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

TurboTax Federal Free Edition - File Taxes Online

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

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


© 2012 - 2018 All rights reserved.

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

File State Tax Online

Irs 2010 Form 1040How To Complete 1040xFree Irs Tax Forms 20112013 Tax Form 1040xHr Block Free State FileHow To File Tax AmendmentAmend Federal Taxes1040 Ez 2012File Tax Extension OnlinePast Year TaxesTurbotax 20062012 Taxes Free OnlineFile Late TaxesFreestatetaxfilingFiling A Tax Amendment OnlineHr Block 2011 Tax SoftwareVita TaxesFree State Tax Return TurbotaxIrse FileIrs Efile Form 4868Irsform1040xIrs 1040ez Form 2011Amend My 2012 Tax ReturnOnline State Tax FilingFree Taxes For Students1040x Turbo TaxFile Taxes For 2010Amendment FormNeed To File 2006 Tax Return1040ez Tax TablesHelp With 1040xWhere Can I File State Taxes For FreeIncome Tax Forms 2012Free File Fillable Forms 2012File 2010 Tax ReturnTurbotax 2011 Free Edition1040nr Online FilingFile Amended Tax Return2012 Tax Return FormIncome Tax Forms

File State Tax Online

File state tax online 2. File state tax online   Taxable and Nontaxable Income Table of Contents Compensation for Services Retirement Plan DistributionsIndividual Retirement Arrangements (IRAs) Pensions and Annuities Social Security and Equivalent Railroad Retirement BenefitsAre Any of Your Benefits Taxable? How Much Is Taxable? How To Report Your Benefits Lump-Sum Election Repayments More Than Gross Benefits Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Life Insurance ProceedsInstallments for life. File state tax online Surviving spouse. File state tax online Endowment Contract Proceeds Accelerated Death Benefits Sale of HomeMaximum Amount of Exclusion Ownership and Use Tests Married Persons Business Use or Rental of Home Reporting the Sale Reverse Mortgages Other ItemsWelfare benefits. File state tax online Payments from a state fund for victims of crime. File state tax online Home Affordable Modification Program (HAMP). File state tax online Mortgage assistance payments. File state tax online Payments to reduce cost of winter energy use. File state tax online Nutrition Program for the Elderly. File state tax online Reemployment Trade Adjustment Assistance (RTAA). File state tax online Generally, income is taxable unless it is specifically exempt (not taxed) by law. File state tax online Your taxable income may include compensation for services, interest, dividends, rents, royalties, income from partnerships, estate or trust income, gain from sales or exchanges of property, and business income of all kinds. File state tax online Under special provisions of the law, certain items are partially or fully exempt from tax. File state tax online Provisions that are of special interest to older taxpayers are discussed in this chapter. File state tax online Compensation for Services Generally, you must include in gross income everything you receive in payment for personal services. File state tax online In addition to wages, salaries, commissions, fees, and tips, this includes other forms of compensation such as fringe benefits and stock options. File state tax online You need not receive the compensation in cash for it to be taxable. File state tax online Payments you receive in the form of goods or services generally must be included in gross income at their fair market value. File state tax online Volunteer work. File state tax online   Do not include in your gross income amounts you receive for supportive services or reimbursements for out-of-pocket expenses under any of the following volunteer programs. File state tax online Retired Senior Volunteer Program (RSVP). File state tax online Foster Grandparent Program. File state tax online Senior Companion Program. File state tax online Service Corps of Retired Executives (SCORE). File state tax online Unemployment compensation. File state tax online   You must include in income all unemployment compensation you or your spouse (if married filing jointly) received. File state tax online More information. File state tax online   See Publication 525, Taxable and Nontaxable Income, for more detailed information on specific types of income. File state tax online Retirement Plan Distributions This section summarizes the tax treatment of amounts you receive from traditional individual retirement arrangements (IRA), employee pensions or annuities, and disability pensions or annuities. File state tax online A traditional IRA is any IRA that is not a Roth or SIMPLE IRA. File state tax online A Roth IRA is an individual retirement plan that can be either an account or an annuity and features nondeductible contributions and tax-free distributions. File state tax online A SIMPLE IRA is a tax-favored retirement plan that certain small employers (including self-employed individuals) can set up for the benefit of their employees. File state tax online More detailed information can be found in Publication 590, Individual Retirement Arrangements (IRAs), and Publication 575, Pension and Annuity Income. File state tax online Individual Retirement Arrangements (IRAs) In general, distributions from a traditional IRA are taxable in the year you receive them. File state tax online Exceptions to the general rule are rollovers, tax-free withdrawals of contributions, and the return of nondeductible contributions. File state tax online These are discussed in Publication 590. File state tax online If you made nondeductible contributions to a traditional IRA, you must file Form 8606, Nondeductible IRAs. File state tax online If you do not file Form 8606 with your return, you may have to pay a $50 penalty. File state tax online Also, when you receive distributions from your traditional IRA, the amounts will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. File state tax online Early distributions. File state tax online   Generally, early distributions are amounts distributed from your traditional IRA account or annuity before you are age 59½, or amounts you receive when you cash in retirement bonds before you are age  59½. File state tax online You must include early distributions of taxable amounts in your gross income. File state tax online These taxable amounts are also subject to an additional 10% tax unless the distribution qualifies for an exception. File state tax online For purposes of the additional 10% tax, an IRA is a qualified retirement plan. File state tax online For more information about this tax, see Tax on Early Distributions under Pensions and Annuities, later. File state tax online After age 59½ and before age 70½. File state tax online   After you reach age 59½, you can receive distributions from your traditional IRA without having to pay the 10% additional tax. File state tax online Even though you can receive distributions after you reach age 59½, distributions are not required until you reach  age 70½. File state tax online Required distributions. File state tax online   If you are the owner of a traditional IRA, you generally must receive the entire balance in your IRA or start receiving periodic distributions from your IRA by April 1 of the year following the year in which you reach age 70½. File state tax online See When Must You Withdraw Assets? (Required Minimum Distributions) in Publication 590. File state tax online If distributions from your traditional IRA(s) are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required. File state tax online For purposes of the 50% excise tax, an IRA is a qualified retirement plan. File state tax online For more information about this tax, see Tax on Excess Accumulation under Pensions and Annuities, later. File state tax online See also Excess Accumulations (Insufficient Distributions) in Publication 590. File state tax online Pensions and Annuities Generally, if you did not pay any part of the cost of your employee pension or annuity, and your employer did not withhold part of the cost of the contract from your pay while you worked, the amounts you receive each year are fully taxable. File state tax online However, see Insurance Premiums for Retired Public Safety Officers , later. File state tax online If you paid part of the cost of your pension or annuity plan (see Cost , later), you can exclude part of each annuity payment from income as a recovery of your cost (investment in the contract). File state tax online This tax-free part of the payment is figured when your annuity starts and remains the same each year, even if the amount of the payment changes. File state tax online The rest of each payment is taxable. File state tax online However, see Insurance Premiums for Retired Public Safety Officers , later. File state tax online You figure the tax-free part of the payment using one of the following methods. File state tax online Simplified Method. File state tax online You generally must use this method if your annuity is paid under a qualified plan (a qualified employee plan, a qualified employee annuity, or a tax-sheltered annuity plan or contract). File state tax online You cannot use this method if your annuity is paid under a nonqualified plan. File state tax online General Rule. File state tax online You must use this method if your annuity is paid under a nonqualified plan. File state tax online You generally cannot use this method if your annuity is paid under a qualified plan. File state tax online Contact your employer or plan administrator to find out if your pension or annuity is paid under a qualified or nonqualified plan. File state tax online You determine which method to use when you first begin receiving your annuity, and you continue using it each year that you recover part of your cost. File state tax online Exclusion limit. File state tax online   If your annuity starting date is after 1986, the total amount of annuity income you can exclude over the years as a recovery of the cost cannot exceed your total cost. File state tax online Any unrecovered cost at your (or the last annuitant's) death is allowed as a miscellaneous itemized deduction on the final return of the decedent. File state tax online This deduction is not subject to the 2%-of-adjusted-gross-income limit on miscellaneous deductions. File state tax online   If you contributed to your pension or annuity and your annuity starting date is before 1987, you can continue to take your monthly exclusion for as long as you receive your annuity. File state tax online If you chose a joint and survivor annuity, your survivor can continue to take the survivor's exclusion figured as of the annuity starting date. File state tax online The total exclusion may be more than your cost. File state tax online Cost. File state tax online   Before you can figure how much, if any, of your pension or annuity benefits are taxable, you must determine your cost in the plan (your investment in the contract). File state tax online Your total cost in the plan includes everything that you paid. File state tax online It also includes amounts your employer contributed that were taxable to you when paid. File state tax online However, see Foreign employment contributions , later. File state tax online   From this total cost, subtract any refunded premiums, rebates, dividends, unrepaid loans, or other tax-free amounts you received by the later of the annuity starting date or the date on which you received your first payment. File state tax online   The annuity starting date is the later of the first day of the first period for which you received a payment from the plan or the date on which the plan's obligations became fixed. File state tax online    The amount of your contributions to the plan may be shown in box 9b of any Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. File state tax online , that you receive. File state tax online Foreign employment contributions. File state tax online   If you worked abroad, certain amounts your employer paid into your retirement plan that were not includible in your gross income may be considered part of your cost. File state tax online For details, see Foreign employment contributions in Publication 575. File state tax online Withholding. File state tax online   The payer of your pension, profit-sharing, stock bonus, annuity, or deferred compensation plan will withhold income tax on the taxable part of amounts paid to you. File state tax online However, you can choose not to have tax withheld on the payments you receive, unless they are eligible rollover distributions. File state tax online (These are distributions that are eligible for rollover treatment but are not paid directly to another qualified retirement plan or to a traditional IRA. File state tax online ) See Withholding Tax and Estimated Tax and Rollovers in Publication 575 for more information. File state tax online   For payments other than eligible rollover distributions, you can tell the payer how much to withhold by filing a Form W-4P, Withholding Certificate for Pension or Annuity Payments. File state tax online Simplified Method. File state tax online   Under the Simplified Method, you figure the tax-free part of each annuity payment by dividing your cost by the total number of anticipated monthly payments. File state tax online For an annuity that is payable over the lives of the annuitants, this number is based on the annuitants' ages on the annuity starting date and is determined from a table. File state tax online For any other annuity, this number is the number of monthly annuity payments under the contract. File state tax online Who must use the Simplified Method. File state tax online   You must use the Simplified Method if your annuity starting date is after November 18, 1996, and you receive your pension or annuity payments from a qualified plan or annuity, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments (defined next). File state tax online   In addition, if your annuity starting date is after July 1, 1986, and before November 19, 1996, you could have chosen to use the Simplified Method for payments from a qualified plan, unless you were at least 75 years old and entitled to at least 5 years of guaranteed payments. File state tax online If you chose to use the Simplified Method, you must continue to use it each year that you recover part of your cost. File state tax online Guaranteed payments. File state tax online   Your annuity contract provides guaranteed payments if a minimum number of payments or a minimum amount (for example, the amount of your investment) is payable even if you and any survivor annuitant do not live to receive the minimum. File state tax online If the minimum amount is less than the total amount of the payments you are to receive, barring death, during the first 5 years after payments begin (figured by ignoring any payment increases), you are entitled to less than 5 years of guaranteed payments. File state tax online Who cannot use the Simplified Method. File state tax online   You cannot use the Simplified Method and must use the General Rule if you receive pension or annuity payments from: A nonqualified plan, such as a private annuity, a purchased commercial annuity, or a nonqualified employee plan, or A qualified plan if you are age 75 or older on your annuity starting date and you are entitled to at least 5 years of guaranteed payments (defined above). File state tax online   In addition, you had to use the General Rule for either circumstance described above if your annuity starting date is after July 1, 1986, and before November 19, 1996. File state tax online If you did not have to use the General Rule, you could have chosen to use it. File state tax online You also had to use the General Rule for payments from a qualified plan if your annuity starting date is before July 2, 1986, and you did not qualify to use the Three-Year Rule. File state tax online   If you had to use the General Rule (or chose to use it), you must continue to use it each year that you recover your cost. File state tax online   Unless your annuity starting date was before 1987, once you have recovered all of your non-taxable investment, all of each remaining payment you receive is fully taxable. File state tax online Once your remaining payments are fully taxable, there is no longer a concern with the General Rule or Simplified Method. File state tax online   Complete information on the General Rule, including the actuarial tables you need, is contained in Publication 939, General Rule for Pensions and Annuities. File state tax online How to use the Simplified Method. File state tax online   Complete the Simplified Method Worksheet in the Form 1040, Form 1040A, or Form 1040NR instructions or in Publication 575 to figure your taxable annuity for 2013. File state tax online Be sure to keep the completed worksheet; it will help you figure your taxable annuity next year. File state tax online   To complete line 3 of the worksheet, you must determine the total number of expected monthly payments for your annuity. File state tax online How you do this depends on whether the annuity is for a single life, multiple lives, or a fixed period. File state tax online For this purpose, treat an annuity that is payable over the life of an annuitant as payable for that annuitant's life even if the annuity has a fixed-period feature or also provides a temporary annuity payable to the annuitant's child under age 25. File state tax online    You do not need to complete line 3 of the worksheet or make the computation on line 4 if you received annuity payments last year and used last year's worksheet to figure your taxable annuity. File state tax online Instead, enter the amount from line 4 of last year's worksheet on line 4 of this year's worksheet. File state tax online Single-life annuity. File state tax online   If your annuity is payable for your life alone, use Table 1 at the bottom of the worksheet to determine the total number of expected monthly payments. File state tax online Enter on line 3 the number shown for your age on your annuity starting date. File state tax online This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. File state tax online Multiple-lives annuity. File state tax online   If your annuity is payable for the lives of more than one annuitant, use Table 2 at the bottom of the worksheet to determine the total number of expected monthly payments. File state tax online Enter on line 3 the number shown for the annuitants' combined ages on the annuity starting date. File state tax online For an annuity payable to you as the primary annuitant and to more than one survivor annuitant, combine your age and the age of the youngest survivor annuitant. File state tax online For an annuity that has no primary annuitant and is payable to you and others as survivor annuitants, combine the ages of the oldest and youngest annuitants. File state tax online Do not treat as a survivor annuitant anyone whose entitlement to payments depends on an event other than the primary annuitant's death. File state tax online   However, if your annuity starting date is before 1998, do not use Table 2 and do not combine the annuitants' ages. File state tax online Instead, you must use Table 1 at the bottom of the worksheet and enter on line 3 the number shown for the primary annuitant's age on the annuity starting date. File state tax online This number will differ depending on whether your annuity starting date is before November 19, 1996, or after November 18, 1996. File state tax online Fixed-period annuities. File state tax online   If your annuity does not depend in whole or in part on anyone's life expectancy, the total number of expected monthly payments to enter on line 3 of the worksheet is the number of monthly annuity payments under the contract. File state tax online Line 6. File state tax online   The amount on line 6 should include all amounts that could have been recovered in prior years. File state tax online If you did not recover an amount in a prior year, you may be able to amend your returns for the affected years. File state tax online    Be sure to keep a copy of the completed worksheet; it will help you figure your taxable annuity in later years. File state tax online Example. File state tax online Bill Smith, age 65, began receiving retirement benefits in 2013, under a joint and survivor annuity. File state tax online Bill's annuity starting date is January 1, 2013. File state tax online The benefits are to be paid over the joint lives of Bill and his wife, Kathy, age 65. File state tax online Bill had contributed $31,000 to a qualified plan and had received no distributions before the annuity starting date. File state tax online Bill is to receive a retirement benefit of $1,200 a month, and Kathy is to receive a monthly survivor benefit of $600 upon Bill's death. File state tax online Bill must use the Simplified Method to figure his taxable annuity because his payments are from a qualified plan and he is under age 75. File state tax online See the illustrated Worksheet 2-A, Simplified Method Worksheet, later. File state tax online You can find a blank version of this worksheet in Publication 575. File state tax online (The references in the illustrated worksheet are to sections in Publication 575). File state tax online His annuity is payable over the lives of more than one annuitant, so Bill uses his and Kathy's combined ages, 130 (65 + 65), and Table 2 at the bottom of the worksheet in completing line 3 of the worksheet and finds the line 3 amount to be 310. File state tax online Bill's tax-free monthly amount is $100 ($31,000 ÷ 310 as shown on line 4 of the worksheet). File state tax online Upon Bill's death, if Bill has not recovered the full $31,000 investment, Kathy will also exclude $100 from her $600 monthly payment. File state tax online The full amount of any annuity payments received after 310 payments are paid must generally be included in gross income. File state tax online If Bill and Kathy die before 310 payments are made, a miscellaneous itemized deduction will be allowed for the unrecovered cost on the final income tax return of the last to die. File state tax online This deduction is not subject to the 2%-of-adjusted-gross-income limit. File state tax online Worksheet 2-A. File state tax online Simplified Method Worksheet—Illustrated 1. File state tax online Enter the total pension or annuity payments received this year. File state tax online Also, add this amount to the total for Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a 1. File state tax online $ 14,400 2. File state tax online Enter your cost in the plan (contract) at the annuity starting date plus any death benefit exclusion* See Cost (Investment in the Contract), earlier 2. File state tax online 31,000   Note. File state tax online If your annuity starting date was before this year and you completed this worksheet last year, skip line 3 and enter the amount from line 4 of last year's worksheet on line 4 below (even if the amount of your pension or annuity has changed). File state tax online Otherwise, go to line 3. File state tax online     3. File state tax online Enter the appropriate number from Table 1 below. File state tax online But if your annuity starting date was after 1997 and the payments are for your life and that of your beneficiary, enter the appropriate number from Table 2 below 3. File state tax online 310 4. File state tax online Divide line 2 by the number on line 3 4. File state tax online 100 5. File state tax online Multiply line 4 by the number of months for which this year's payments were made. File state tax online If your annuity starting date was before 1987, enter this amount on line 8 below and skip lines 6, 7, 10, and 11. File state tax online Otherwise, go to line 6 5. File state tax online 1,200 6. File state tax online Enter any amount previously recovered tax free in years after 1986. File state tax online This is the amount shown on line 10 of your worksheet for last year 6. File state tax online 0 7. File state tax online Subtract line 6 from line 2 7. File state tax online 31,000 8. File state tax online Enter the smaller of line 5 or line 7 8. File state tax online 1,200 9. File state tax online Taxable amount for year. File state tax online Subtract line 8 from line 1. File state tax online Enter the result, but not less than zero. File state tax online Also, add this amount to the total for Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. File state tax online Note. File state tax online If your Form 1099-R shows a larger taxable amount, use the amount figured on this line instead. File state tax online If you are a retired public safety officer, see Insurance Premiums for Retired Public Safety Officers, earlier, before entering an amount on your tax return. File state tax online 9. File state tax online $ 13,200 10. File state tax online Was your annuity starting date before 1987? □ Yes. File state tax online STOP. File state tax online Do not complete the rest of this worksheet. File state tax online  ☑ No. File state tax online Add lines 6 and 8. File state tax online This is the amount you have recovered tax free through 2013. File state tax online You will need this number if you need to fill out this worksheet next year. File state tax online 10. File state tax online 1,200 11. File state tax online Balance of cost to be recovered. File state tax online Subtract line 10 from line 2. File state tax online If zero, you will not have to complete this worksheet next year. File state tax online The payments you receive next year will generally be fully taxable 11. File state tax online $ 29,800 * A death benefit exclusion (up to $5,000) applied to certain benefits received by employees who died before August 21, 1996. File state tax online   Table 1 for Line 3 Above       AND your annuity starting date was—   IF your age on your annuity starting date was . File state tax online . File state tax online . File state tax online   BEFORE November 19, 1996, enter on line 3 . File state tax online . File state tax online . File state tax online AFTER November 18, 1996, enter on line 3 . File state tax online . File state tax online . File state tax online   55 or under 300 360   56-60 260 310   61-65 240 260   66-70 170 210   71 or over 120 160 Table 2 for Line 3 Above   IF the annuitants' combined ages on your annuity starting date were . File state tax online . File state tax online . File state tax online   THEN enter on line 3 . File state tax online . File state tax online . File state tax online         110 or under   410         111-120   360         121-130   310         131-140   260         141 or over   210       Survivors of retirees. File state tax online   Benefits paid to you as a survivor under a joint and survivor annuity must be included in your gross income in the same way the retiree would have included them in gross income. File state tax online   If you receive a survivor annuity because of the death of a retiree who had reported the annuity under the Three-Year Rule, include the total received in your income. File state tax online The retiree's cost has already been recovered tax free. File state tax online   If the retiree was reporting the annuity payments under the General Rule, you must apply the same exclusion percentage the retiree used to your initial payment called for in the contract. File state tax online The resulting tax-free amount will then remain fixed. File state tax online Any increases in the survivor annuity are fully taxable. File state tax online   If the retiree was reporting the annuity payments under the Simplified Method, the part of each payment that is tax free is the same as the tax-free amount figured by the retiree at the annuity starting date. File state tax online See Simplified Method , earlier. File state tax online How to report. File state tax online   If you file Form 1040, report your total annuity on line 16a, and the taxable part on line 16b. File state tax online If your pension or annuity is fully taxable, enter it on line 16b. File state tax online Do not make an entry on line 16a. File state tax online   If you file Form 1040A, report your total annuity on line 12a, and the taxable part on line 12b. File state tax online If your pension or annuity is fully taxable, enter it on line 12b. File state tax online Do not make an entry on line 12a. File state tax online   If you file Form 1040NR, report your total annuity on line 17a, and the taxable part on line 17b. File state tax online If your pension or annuity is fully taxable, enter it on line 17b. File state tax online Do not make an entry on line 17a. File state tax online Example. File state tax online You are a Form 1040 filer and you received monthly payments totaling $1,200 (12 months x $100) during 2013 from a pension plan that was completely financed by your employer. File state tax online You had paid no tax on the payments that your employer made to the plan, and the payments were not used to pay for accident, health, or long-term care insurance premiums (as discussed later under Insurance Premiums for Retired Public Safety Officers ). File state tax online The entire $1,200 is taxable. File state tax online You include $1,200 only on Form 1040, line 16b. File state tax online Joint return. File state tax online   If you file a joint return and you and your spouse each receive one or more pensions or annuities, report the total of the pensions and annuities on line 16a of Form 1040, line 12a of Form 1040A, or line 17a of Form 1040NR. File state tax online Report the total of the taxable parts on line 16b of Form 1040, line 12b of Form 1040A, or line 17b of Form 1040NR. File state tax online Form 1099-R. File state tax online   You should receive a Form 1099-R for your pension or annuity. File state tax online Form 1099-R shows your pension or annuity for the year and any income tax withheld. File state tax online You should receive a Form W-2 if you receive distributions from certain nonqualified plans. File state tax online You must attach Forms 1099-R or Forms W-2 to your 2013 tax return if federal income tax was withheld. File state tax online Generally, you should be sent these forms by January 31, 2014. File state tax online Nonperiodic Distributions If you receive a nonperiodic distribution from your retirement plan, you may be able to exclude all or part of it from your income as a recovery of your cost. File state tax online Nonperiodic distributions include cash withdrawals, distributions of current earnings (dividends) on your investment, and certain loans. File state tax online For information on how to figure the taxable amount of a nonperiodic distribution, see Taxation of Nonperiodic Payments in Publication 575. File state tax online The taxable part of a nonperiodic distribution may be subject to an additional 10% tax. File state tax online See Tax on Early Distributions, later. File state tax online Lump-sum distributions. File state tax online   If you receive a lump-sum distribution from a qualified employee plan or qualified employee annuity and the plan participant was born before January 2, 1936, you may be able to elect optional methods of figuring the tax on the distribution. File state tax online The part from active participation in the plan before 1974 may qualify as capital gain subject to a 20% tax rate. File state tax online The part from participation after 1973 (and any part from participation before 1974 that you do not report as capital gain) is ordinary income. File state tax online You may be able to use the 10-year tax option to figure tax on the ordinary income part. File state tax online Form 1099-R. File state tax online   If you receive a total distribution from a plan, you should receive a Form 1099-R. File state tax online If the distribution qualifies as a lump-sum distribution, box 3 shows the capital gain part of the distribution. File state tax online The amount in box 2a, Taxable amount, minus the amount in box 3, Capital gain, is the ordinary income part. File state tax online More information. File state tax online   For more detailed information on lump-sum distributions, see Publication 575 or Form 4972, Tax on Lump-Sum Distributions. File state tax online Tax on Early Distributions Most distributions you receive from your qualified retirement plan and nonqualified annuity contracts before you reach age 59½ are subject to an additional tax of 10%. File state tax online The tax applies to the taxable part of the distribution. File state tax online For this purpose, a qualified retirement plan is: A qualified employee plan (including a qualified cash or deferred arrangement (CODA) under Internal Revenue Code section 401(k)), A qualified employee annuity plan, A tax-sheltered annuity plan (403(b) plan), or An eligible state or local government section 457 deferred compensation plan (to the extent that any distribution is attributable to amounts the plan received in a direct transfer or rollover from one of the other plans listed here or an IRA). File state tax online  An IRA is also a qualified retirement plan for purposes of this tax. File state tax online General exceptions to tax. File state tax online   The early distribution tax does not apply to any distributions that are: Made as part of a series of substantially equal periodic payments (made at least annually) for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary (if from a qualified retirement plan, the payments must begin after separation from service), Made because you are totally and permanently disabled, or Made on or after the death of the plan participant or contract holder. File state tax online Additional exceptions. File state tax online   There are additional exceptions to the early distribution tax for certain distributions from qualified retirement plans and nonqualified annuity contracts. File state tax online See Publication 575 for details. File state tax online Reporting tax. File state tax online   If you owe only the tax on early distributions and distribution code 1 (early distribution, no known exception) is correctly shown in Form 1099-R, box 7, multiply the taxable part of the early distribution by 10% (. File state tax online 10) and enter the result on Form 1040, line 58, or Form 1040NR, line 56. File state tax online See the instructions for line 58 of Form 1040 or line 56 of Form 1040NR for more information about reporting the early distribution tax. File state tax online Tax on Excess Accumulation To make sure that most of your retirement benefits are paid to you during your lifetime, rather than to your beneficiaries after your death, the payments that you receive from qualified retirement plans must begin no later than your required beginning date. File state tax online Unless the rule for 5% owners applies, this is generally April 1 of the year that follows the later of: The calendar year in which you reach age 70½, or The calendar year in which you retire from employment with the employer maintaining the plan. File state tax online However, your plan may require you to begin to receive payments by April 1 of the year that follows the year in which you reach 70½, even if you have not retired. File state tax online For this purpose, a qualified retirement plan includes: A qualified employee plan, A qualified employee annuity plan, An eligible section 457 deferred compensation plan, or A tax-sheltered annuity plan (403(b) plan) (for benefits accruing after 1986). File state tax online  An IRA is also a qualified retirement plan for purposes of this tax. File state tax online An excess accumulation is the undistributed remainder of the required minimum distribution that was left in your qualified retirement plan. File state tax online 5% owners. File state tax online   If you own (or are considered to own under section 318 of the Internal Revenue Code) more than 5% of the company maintaining your qualified retirement plan, you must begin to receive distributions from the plan by April 1 of the year after the calendar year in which you reach age 70½. File state tax online See Publication 575 for more information. File state tax online Amount of tax. File state tax online   If you do not receive the required minimum distribution, you are subject to an additional tax. File state tax online The tax equals 50% of the difference between the amount that must be distributed and the amount that was distributed during the tax year. File state tax online You can get this excise tax excused if you establish that the shortfall in distributions was due to reasonable error and that you are taking reasonable steps to remedy the shortfall. File state tax online Form 5329. File state tax online   You must file a Form 5329 if you owe a tax because you did not receive a minimum required distribution from your qualified retirement plan. File state tax online Additional information. File state tax online   For more detailed information on the tax on excess accumulation, see Publication 575. File state tax online Insurance Premiums for Retired Public Safety Officers If you are an eligible retired public safety officer (law enforcement officer, firefighter, chaplain, or member of a rescue squad or ambulance crew), you can elect to exclude from income distributions made from your eligible retirement plan that are used to pay the premiums for accident or health insurance or long-term care insurance. File state tax online The premiums can be for coverage for you, your spouse, or dependent(s). File state tax online The distribution must be made directly from the plan to the insurance provider. File state tax online You can exclude from income the smaller of the amount of the insurance premiums or $3,000. File state tax online You can only make this election for amounts that would otherwise be included in your income. File state tax online The amount excluded from your income cannot be used to claim a medical expense deduction. File state tax online An eligible retirement plan is a governmental plan that is a: Qualified trust, Section 403(a) plan, Section 403(b) annuity, or Section 457(b) plan. File state tax online If you make this election, reduce the otherwise taxable amount of your pension or annuity by the amount excluded. File state tax online The taxable amount shown in box 2a of any Form 1099-R that you receive does not reflect the exclusion. File state tax online Report your total distributions on Form 1040, line 16a; Form 1040A, line 12a; or Form 1040NR, line 17a. File state tax online Report the taxable amount on Form 1040, line 16b; Form 1040A, line 12b; or Form 1040NR, line 17b. File state tax online Enter “PSO” next to the appropriate line on which you report the taxable amount. File state tax online Railroad Retirement Benefits Benefits paid under the Railroad Retirement Act fall into two categories. File state tax online These categories are treated differently for income tax purposes. File state tax online Social security equivalent benefits. File state tax online   The first category is the amount of tier 1 railroad retirement benefits that equals the social security benefit that a railroad employee or beneficiary would have been entitled to receive under the social security system. File state tax online This part of the tier 1 benefit is the social security equivalent benefit (SSEB) and is treated for tax purposes like social security benefits. File state tax online (See Social Security and Equivalent Railroad Retirement Benefits , later. File state tax online ) Non-social security equivalent benefits. File state tax online   The second category contains the rest of the tier 1 benefits, called the non-social security equivalent benefit (NSSEB). File state tax online It also contains any tier 2 benefit, vested dual benefit (VDB), and supplemental annuity benefit. File state tax online This category of benefits is treated as an amount received from a qualified employee plan. File state tax online This allows for the tax-free (nontaxable) recovery of employee contributions from the tier 2 benefits and the NSSEB part of the tier 1 benefits. File state tax online Vested dual benefits and supplemental annuity benefits are non-contributory pensions and are fully taxable. File state tax online More information. File state tax online   For more information about railroad retirement benefits, see Publication 575. File state tax online Military Retirement Pay Military retirement pay based on age or length of service is taxable and must be included in income as a pension on Form 1040, lines 16a and 16b; on Form 1040A, lines 12a and 12b; or on Form 1040NR, lines 17a and 17b. File state tax online But, certain military and government disability pensions that are based on a percentage of disability from active service in the Armed Forces of any country generally are not taxable. File state tax online For more information, including information about veterans' benefits and insurance, see Publication 525. File state tax online Social Security and Equivalent Railroad Retirement Benefits This discussion explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. File state tax online Social security benefits include monthly retirement, survivor, and disability benefits. File state tax online They do not include supplemental security income (SSI) payments, which are not taxable. File state tax online Equivalent tier 1 railroad retirement benefits are the part of tier 1 benefits that a railroad employee or beneficiary would have been entitled to receive under the social security system. File state tax online They commonly are called the social security equivalent benefit (SSEB) portion of tier 1 benefits. File state tax online If you received these benefits during 2013, you should have received a Form SSA-1099 or Form RRB-1099 (Form SSA-1042S or Form RRB-1042S if you are a nonresident alien), showing the amount of the benefits. File state tax online Are Any of Your Benefits Taxable? Note. File state tax online When the term “benefits” is used in this section, it applies to both social security benefits and the SSEB portion of tier 1 railroad retirement benefits. File state tax online  To find out whether any of your benefits may be taxable, compare the base amount for your filing status (explained later) with the total of: One-half of your benefits, plus All your other income, including tax-exempt interest. File state tax online When making this comparison, do not reduce your other income by any exclusions for: Interest from qualified U. File state tax online S. File state tax online savings bonds, Employer-provided adoption benefits, Foreign earned income or foreign housing, or Income earned in American Samoa or Puerto Rico by bona fide residents. File state tax online Figuring total income. File state tax online   To figure the total of one-half of your benefits plus your other income, use Worksheet 2-B. File state tax online If that total amount is more than your base amount, part of your benefits may be taxable. File state tax online If you are married and file a joint return for 2013, you and your spouse must combine your incomes and your benefits to figure whether any of your combined benefits are taxable. File state tax online Even if your spouse did not receive any benefits, you must add your spouse's income to yours to figure whether any of your benefits are taxable. File state tax online If the only income you received during 2013 was your social security or the SSEB portion of tier 1 railroad retirement benefits, your benefits generally are not taxable and you probably do not have to file a return. File state tax online If you have income in addition to your benefits, you may have to file a return even if none of your benefits are taxable. File state tax online Worksheet 2-B. File state tax online A Quick Way To Check if Your Benefits May Be Taxable A. File state tax online Enter the amount from box 5 of all your Forms SSA-1099 and RRB-1099. File state tax online Include  the full amount of any lump-sum benefit payments received in 2013, for 2013 and  earlier years. File state tax online (If you received more than one form, combine the amounts from box 5  and enter the total. File state tax online ) A. File state tax online     Note. File state tax online If the amount on line A is zero or less, stop here; none of your benefits are  taxable this year. File state tax online     B. File state tax online Enter one-half of the amount on line A B. File state tax online   C. File state tax online Enter your taxable pensions, wages, interest, dividends, and other taxable income C. File state tax online   D. File state tax online Enter any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income for: •Interest from qualified U. File state tax online S. File state tax online savings bonds, •Employer-provided adoption benefits, •Foreign earned income or foreign housing, or •Income earned in American Samoa or Puerto Rico by bona fide residents D. File state tax online   E. File state tax online Add lines B, C, and D and enter the total E. File state tax online   F. File state tax online If you are: •Married filing jointly, enter $32,000 •Single, head of household, qualifying widow(er), or married filing separately and you  lived apart from your spouse for all of 2013, enter $25,000 •Married filing separately and you lived with your spouse at any time during 2013,  enter -0- F. File state tax online   G. File state tax online Is the amount on line F less than or equal to the amount on line E? □ No. File state tax online None of your benefits are taxable this year. File state tax online  □ Yes. File state tax online Some of your benefits may be taxable. File state tax online To figure how much of your benefits  are taxable, see Which worksheet to use under How Much Is Taxable. File state tax online     Base Amount Your base amount is: $25,000 if you are single, head of household, or qualifying widow(er) with dependent child, $25,000 if you are married filing separately and lived apart from your spouse for all of 2013, $32,000 if you are married filing jointly, or $0 if you are married filing separately and lived with your spouse at any time during 2013. File state tax online Repayment of Benefits Any repayment of benefits you made during 2013 must be subtracted from the gross benefits you received in 2013. File state tax online It does not matter whether the repayment was for a benefit you received in 2013 or in an earlier year. File state tax online If you repaid more than the gross benefits you received in 2013, see Repayments More Than Gross Benefits , later. File state tax online Your gross benefits are shown in box 3 of Form SSA-1099 or Form RRB-1099. File state tax online Your repayments are shown in box 4. File state tax online The amount in box 5 shows your net benefits for 2013 (box 3 minus box 4). File state tax online Use the amount in box 5 to figure whether any of your benefits are taxable. File state tax online Tax Withholding and Estimated Tax You can choose to have federal income tax withheld from your social security and/or the SSEB portion of your tier 1 railroad retirement benefits. File state tax online If you choose to do this, you must complete a Form W-4V, Voluntary Withholding Request. File state tax online If you do not choose to have income tax withheld, you may have to request additional withholding from other income, or pay estimated tax during the year. File state tax online For details, see Publication 505, Tax Withholding and Estimated Tax, or the instructions for Form 1040-ES, Estimated Tax for Individuals. File state tax online How Much Is Taxable? If part of your benefits is taxable, how much is taxable depends on the total amount of your benefits and other income. File state tax online Generally, the higher that total amount, the greater the taxable part of your benefits. File state tax online Maximum taxable part. File state tax online   The taxable part of your benefits usually cannot be more than 50%. File state tax online However, up to 85% of your benefits can be taxable if either of the following situations applies to you. File state tax online The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly). File state tax online You are married filing separately and lived with your spouse at any time during 2013. File state tax online   If you are a nonresident alien, 85% of your benefits are taxable. File state tax online However, this income is exempt under some tax treaties. File state tax online Which worksheet to use. File state tax online   A worksheet to figure your taxable benefits is in the instructions for your Form 1040 or 1040A. File state tax online However, you will need to use a different worksheet(s) if any of the following situations applies to you. File state tax online You contributed to a traditional individual retirement arrangement (IRA) and you or your spouse were covered by a retirement plan at work. File state tax online In this situation, you must use the special worksheets in Appendix B of Publication 590 to figure both your IRA deduction and your taxable benefits. File state tax online Situation (1) does not apply and you take one or more of the following exclusions. File state tax online Interest from qualified U. File state tax online S. File state tax online savings bonds (Form 8815). File state tax online Employer-provided adoption benefits (Form 8839). File state tax online Foreign earned income or housing (Form 2555 or Form 2555-EZ). File state tax online Income earned in American Samoa (Form 4563) or Puerto Rico by bona fide residents. File state tax online In these situations, you must use Worksheet 1 in Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure your taxable benefits. File state tax online You received a lump-sum payment for an earlier year. File state tax online In this situation, also complete Worksheet 2 or 3 and Worksheet 4 in Publication 915. File state tax online See Lump-Sum Election , later. File state tax online How To Report Your Benefits If part of your benefits are taxable, you must use Form 1040, Form 1040A, or Form 1040NR. File state tax online You cannot use Form 1040EZ. File state tax online Reporting on Form 1040. File state tax online   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 20a and the taxable part on line 20b. File state tax online If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 20a. File state tax online Reporting on Form 1040A. File state tax online   Report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on line 14a and the taxable part on line 14b. File state tax online If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on line 14a. File state tax online Reporting on Form 1040NR. File state tax online   Report 85% of the total amount of your benefits (box 5 of your Form SSA-1042S or Form RRB-1042S) in the appropriate column of Form 1040NR, Schedule NEC, line 8. File state tax online Benefits not taxable. File state tax online   If you are filing Form 1040EZ, do not report any benefits on your tax return. File state tax online If you are filing Form 1040 or Form 1040A, report your net benefits (the amount in box 5 of your Form SSA-1099 or Form RRB-1099) on Form 1040, line 20a, or Form 1040A, line 14a. File state tax online Enter -0- on Form 1040, line 20b, or Form 1040A, line 14b. File state tax online If you are married filing separately and you lived apart from your spouse for all of 2013, also enter “D” to the right of the word “benefits” on Form 1040, line 20a, or Form 1040A, line 14a. File state tax online Lump-Sum Election You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2013 in your 2013 income, even if the payment includes benefits for an earlier year. File state tax online This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. File state tax online No part of the lump-sum death benefit is subject to tax. File state tax online For more information about the lump-sum death benefit, visit the Social Security Administration website at www. File state tax online SSA. File state tax online gov, and use keyword: death benefit. File state tax online Generally, you use your 2013 income to figure the taxable part of the total benefits received in 2013. File state tax online However, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. File state tax online You can elect this method if it lowers your taxable benefits. File state tax online See Publication 915 for more information. File state tax online Repayments More Than Gross Benefits In some situations, your Form SSA-1099 or Form RRB-1099 will show that the total benefits you repaid (box 4) are more than the gross benefits (box 3) you received. File state tax online If this occurred, your net benefits in box 5 will be a negative figure (a figure in parentheses) and none of your benefits will be taxable. File state tax online If you receive more than one form, a negative figure in box 5 of one form is used to offset a positive figure in box 5 of another form for that same year. File state tax online If you have any questions about this negative figure, contact your local Social Security Administration office or your local U. File state tax online S. File state tax online Railroad Retirement Board field office. File state tax online Joint return. File state tax online   If you and your spouse file a joint return, and your Form SSA-1099 or RRB-1099 has a negative figure in box 5 but your spouse's does not, subtract the box 5 amount on your form from the box 5 amount on your spouse's form. File state tax online You do this to get your net benefits when figuring if your combined benefits are taxable. File state tax online Repayment of benefits received in an earlier year. File state tax online   If the total amount shown in box 5 of all of your Forms SSA-1099 and RRB-1099 is a negative figure, you can take an itemized deduction for the part of this negative figure that represents benefits you included in gross income in an earlier year. File state tax online   If this deduction is $3,000 or less, it is subject to the 2%-of-adjusted-gross-income limit that applies to certain miscellaneous itemized deductions. File state tax online Claim it on Schedule A (Form 1040), line 23. File state tax online   If this deduction is more than $3,000, you have to follow some special instructions. File state tax online See Publication 915 for those instructions. File state tax online Sickness and Injury Benefits Generally, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. File state tax online If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. File state tax online However, certain payments may not be taxable to you. File state tax online Some of these payments are discussed later in this section. File state tax online Also, see Military and Government Disability Pensions and Other Sickness and Injury Benefits in Publication 525. File state tax online Cost paid by you. File state tax online   If you pay the entire cost of an accident or health plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. File state tax online If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. File state tax online Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. File state tax online You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A or on line 8 of Form 1040NR until you reach minimum retirement age. File state tax online Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. File state tax online If you were 65 or older by the end of 2013 or you were retired on permanent and total disability and received taxable disability income, you may be able to claim the credit for the elderly or the disabled. File state tax online See Credit for the Elderly or the Disabled, later. File state tax online For more information on this credit, see Publication 524, Credit for the Elderly or the Disabled. File state tax online Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. File state tax online Report the payments on lines 16a and 16b of Form 1040, on lines 12a and 12b of Form 1040A, or on lines 17a and 17b of Form 1040NR. File state tax online For more information on pensions and annuities, see Publication 575. File state tax online Retirement and profit-sharing plans. File state tax online   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. File state tax online The payments must be reported as a pension or annuity. File state tax online Accrued leave payment. File state tax online   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. File state tax online The payment is not a disability payment. File state tax online Include it in your income in the tax year you receive it. File state tax online Long-Term Care Insurance Contracts In most cases, long-term care insurance contracts generally are treated as accident and health insurance contracts. File state tax online Amounts you receive from them (other than policyholder dividends or premium refunds) generally are excludable from income as amounts received for personal injury or sickness. File state tax online However, the amount you can exclude may be limited. File state tax online Long-term care insurance contracts are discussed in more detail in Publication 525. File state tax online Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. File state tax online The exemption also applies to your survivors. File state tax online The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. File state tax online If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. File state tax online For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. File state tax online Return to work. File state tax online   If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. File state tax online Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. File state tax online Federal Employees' Compensation Act (FECA). File state tax online   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. File state tax online However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. File state tax online Report this income on Form 1040, line 7; Form 1040A, line 7; on Form 1040EZ, line 1; or Form 1040NR, line 8. File state tax online Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. File state tax online    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. File state tax online For a discussion of the taxability of these benefits, see Social Security and Equivalent Railroad Retirement Benefits, earlier. File state tax online Other compensation. File state tax online   Many other amounts you receive as compensation for sickness or injury are not taxable. File state tax online These include the following amounts. File state tax online Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. File state tax online Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. File state tax online Compensation you receive for permanent loss or loss of use of a part or function of your body, for your permanent disfigurement, or for such loss or disfigurement suffered by your spouse or dependent(s). File state tax online This compensation must be based only on the injury and not on the period of your absence from work. File state tax online These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. File state tax online Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. File state tax online This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. File state tax online Proceeds not received in installments. File state tax online   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. File state tax online If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. File state tax online Proceeds received in installments. File state tax online   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. File state tax online   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. File state tax online Include anything over this excluded part in your income as interest. File state tax online Installments for life. File state tax online   If, as the beneficiary under an insurance contract, you are entitled to receive the proceeds in installments for the rest of your life without a refund or period-certain guarantee, you figure the excluded part of each installment by dividing the amount held by the insurance company by your life expectancy. File state tax online If there is a refund or period-certain guarantee, the amount held by the insurance company for this purpose is reduced by the actuarial value of the guarantee. File state tax online Surviving spouse. File state tax online   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude, in any year, up to $1,000 of the interest included in the installments. File state tax online If you remarry, you can continue to take the exclusion. File state tax online Surrender of policy for cash. File state tax online   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. File state tax online In general, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. File state tax online You should receive a Form 1099-R showing the total proceeds and the taxable part. File state tax online Report these amounts on Form 1040, lines 16a and 16b; Form 1040A, lines 12a and 12b; or Form 1040NR, lines 17a and 17b. File state tax online Endowment Contract Proceeds An endowment contract is a policy that pays over to you a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. File state tax online Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. File state tax online To determine your cost, subtract from the total premiums (or other consideration) paid for the contract any amount that you previously received under the contract and excluded from your income. File state tax online Include in your income the part of the lump-sum payment that is more than your cost. File state tax online Endowment proceeds that you choose to receive in installments instead of a lump-sum payment at the maturity of the policy are taxed as an annuity. File state tax online The tax treatment of an annuity is explained in Publication 575. File state tax online For this treatment to apply, you must choose to receive the proceeds in installments before receiving any part of the lump sum. File state tax online This election must be made within 60 days after the lump-sum payment first becomes payable to you. File state tax online Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are generally excluded from income if the insured is terminally or chronically ill. File state tax online However, see Exception , later. File state tax online For a chronically ill individual, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. File state tax online Accelerated death benefits paid on a per diem or other periodic basis without regard to the costs are excludable up to a limit. File state tax online In addition, if any portion of a death benefit under a life insurance contract on the life of a terminally or chronically ill individual is sold or assigned to a viatical settlement provider, the amount received also is excluded from income. File state tax online Generally, a viatical settlement provider is one who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill. File state tax online To report taxable accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. File state tax online Terminally or chronically ill defined. File state tax online   A terminally ill person is one who has been certified by a physician as having an illness or physical condition that reasonably can be expected to result in death within 24 months from the date of the certification. File state tax online A chronically ill person is one who is not terminally ill but has been certified (within the previous 12 months) by a licensed health care practitioner as meeting either of the following conditions. File state tax online The person is unable to perform (without substantial help) at least two activities of daily living (eating, toileting, transferring, bathing, dressing, and continence) for a period of 90 days or more because of a loss of functional capacity. File state tax online The person requires substantial supervision to protect himself or herself from threats to health and safety due to severe cognitive impairment. File state tax online Exception. File state tax online   The exclusion does not apply to any amount paid to a person other than the insured if that other person has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the other person, or Has a financial interest in the business of the other person. File state tax online Sale of Home You may be able to exclude from income any gain up to $250,000 ($500,000 on a joint return in most cases) on the sale of your main home. File state tax online Generally, if you can exclude all of the gain, you do not need to report the sale on your tax return. File state tax online You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. File state tax online Main home. File state tax online   Usually, your main home is the home you live in most of the time and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. File state tax online Repaying the first-time homebuyer credit because you sold your home. File state tax online   If you claimed a first-time homebuyer credit for your main home and you sell it, you may have to repay the credit. File state tax online For a home purchased in 2008 and used as your main home until sold in 2013, you must file Form 5405 and repay the balance of the unpaid credit on your 2013 tax return. File state tax online   For a home purchased after 2008, you generally must repay the entire credit if the home was sold (or otherwise ceased to be your main home) within 36 months of the purchase date. File state tax online If you purchased your home in 2009 and used it as your main home until sold in 2013, you do not have to repay the credit or file Form 5405. File state tax online If you purchased your home in 2010 and used it as your main home until sold in 2013, you may have to file Form 5405 and repay the entire credit on your 2013 tax return. File state tax online   See the Instructions for Form 5405 for more information about repaying the credit and exceptions to repayment that may apply to you. File state tax online Maximum Amount of Exclusion You can generally exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. File state tax online You meet the ownership test. File state tax online You meet the use test. File state tax online During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. File state tax online You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . File state tax online Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. File state tax online This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). File state tax online Exception to ownership and use tests. File state tax online   If you owned and lived in the property as your main home for less than 2 years, you still can claim an exclusion in some cases. File state tax online Generally, you must have sold the home due to a change in place of employment, health, or unforeseen circumstances. File state tax online The maximum amount you can exclude will be reduced. File state tax online See Publication 523, Selling Your Home, for more information. File state tax online Exception to use test for individuals with a disability. File state tax online   There is an exception to the use test if, during the 5-year period before the sale of your home: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year. File state tax online Under this exception, you are considered to live in your home during any time that you own the home and live in a facility (including a nursing home) that is licensed by a state or political subdivision to care for persons in your condition. File state tax online   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. File state tax online Exception to ownership test for property acquired in a like-kind exchange. File state tax online   You must have owned your main home for at least 5 years to qualify for the exclusion if you acquired your main home in a like-kind exchange. File state tax online This special 5-year ownership rule continues to apply to a home you acquired in a like-kind exchange and gave to another person. File state tax online A like-kind exchange is an exchange of property held for productive use in a trade or business or for investment. File state tax online See Publication 523 for more information. File state tax online Period of nonqualified use. File state tax online   Generally, the gain from the sale or exchange of your main home will not qualify for the exclusion to the extent that the gain is allocated to periods of nonqualified use. File state tax online Nonqualified use is any period after December 31, 2008, during which the property is not used as the main home. File state tax online See Publication 523 for more information. File state tax online Married Persons In the special situations discussed below, if you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use test, you can exclude up to $250,000 of gain. File state tax online However, see Special rules for joint returns , next. File state tax online Special rules for joint returns. File state tax online   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. File state tax online You are married and file a joint return for the year. File state tax online Either you or your spouse meets the ownership test. File state tax online Both you and your spouse meet the use test. File state tax online During the 2-year period ending on the date of the sale, neither you nor your spouse exclude gain from the sale of another home. File state tax online Sale of home by surviving spouse. File state tax online   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. File state tax online   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home in 2013. File state tax online The sale or exchange took place no more than 2 years after the date of death of your spouse. File state tax online You have not remarried. File state tax online You and your spouse met the use test at the time of your spouse's death. File state tax online You or your spouse met the ownership test at the time of your spouse's death. File state tax online Neither you nor your spouse excluded gain from the sale of another home during the last 2 years. File state tax online Home transferred from spouse. File state tax online   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. File state tax online Use of home after divorce. File state tax online   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. File state tax online Business Use or Rental of Home You may be able to exclude gain from the sale of a home that you have used for business or to produce rental income. File state tax online However, you must meet the ownership and use tests. File state tax online See Publication 523 for more information. File state tax online Depreciation after May 6, 1997. File state tax online   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. File state tax online See Publication 523 for more information. File state tax online Reporting the Sale Do not report the 2013 sale of your main home on your tax return unless: You have a gain and you do not qualify to exclude all of it, You have a gain and you choose not to exclude it, or You received Form 1099-S. File state tax online If you have a gain that you cannot or choose not to exclude, if you received a Form 1099-S, or if you have a deductible loss, report the sale on your tax return. File state tax online Report the sale on Part I or Part II of Form 8949 as a short-term or long-term transaction, depending on how long you owned the home. File state tax online If you used your home for business or to produce rental income, you may have to use Form 4797, Sales of Business Property, to report the sale of the business or rental part. File state tax online See Publication 523 for more information. File state tax online Reverse Mortgages A revers
Español

About USA.gov

As the U.S. government's official web portal, USA.gov makes it easy for the public to get U.S. government information and services on the web.

Our Mission

We provide trusted, timely, valuable government information and services when and where you want them.

Our History

Many people and organizations have had a hand in creating our comprehensive, award-winning portal to government.

USA.gov is an interagency initiative administered by the Federal Citizen Information Center, a division of the U.S. General Services Administration's Office of Citizen Services and Innovative Technologies. It got its start when Internet entrepreneur Eric Brewer, whose early research was funded by the Department of Defense, offered to donate a powerful search engine to government. That gift helped accelerate the government's earlier work to create a government-wide portal.

In June 2000, President Clinton announced the gift from the Federal Search Foundation, a nonprofit organization established by Brewer, and instructed that an official U.S. web portal be launched within 90 days. USA.gov went online on September 22, 2000 under the name FirstGov.gov. The GSA and 22 federal agencies funded the initiative in 2001 and 2002.

USA.gov was legislatively mandated through Section 204 of the E-Government Act of 2002. Since 2002, USA.gov has received an annual appropriation from the U.S. Congress. In January 2007, FirstGov.gov officially changed its name to USA.gov.

Back to Top

Social Media

We believe in delivering information and services in ways that are convenient for you. Connect with us through Facebook, Twitter, YouTube, our blog, RSS feeds, and StumbleUpon.

Back to Top

Popular Topics on USA.gov

If you want to know what's on Americans' minds regarding the government, we publish USA.gov's most popular pages, links, and search terms. See what's trending now.

Back to Top

News and Media

Learn more about the information and services USA.gov offers to the public through our media resources, public service announcements for TV, radio and print, e-mail alerts, and RSS feeds.

Back to Top

USA.gov links to websites that provide useful, timely, citizen-centered government information and services consistent with our linking policy.

USA.gov searches across all federal, state, local, tribal, and territorial government websites. Most government websites end in .gov or .mil, but many end in .com, .org, .edu, or other top-level domains. Learn more about the non-.gov and .mil URLs that we search.

Back to Top

Important Notices

USA.gov provides more details on its policies and guidelines with regard to disclaimers of endorsements, web accessibility, free commercial downloads, and privacy and security matters on our Important Notices page.

Back to Top

Customer Satisfaction

USA.gov is an Internet portal designed for you. We want to make your experience at our website productive, informative, and satisfying. Customer feedback is the driving force for how we organize and present government information, services, and transactions.
If you would like to provide us with comments, suggestions, and personal experiences while visiting USA.gov, please contact us.

Back to Top

The File State Tax Online

File state tax online Accelerated Cost Recovery System (ACRS) Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: ACRS Defined What Can and Cannot Be Depreciated Under ACRSRecovery Property Nonrecovery Property How To Figure the DeductionUnadjusted Basis Classes of Recovery Property Recovery Periods Alternate ACRS Method (Modified Straight Line Method) ACRS Deduction in Short Tax Year DispositionsEarly dispositions of ACRS property other than 15-, 18-, or 19-year real property. File state tax online Dispositions — mass asset accounts. File state tax online Early dispositions — 15-year real property. File state tax online Early dispositions — 18- and 19-year real property. File state tax online Depreciation Recapture Topics - This chapter discusses: The definition of ACRS What can and cannot be depreciated under ACRS How to figure the deduction Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization The Accelerated Cost Recovery System (ACRS) applies to property first used before 1987. File state tax online It is the name given to tax rules for getting back (recovering) through depreciation deductions the cost of property used in a trade or business or to produce income. File state tax online These rules are mandatory and generally apply to tangible property placed in service after 1980 and before 1987. File state tax online If you placed property in service during this period, you must continue to figure your depreciation under ACRS. File state tax online If you used listed property placed in service after June 18, 1984, less than 50% for business in 1995, see Predominant Use Test in chapter 3. File state tax online Listed property includes cars, other means of transportation, and certain computers. File state tax online Any additions or improvements placed in service after 1986, including any components of a building (such as plumbing, wiring, storm windows, etc. File state tax online ), are depreciated using MACRS, discussed in chapter 3 of Publication 946. File state tax online It does not matter that the underlying property is depreciated under ACRS or one of the other methods. File state tax online ACRS Defined ACRS consists of accelerated depreciation methods and an alternate ACRS method that could have been elected. File state tax online The alternate ACRS method used a recovery percentage based on a modified straight line method. File state tax online The law prescribes fixed percentages to be uses for each class of property. File state tax online Property depreciable under ACRS is called recovery property. File state tax online The recovery class of property determines the recovery period. File state tax online Generally, the class life of property places it in a 3-year, 5-year, 10-year, 15-year, 18-year, or 19-year recovery class. File state tax online Under ACRS, the prescribed percentages are used to recover the unadjusted basis of recovery property. File state tax online To figure a depreciation deduction, you multiply the prescribed percentage for the recovery class by the unadjusted basis of the recovery property. File state tax online You must continue to figure your depreciation under ACRS for property placed in service after 1980 and before 1987. File state tax online For property you placed in service after 1986, you must use MACRS, discussed in chapter 3 of Publication 946. File state tax online What Can and Cannot Be Depreciated Under ACRS ACRS applies to most depreciable tangible property placed in service after 1980 and before 1987. File state tax online It includes new or used and real or personal property. File state tax online The property must be for use in a trade or business or for the production of income. File state tax online Property you acquired before 1981 or after 1986 is not ACRS recovery property. File state tax online For information on depreciating property acquired before 1981, see chapter 2. File state tax online For information on depreciating property acquired after 1986, see chapter 3 of Publication 946. File state tax online Recovery Property Recovery property under ACRS is tangible depreciable property placed in service after 1980 and before 1987. File state tax online It generally includes new or used property that you acquired after 1980 and before 1987 for use in your trade or business or for the production of income. File state tax online Nonrecovery Property You cannot use ACRS for property you placed in service before 1981 or after 1986. File state tax online Nonrecovery property also includes: Intangible property, Property you elected to exclude from ACRS that is properly depreciated under a method of depreciation that is not based on a term of years, Certain public utility property, and Certain property acquired and excluded from ACRS because of the antichurning rules. File state tax online Intangible property. File state tax online   Intangible property is not depreciated under ACRS. File state tax online Property depreciated under methods not expressed in a term of years. File state tax online   Certain property depreciated under a method not expressed in a term of years is not depreciated under ACRS. File state tax online This included any property: If you made an irrevocable election to exclude such property, and In the first year that you could have claimed depreciation, you properly used the unit-of-production method or any method of depreciation not expressed in a term of years (not including the retirement-replacement-betterment method). File state tax online Public utility property. File state tax online   Public utility property for which the taxpayer does not use a normalization method of accounting is excluded from ACRS and is subject to depreciation under a special rule. File state tax online Additions or improvements to ACRS property after 1986. File state tax online   Any additions or improvements placed in service after 1986, including any components of a building (plumbing, wiring, storm windows, etc. File state tax online ) are depreciated using MACRS, discussed in chapter 3 of Publication 946. File state tax online It does not matter that the underlying property is depreciated under ACRS or one of the other methods. File state tax online How To Figure the Deduction After you determine that your property can be depreciated under ACRS, you are ready to figure your deduction. File state tax online Because the conventions are built into the percentage table rates, you only need to know the following: The unadjusted basis of your recovery property, The classes of recovery property, The recovery periods, and Whether to use the prescribed percentages based on accelerated methods or percentages based on using the alternate ACRS method. File state tax online Unadjusted Basis To figure your ACRS deduction, you multiply the unadjusted basis in your recovery property by its applicable percentage for the year. File state tax online Unadjusted basis is the same amount you would use to figure gain on a sale, but it is figured without taking into account any depreciation taken in earlier years. File state tax online However, reduce your original basis by the amount of amortization taken on the property and by any section 179 deduction claimed as discussed in chapter 2 of Publication 946. File state tax online If you buy property, your unadjusted basis is usually its cost minus any amortized amount and minus any section 179 deduction elected. File state tax online If you acquire property in some other way, such as by inheriting it, getting it as a gift, or building it yourself, you figure your unadjusted basis under other rules. File state tax online See Publication 551. File state tax online Classes of Recovery Property All recovery property under ACRS is in one of the following classes. File state tax online The class for your property was determined when you began to depreciate it. File state tax online 3-Year Property 3-year property includes automobiles, light-duty trucks (actual unloaded weight less than 13,000 pounds), and tractor units for use over-the-road. File state tax online Race horses over 2 years old when placed in service are 3-year property. File state tax online Any other horses over 12 years old when you placed them in service are also included in the 3-year property class. File state tax online The ACRS percentages for 3-year recovery property are: Recovery Period Percentage 1st year 25% 2nd year 38% 3rd year 37% If you used the percentages above to depreciate your 3-year recovery property, your property, except for certain passenger automobiles, is fully depreciated. File state tax online You cannot claim depreciation for this property after 1988. File state tax online 5-Year Property 5-year property includes computers, copiers, and equipment, such as office furniture and fixtures. File state tax online It also includes single purpose agricultural or horticultural structures and petroleum storage facilities (other than buildings and their structural components). File state tax online The ACRS percentages for 5-year recovery property are: Recovery period Percentage 1st year 15% 2nd year 22% 3rd through 5th year 21% If you used the percentages above to depreciate your 5-year recovery property, it is fully depreciated. File state tax online You cannot claim depreciation for this property after 1990. File state tax online 10-Year Property 10-year property includes certain real property such as theme-park structures and certain public utility property. File state tax online Manufactured homes (including mobile homes) and railroad tank cars are also 10-year property. File state tax online You do not treat a building, and its structural components, as 10-year property by reason of a change in use after you placed the property in service. File state tax online For example, a building (15-year real property) that was placed in service in 1981 and was converted to a theme-park structure in 1986 remains 15-year real property. File state tax online The ACRS percentages for 10-year recovery property are: Recovery Period Percentage 1st year 8% 2nd year 14% 3rd year 12% 4th through 6th year 10% 7th through 10th year 9% If you used the percentages above, you cannot claim depreciation for this property after 1995. File state tax online Example. File state tax online On April 21, 1986, you bought and placed in service a new mobile home for $26,000 to be used as rental property. File state tax online You paid $10,000 cash and signed a note for $16,000 giving you an unadjusted basis of $26,000. File state tax online On June 8, 1986, you bought and placed in service a used mobile home for use as rental property at a total cost of $11,500. File state tax online The total unadjusted basis of your 10-year recovery property placed in service in 1986 was $37,500 ($26,000 + $11,500). File state tax online Your ACRS deduction was $3,000 (8% × $37,500). File state tax online In 1987, your ACRS deduction was $5,250 (14% × $37,500). File state tax online In 1988, your ACRS deduction was $4,500 (12% × $37,500). File state tax online In 1989, 1990, and 1991, your ACRS deduction was $3,750 (10% × $37,500). File state tax online In 1992, 1993, 1994, and 1995 your deduction for each year is $3,375 (9% × $37,500). File state tax online 15-Year Real Property 15-year real property is real property that is recovery property placed in service before March 16, 1984. File state tax online It includes all real property, such as buildings, other than that designated as 5-year or 10-year property. File state tax online Unlike the 3-, 5-, or 10-year classes of property, the percentages for 15-year real property depend on when you placed the property in service during your tax year. File state tax online You could group 15-year real property by month and year placed in service. File state tax online In Table 1, at the end of this publication in the Appendix, find the month in your tax year that you placed the property in service in your trade or business or for the production of income. File state tax online You use the percentages listed under that month for each year of the recovery period to determine your depreciation deduction each year. File state tax online Example. File state tax online On March 5, 1984, you placed an apartment building in service in your business. File state tax online It is 15-year real property. File state tax online After subtracting the value of the land, your unadjusted basis in the building is $250,000. File state tax online You use the calendar year as your tax year. File state tax online March is the third month of your tax year. File state tax online Your ACRS deduction for 1984 was $25,000 (10% × $250,000). File state tax online For 1985, the percentage for the third month of the second year of the recovery period is 11%. File state tax online Your deduction was $27,500 (11% × $250,000). File state tax online For the third, fourth, and fifth years of the recovery period (1986, 1987, and 1988), the percentages are 9%, 8%, and 7%. File state tax online For 1989 through 1992, the percentage for the third month is 6%. File state tax online Your deduction each year is $15,000 (6% × $250,000). File state tax online For 1993, 1994, and 1995, the percentage for the third month is 5%. File state tax online Your depreciation deduction is $12,500 (5% × $250,000) for 1993, 1994, and 1995. File state tax online Low-Income Housing Low-income housing that was assigned a 15-year recovery period under ACRS includes the following types of property: Federally assisted housing projects where the mortgage is insured under section 221(d)(3) or 236 of the National Housing Act, or housing financed or assisted by direct loan or tax abatement under similar provisions of state or local laws. File state tax online Low-income rental housing for which a depreciation deduction for rehabilitation expenditures is allowed. File state tax online Low-income rental housing held for occupancy by families or individuals eligible to receive subsidies under section 8 of the United States Housing Act of 1937, as amended, or under the provisions of state or local laws that authorize similar subsidies for low-income families. File state tax online Housing financed or assisted by direct loan or insured under Title V of the Housing Act of 1949. File state tax online The ACRS percentages for low-income housing real property, like the regular 15-year real property percentages, depend on when you placed the property in service. File state tax online Find the month in your tax year in Table 2 or 3 at the end of this publication in the Appendix that you first placed the property in service as rental housing. File state tax online Use the percentages listed under that month for each year of the recovery period. File state tax online Table 2 shows percentages for low-income housing placed in service before May 9, 1985. File state tax online Table 3 shows percentages for low-income housing placed in service after May 8, 1985, and before 1987. File state tax online Example. File state tax online In May 1986, you acquired and placed in service a house that qualified as low-income rental housing under item 3) of the above listing. File state tax online You use the calendar year as your tax year. File state tax online You use Table C–3 because the property was placed in service after May 8, 1985. File state tax online Your unadjusted basis for the property, not including the land, was $59,000. File state tax online Your deduction for 1986 through 2001 is shown in the following table. File state tax online Year Rate Deduction 1986 8. File state tax online 9% $5,251 1987 12. File state tax online 1% 7,139 1988 10. File state tax online 5% 6,195 1989 9. File state tax online 1% 5,369 1990 7. File state tax online 9% 4,661 1991 6. File state tax online 9% 4,071 1992 5. File state tax online 9% 3,481 1993 5. File state tax online 2% 3,068 1994 4. File state tax online 6% 2,714 1995 4. File state tax online 6% 2,714 1996 4. File state tax online 6% 2,714 1997 4. File state tax online 6% 2,714 1998 4. File state tax online 6% 2,714 1999 4. File state tax online 5% 2,655 2000 4. File state tax online 5% 2,655 2001 1. File state tax online 5% 885 18-Year Real Property 18-year real property is real property that is recovery property placed in service after March 15, 1984, and before May 9, 1985. File state tax online It includes real property, such as buildings, other than that designated as 5-year, 10-year, 15-year real property, or low-income housing. File state tax online The ACRS percentages for 18-year real property depend on when you placed the property in service in your trade or business or for the production of income during your tax year. File state tax online There are also tables for 18-year real property in the Appendix. File state tax online Table 4 shows the percentages for 18-year real property you placed in service after June 22, 1984, and before May 9, 1985. File state tax online Table 5 is for 18-year real property placed in service after March 15, 1984, and before June 23, 1984. File state tax online Find the month in your tax year that you placed the property in service in a trade or business or for the production of income. File state tax online Use the percentages listed under that month for each year of the recovery period. File state tax online Example. File state tax online On April 28, 1985, you bought and placed in service a rental house. File state tax online The house, not including the land, cost $95,000. File state tax online This is your unadjusted basis for the house. File state tax online You use the calendar year as your tax year. File state tax online Because the house was placed in service after June 22, 1984, and before May 9, 1985, it is 18-year real property. File state tax online You use Table 4 to figure your deduction for the house. File state tax online April is the fourth month of your tax year. File state tax online Your deduction for 1985 through 2003 is shown in the following table. File state tax online Year Rate Deduction 1985 7. File state tax online 0% $6,650 1986 9. File state tax online 0% 8,550 1987 8. File state tax online 0% 7,600 1988 7. File state tax online 0% 6,650 1989 7. File state tax online 0% 6,650 1990 6. File state tax online 0% 5,700 1991 5. File state tax online 0% 4,750 1992 5. File state tax online 0% 4,750 1993 5. File state tax online 0% 4,750 1994 5. File state tax online 0% 4,750 1995 5. File state tax online 0% 4,750 1996 5. File state tax online 0% 4,750 1997 5. File state tax online 0% 4,750 1998 4. File state tax online 0% 3,800 1999 4. File state tax online 0% 3,800 2000 4. File state tax online 0% 3,800 2001 4. File state tax online 0% 3,800 2002 4. File state tax online 0% 3,800 2003 1. File state tax online 0% 950 19-Year Real Property 19-year real property is real property that is recovery property placed in service after May 8, 1985, and before 1987. File state tax online It includes all real property, other than that designated as 5-year, 10-year, 15-year, or 18-year real property, or low-income housing. File state tax online The ACRS percentages for 19-year real property depend on when you placed the property in service in a trade or business or for the production of income during your tax year. File state tax online Table 6 shows the percentages for 19-year real property. File state tax online You find the month in your tax year that you placed the property in service. File state tax online You use the percentages listed under that month for each year of the recovery period. File state tax online Recovery Periods Each item of recovery property is assigned to a class of property. File state tax online The classes of recovery property establish the recovery periods over which the unadjusted basis of items in a class is recovered. File state tax online The classes of property are: 3-Year property 5-Year property 10-Year property 15-Year real property Low-income housing 18-Year real property 19-Year real property Alternate ACRS Method (Modified Straight Line Method) ACRS provides an alternate ACRS method that could be elected. File state tax online This alternate ACRS method uses a recovery percentage based on a modified straight line method. File state tax online This alternate ACRS method generally uses percentages other than those from the tables. File state tax online If you elected the alternate ACRS method, you determine the recovery period by using the following schedule. File state tax online This schedule is for other than 18- and 19-year real property and low-income housing: In the case of: You could have elected a recovery period of: 3-year property 3, 5, or 12 years 5-year property 5, 12, or 25 years 15-year real property 15, 35, or 45 years Percentages. File state tax online   The straight-line percentages for the alternate ACRS method are: Recovery Period Percentage 5 years 20. File state tax online 00% 10 years 10. File state tax online 00% 12 years 8. File state tax online 333% 15 years 6. File state tax online 667% 25 years 4. File state tax online 00% 35 years 2. File state tax online 857%   You apply the percentage to the unadjusted basis(defined earlier) of the property to figure your ACRS deduction. File state tax online There are tables for 18- and 19-year real property later in this publication in the Appendix. File state tax online For 15-year real property, see 15-year real property, later. File state tax online 3-, 5-, and 10-year property. File state tax online   If you elected to use an alternate recovery percentage, you have to use the same recovery percentage for all property in that class that you placed in service in that tax year. File state tax online This applies throughout the recovery period you selected. File state tax online Half-year convention. File state tax online   If you elected the alternate method, only a half-year of depreciation was deducted for the year you placed the property in service. File state tax online This applied regardless of when in the tax year you placed the property in service. File state tax online For each of the remaining years in the recovery period, you take a full year's deduction. File state tax online If you hold the property for the entire recovery period, a half-year of depreciation is allowable for the year following the end of the recovery period. File state tax online Example. File state tax online You operate a small upholstery business. File state tax online On March 19, 1986, you bought and placed in service a $13,000 light-duty panel truck to be used in your business and a $500 electric saw. File state tax online You elected to use the alternate ACRS method. File state tax online You did not elect to take a section 179 deduction. File state tax online You decided to recover the cost of the truck, which is 3-year recovery property, over 5 years. File state tax online The saw is 5-year property, but you decided to recover its cost over 12 years. File state tax online For 1986, your ACRS deduction reflected the half-year convention. File state tax online In the first year, you deducted half of the amount determined for a full year. File state tax online Your ACRS deduction for 1986 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. File state tax online 00     Electric saw   12 years straight line = 8. File state tax online 333% 8. File state tax online 333% ÷ $500 = $41. File state tax online 67 Half-year convention -½ of $41. File state tax online 67= 20. File state tax online 84 Total ACRS deduction for 1986 $1,320. File state tax online 84       You take a full year of depreciation for both the truck and the saw for the years 1987 through 1990. File state tax online Your ACRS deduction for each of those years is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600     Electric saw     12 years straight line = 8. File state tax online 333% 8. File state tax online 333% ÷ $500 = $41. File state tax online 67 Total annual ACRS deduction for 1987 through 1990 $2,641. File state tax online 67       In 1991, you take a half-year of depreciation for the truck and a full year of depreciation for the saw. File state tax online Your ACRS deduction for 1991 is as follows: Light-duty truck   5 years straight line = 20% 20% ÷ $13,000 = $2,600 Half-year convention -½ of $2,600= $1,300. File state tax online 00     Electric saw   12 years straight line = 8. File state tax online 333% 8. File state tax online 333% ÷ $500 = $41. File state tax online 67 Total ACRS deduction for 1991 $1,341. File state tax online 67       The truck is fully depreciated after 1991. File state tax online You take a full year of depreciation for the saw for the years 1992 through 1997. File state tax online Your ACRS deduction for each of those years is as follows: Electric saw     12 years straight line = 8. File state tax online 333% 8. File state tax online 333% ÷ $500 = $41. File state tax online 67 Total annual ACRS deduction for 1992 through 1997 $41. File state tax online 67       You take a half-year of depreciation for the saw for 1998. File state tax online Your ACRS deduction for 1998 is as follows: Electric saw   12 years straight line = 8. File state tax online 333% 8. File state tax online 333% ÷ $500 = $41. File state tax online 67 Half-year convention -½ of $41. File state tax online 67= 20. File state tax online 84 Total ACRS deduction for 1998 $20. File state tax online 84       The saw is fully depreciated after 1998. File state tax online 15-year real property. File state tax online   Under ACRS, you could also elect to use the alternate ACRS method for 15-year real property. File state tax online The alternate ACRS method allows you to depreciate your 15-year real property using the straight line ACRS method over the alternate recovery periods of 15, 35, or 45 years. File state tax online If you selected a 15-year recovery period, you use the percentage (6. File state tax online 667%) from the schedule above. File state tax online You prorate this percentage for the number of months the property was in service in the first year. File state tax online If you selected a 35- or 45-year recovery period, you use either Table 11 or 15. File state tax online Alternate periods for 18-year real property. File state tax online   For 18-year real property, the alternate recovery periods are 18, 35, or 45 years. File state tax online The percentages for 18-year real property under the alternate method are in Tables 7, 8, 10, 11, 14, and 15 in the Appendix. File state tax online There are two tables for each alternate recovery period. File state tax online One table shows the percentage for property placed in service after June 22, 1984. File state tax online The other table has the percentages for property placed in service after March 15, 1984, and before June 23, 1984. File state tax online Alternate periods for 19-year real property. File state tax online   For 19-year real property, the alternate recovery periods are 19, 35, or 45 years. File state tax online If you selected a 19-year recovery period, use Table 9 to determine your deduction. File state tax online If you select a 35- or 45-year recovery period, use either Table 13 or 14. File state tax online Example. File state tax online You placed in service an apartment building on August 3, 1986. File state tax online The building is 19-year real property. File state tax online The sales contract allocated $300,000 to the building and $100,000 to the land. File state tax online You use the calendar year as your tax year. File state tax online You chose the alternate ACRS method over a recovery period of 35 years. File state tax online For 1986, you figure your ACRS deduction usingTable 13. File state tax online August is the eighth month of your tax year. File state tax online The percentage from Table 13 for the eighth month is 1. File state tax online 1%. File state tax online Your deduction was $3,300 ($300,000 ÷ 1. File state tax online 1%). File state tax online The deduction rate from ACRS Table 13 for years 2 through 20 is 2. File state tax online 9% so that your deduction in 1987 through 2005 is $8,700 ($300,000 ÷ 2. File state tax online 9%). File state tax online Alternate periods for low-income housing. File state tax online   For low-income housing, the alternate recovery periods are 15, 35, or 45 years. File state tax online If you selected a 15-year period for this property, use 6. File state tax online 667% as the percentage. File state tax online If you selected a 35- or 45-year period, use either Table 11, 12, or 15. File state tax online Election. File state tax online   You had to make the election to use the alternate ACRS method by the return due date (including extensions) for the tax year you placed the property in service. File state tax online Revocation of election. File state tax online   Your election to use an alternate ACRS method, once made, can be changed only with the consent of the Commissioner. File state tax online The Commissioner grants consent only in extraordinary circumstances. File state tax online Any request for a revocation will be considered a request for a ruling. File state tax online ACRS Deduction in Short Tax Year For a tax year that is less than 12 months, the ACRS deduction is prorated on a 12-month basis. File state tax online Figure the amount of the ACRS deduction for a short tax year as follows: First, you figure the ACRS deduction for a full year. File state tax online You figure this by multiplying the unadjusted basis by the recovery percentage. File state tax online You then multiply the ACRS deduction determined for a full tax year by a fraction. File state tax online The numerator (top number) of the fraction is the number of months in the short tax year and the denominator (bottom number) is 12. File state tax online For example, a corporation placed in service in June 1986 an item of 3-year property with an unadjusted basis of $10,000. File state tax online The corporation files a tax return, because of a change in its accounting period, for the 6-month short tax year ending June 30, 1986. File state tax online The full year's ACRS deduction for this item is $2,500 ($10,000 ÷ 25%), the first year percentage from the 3-year table. File state tax online The ACRS deduction for the short tax year is $1,250 ($2,500 ÷ 6/12). File state tax online You use the full ACRS percentages during the remaining years of the recovery period. File state tax online For the first tax year after the recovery period, the unrecovered basis will be deductible. File state tax online Exception. File state tax online   For the tax year in which you placed 15-, 18-, or 19-year real property in service or in the tax year you dispose of it, you compute the ACRS deduction for the number of months that the property is in service during that tax year. File state tax online You compute the number of months using either a full month or mid-month convention. File state tax online This is true regardless of the number of months in the tax year and the recovery period and method used. File state tax online Dispositions A disposition is the permanent withdrawal of property from use in your trade or business or in the production of income. File state tax online You can make a withdrawal by sale, exchange, retirement, abandonment, or destruction. File state tax online You generally recognize gain or loss on the disposition of an asset by sale. File state tax online However, nonrecognition rules can allow you to postpone some gain. File state tax online See Publication 544. File state tax online If you physically abandon property, you can deduct as a loss the adjusted basis of the asset at the time of its abandonment. File state tax online Your intent must be to discard the asset so that you will not use it again or retrieve it for sale, exchange, or other disposition. File state tax online Early dispositions. File state tax online   The disposal of an asset before the end of its specified recovery period, is referred to as an early disposition. File state tax online When an early disposition occurs, the depreciation deduction in the year of disposition depends on the class of property involved. File state tax online Early dispositions of ACRS property other than 15-, 18-, or 19-year real property. File state tax online   Generally, you get no ACRS deduction for the tax year in which you dispose of or retire recovery property, except for 15-, 18-, and 19-year real property. File state tax online This means there is no depreciation deduction under ACRS in the year you dispose of or retire any of your 3-, 5-, or 10-year recovery property. File state tax online Dispositions — mass asset accounts. File state tax online   The law provides a special rule to avoid the calculation of gain on the disposition of assets from mass asset accounts. File state tax online A mass asset account includes items usually minor in value in relation to the group, numerous in quantity, impractical to separately identify, and not usually accounted for on a separate basis, but on a total dollar value. File state tax online Examples of mass assets include minor items of office, plant, and store furniture and fixtures. File state tax online   Under the special rule, if you elected to use a mass asset account, you recognize gain to the extent of the proceeds from the disposition of the asset. File state tax online You leave the unadjusted basis of the property in the account until recovered in future years. File state tax online If you did this, include the total proceeds realized from the disposition in income on the tax return for the year of disposition. File state tax online Early dispositions — 15-year real property. File state tax online   If you dispose of 15-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. File state tax online You use a full-month convention. File state tax online For a disposition at any time during a particular month before the end of the recovery period, no deduction is allowed for the month of disposition. File state tax online This applies whether you use the regular ACRS method or elected the alternate ACRS method. File state tax online Example. File state tax online You purchased and placed in service a rental house on March 2, 1984, for $98,000 (not including the cost of land). File state tax online You file your return based on a calendar year. File state tax online Your rate from Table 1 for the third month is 10%. File state tax online Your ACRS deduction for 1984 was $9,800 ($98. File state tax online 000 ÷ 10%). File state tax online For 1985 through 1988, you figured your ACRS deductions using 11%, 9%, 8%, and 7% ÷ $98,000. File state tax online For 1989 through 1992, you figured your ACRS deductions using 6% for each year. File state tax online The deduction each year was $98,000 ÷ 6%. File state tax online For 1993 and 1994, the ACRS deduction is ($98,000 ÷ 5%) $4,900 for each year. File state tax online You sell the house on June 1, 1995. File state tax online You figure your ACRS deduction for 1995 for the full year and then prorate that amount for the months of use. File state tax online The full ACRS deduction for 1995 is $4,900 ($98,000 ÷ 5%). File state tax online You then prorate this amount to the 5 months in 1995 during which it was rented. File state tax online Your ACRS deduction for 1995 is $2,042 ($4,900 ÷ 5/12). File state tax online Early dispositions — 18- and 19-year real property. File state tax online   If you dispose of 18- or 19-year real property, you base your ACRS deduction for the year of disposition on the number of months in use. File state tax online For 18-year property placed in service before June 23, 1984, use a full-month convention on a disposition. File state tax online For 18-year property placed in service after June 22, 1984, and for 19-year property, determine the number of months in use by using the mid-month convention. File state tax online Under the mid-month convention,treat real property disposed of any time during a month as disposed of in the middle of that month. File state tax online Count the month of disposition as half a month of use. File state tax online Example. File state tax online You purchased and placed in service a rental house on July 2, 1984, for $100,000 (not including the cost of land). File state tax online You file your return based on a calendar year. File state tax online Your rate from Table 4 for the seventh month is 4%. File state tax online You figured your ACRS deduction for 1984 was $4,000 ($100,000 ÷ 4%). File state tax online In 1985 through 1994, your ACRS deductions were 9%, 8%, 8%, 7%, 6%, 6%, 5%, 5%, and 5% ÷ $100,000. File state tax online You sell the house on September 24, 1995. File state tax online Figure your ACRS deduction for 1995 for the months of use. File state tax online The full ACRS deduction for 1995 is $5,000 ($100,000 ÷ 5%). File state tax online Prorate this amount for the 8. File state tax online 5 months in 1995 that you held the property. File state tax online Under the mid-month convention, you count September as half a month. File state tax online Your ACRS deduction for 1995 is $3,542 ($5,000 ÷ 8. File state tax online 5/12). File state tax online Depreciation Recapture If you dispose of property depreciated under ACRS that is section 1245 recovery property, you will generally recognize gain or loss. File state tax online Gain recognized on a disposition is ordinary income to the extent of prior depreciation deductions taken. File state tax online This recapture rule applies to all personal property in the 3-year, 5-year, and 10-year classes. File state tax online You recapture gain on manufactured homes and theme park structures in the 10-year class as section 1245 property. File state tax online Section 1245 property generally includes all personal property. File state tax online See Section 1245 property in chapter 4 of Publication 544 for more information. File state tax online You treat dispositions of section 1250 real property on which you have a gain as section 1245 recovery property. File state tax online You recognize gain on this property as ordinary income to the extent of prior depreciation deductions taken. File state tax online Section 1250 property includes most real property. File state tax online See Section 1250 property in chapter 4 of Publication 544 for more information. File state tax online This rule applies to all section 1250 real property except the following property: Any 15-, 18-, or 19-year real property that is residential rental property. File state tax online Any 15-, 18-, or 19-year real property that you elected to depreciate using the alternate ACRS method. File state tax online Any 15-, 18-, or 19-year real property that is subsidized low-income housing. File state tax online For these recapture rules, you treat the section 179 deduction and 50% of the investment credit that reduced your basis as depreciation. File state tax online See Publication 544 for further discussion of dispositions of section 1245 and 1250 property. File state tax online Prev  Up  Next   Home   More Online Publications