal and state taxes online This is done on Form 8899, Notice of Income From Donated Intellectual Property. File free federal and state taxes online Determining Fair Market Value This section discusses general guidelines for determining the fair market value of various types of donated property. File free federal and state taxes online Publication 561 contains a more complete discussion. File free federal and state taxes online Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. File free federal and state taxes online Used clothing. File free federal and state taxes online   The fair market value of used clothing and other personal items is usually far less than the price you paid for them. File free federal and state taxes online There are no fixed formulas or methods for finding the value of items of clothing. File free federal and state taxes online   You should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops. File free federal and state taxes online      Also see Clothing and Household Items , earlier. File free federal and state taxes online Example. File free federal and state taxes online    Kristin donated a coat to a thrift store operated by her church. File free federal and state taxes online She paid $300 for the coat 3 years ago. File free federal and state taxes online Similar coats in the thrift store sell for $50. File free federal and state taxes online The fair market value of the coat is $50. File free federal and state taxes online Kristin's donation is limited to $50. File free federal and state taxes online Household items. File free federal and state taxes online   The fair market value of used household items, such as furniture, appliances, and linens, is usually much lower than the price paid when new. File free federal and state taxes online These items may have little or no market value because they are in a worn condition, out of style, or no longer useful. File free federal and state taxes online For these reasons, formulas (such as using a percentage of the cost to buy a new replacement item) are not acceptable in determining value. File free federal and state taxes online   You should support your valuation with photographs, canceled checks, receipts from your purchase of the items, or other evidence. File free federal and state taxes online Magazine or newspaper articles and photographs that describe the items and statements by the recipients of the items are also useful. File free federal and state taxes online Do not include any of this evidence with your tax return. File free federal and state taxes online   If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art in Publication 561. File free federal and state taxes online   Also see Clothing and Household Items , earlier. File free federal and state taxes online Cars, boats, and airplanes. File free federal and state taxes online   If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value. File free federal and state taxes online Boats. File free federal and state taxes online   Except for small, inexpensive boats, the valuation of boats should be based on an appraisal by a marine surveyor or appraiser because the physical condition is critical to the value. File free federal and state taxes online Cars. File free federal and state taxes online   Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. File free federal and state taxes online The guides may be published monthly or seasonally, and for different regions of the country. File free federal and state taxes online These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. File free federal and state taxes online The prices are not “official” and these publications are not considered an appraisal of any specific donated property. File free federal and state taxes online But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. File free federal and state taxes online   These publications are sometimes available from public libraries, or from the loan officer at a bank, credit union, or finance company. File free federal and state taxes online You can also find used car pricing information on the Internet. File free federal and state taxes online   To find the fair market value of a donated car, use the price listed in a used car guide for a private party sale, not the dealer retail value. File free federal and state taxes online However, the fair market value may be less if the car has engine trouble, body damage, high mileage, or any type of excessive wear. File free federal and state taxes online The fair market value of a donated car is the same as the price listed in a used car guide for a private party sale only if the guide lists a sales price for a car that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated car. File free federal and state taxes online Example. File free federal and state taxes online You donate a used car in poor condition to a local high school for use by students studying car repair. File free federal and state taxes online A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. File free federal and state taxes online However, the guide shows the price for a private party sale of the car is only $750. File free federal and state taxes online The fair market value of the car is considered to be $750. File free federal and state taxes online Large quantities. File free federal and state taxes online   If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold. File free federal and state taxes online Example. File free federal and state taxes online You purchase 500 bibles for $1,000. File free federal and state taxes online The person who sells them to you says the retail value of these bibles is $3,000. File free federal and state taxes online If you contribute the bibles to a qualified organization, you can claim a deduction only for the price at which similar numbers of the same bible are currently being sold. File free federal and state taxes online Your charitable contribution is $1,000, unless you can show that similar numbers of that bible wer