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Filing 1040 Ez Online

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Filing 1040 Ez Online

Filing 1040 ez online 2. Filing 1040 ez online   Accounting Periods and Methods Table of Contents Introduction Useful Items - You may want to see: Accounting Periods Accounting MethodsCash Method Accrual Method Combination Method Inventories Uniform Capitalization Rules Special Methods Change in Accounting Method Introduction You must figure your taxable income and file an income tax return for an annual accounting period called a tax year. Filing 1040 ez online Also, you must consistently use an accounting method that clearly shows your income and expenses for the tax year. Filing 1040 ez online Useful Items - You may want to see: Publication 538 Accounting Periods and Methods See chapter 12 for information about getting publications and forms. Filing 1040 ez online Accounting Periods When preparing a statement of income and expenses (generally your income tax return), you must use your books and records for a specific interval of time called an accounting period. Filing 1040 ez online The annual accounting period for your income tax return is called a tax year. Filing 1040 ez online You can use one of the following tax years. Filing 1040 ez online A calendar tax year. Filing 1040 ez online A fiscal tax year. Filing 1040 ez online Unless you have a required tax year, you adopt a tax year by filing your first income tax return using that tax year. Filing 1040 ez online A required tax year is a tax year required under the Internal Revenue Code or the Income Tax Regulations. Filing 1040 ez online Calendar tax year. Filing 1040 ez online   A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Filing 1040 ez online   You must adopt the calendar tax year if any of the following apply. Filing 1040 ez online You do not keep books. Filing 1040 ez online You have no annual accounting period. Filing 1040 ez online Your present tax year does not qualify as a fiscal year. Filing 1040 ez online Your use of the calendar tax year is required under the Internal Revenue Code or the Income Tax Regulations. Filing 1040 ez online   If you filed your first income tax return using the calendar tax year and you later begin business as a sole proprietor, you must continue to use the calendar tax year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Filing 1040 ez online For more information, see Change in tax year, later. Filing 1040 ez online   If you adopt the calendar tax year, you must maintain your books and records and report your income and expenses for the period from January 1 through December 31 of each year. Filing 1040 ez online Fiscal tax year. Filing 1040 ez online   A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Filing 1040 ez online A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Filing 1040 ez online   If you adopt a fiscal tax year, you must maintain your books and records and report your income and expenses using the same tax year. Filing 1040 ez online   For more information on a fiscal tax year, including a 52-53-week tax year, see Publication 538. Filing 1040 ez online Change in tax year. Filing 1040 ez online   Generally, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year, to request IRS approval to change your tax year. Filing 1040 ez online See the Instructions for Form 1128 for exceptions. Filing 1040 ez online If you qualify for an automatic approval request, a user fee is not required. Filing 1040 ez online If you do not qualify for automatic approval, a ruling must be requested. Filing 1040 ez online See the instructions for Form 1128 for information about user fees if you are requesting a ruling. Filing 1040 ez online Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. Filing 1040 ez online Your accounting method includes not only the overall method of accounting you use, but also the accounting treatment you use for any material item. Filing 1040 ez online You choose an accounting method for your business when you file your first income tax return that includes a Schedule C for the business. Filing 1040 ez online After that, if you want to change your accounting method, you must generally get IRS approval. Filing 1040 ez online See Change in Accounting Method, later. Filing 1040 ez online Kinds of methods. Filing 1040 ez online   Generally, you can use any of the following accounting methods. Filing 1040 ez online Cash method. Filing 1040 ez online An accrual method. Filing 1040 ez online Special methods of accounting for certain items of income and expenses. Filing 1040 ez online Combination method using elements of two or more of the above. Filing 1040 ez online You must use the same accounting method to figure your taxable income and to keep your books. Filing 1040 ez online Also, you must use an accounting method that clearly shows your income. Filing 1040 ez online Business and personal items. Filing 1040 ez online   You can account for business and personal items under different accounting methods. Filing 1040 ez online For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Filing 1040 ez online Two or more businesses. Filing 1040 ez online   If you have two or more separate and distinct businesses, you can use a different accounting method for each if the method clearly reflects the income of each business. Filing 1040 ez online They are separate and distinct only if you maintain complete and separate books and records for each business. Filing 1040 ez online Cash Method Most individuals and many sole proprietors with no inventory use the cash method because they find it easier to keep cash method records. Filing 1040 ez online However, if an inventory is necessary to account for your income, you must generally use an accrual method of accounting for sales and purchases. Filing 1040 ez online For more information, see Inventories, later. Filing 1040 ez online Income Under the cash method, include in your gross income all items of income you actually or constructively receive during your tax year. Filing 1040 ez online If you receive property or services, you must include their fair market value in income. Filing 1040 ez online Example. Filing 1040 ez online On December 30, 2012, Mrs. Filing 1040 ez online Sycamore sent you a check for interior decorating services you provided to her. Filing 1040 ez online You received the check on January 2, 2013. Filing 1040 ez online You must include the amount of the check in income for 2013. Filing 1040 ez online Constructive receipt. Filing 1040 ez online   You have constructive receipt of income when an amount is credited to your account or made available to you without restriction. Filing 1040 ez online You do not need to have possession of it. Filing 1040 ez online If you authorize someone to be your agent and receive income for you, you are treated as having received it when your agent received it. Filing 1040 ez online Example. Filing 1040 ez online Interest is credited to your bank account in December 2013. Filing 1040 ez online You do not withdraw it or enter it into your passbook until 2014. Filing 1040 ez online You must include it in your gross income for 2013. Filing 1040 ez online Delaying receipt of income. Filing 1040 ez online   You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Filing 1040 ez online You must report the income in the year the property is received or made available to you without restriction. Filing 1040 ez online Example. Filing 1040 ez online Frances Jones, a service contractor, was entitled to receive a $10,000 payment on a contract in December 2013. Filing 1040 ez online She was told in December that her payment was available. Filing 1040 ez online At her request, she was not paid until January 2014. Filing 1040 ez online She must include this payment in her 2013 income because it was constructively received in 2013. Filing 1040 ez online Checks. Filing 1040 ez online   Receipt of a valid check by the end of the tax year is constructive receipt of income in that year, even if you cannot cash or deposit the check until the following year. Filing 1040 ez online Example. Filing 1040 ez online Dr. Filing 1040 ez online Redd received a check for $500 on December 31, 2013, from a patient. Filing 1040 ez online She could not deposit the check in her business account until January 2, 2014. Filing 1040 ez online She must include this fee in her income for 2013. Filing 1040 ez online Debts paid by another person or canceled. Filing 1040 ez online   If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. Filing 1040 ez online If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Filing 1040 ez online For more information, see Canceled Debt under Kinds of Income in chapter 5. Filing 1040 ez online Repayment of income. Filing 1040 ez online   If you include an amount in income and in a later year you have to repay all or part of it, you can usually deduct the repayment in the year in which you make it. Filing 1040 ez online If the amount you repay is over $3,000, a special rule applies. Filing 1040 ez online For details about the special rule, see Repayments in chapter 11 of Publication 535, Business Expenses. Filing 1040 ez online Expenses Under the cash method, you generally deduct expenses in the tax year in which you actually pay them. Filing 1040 ez online This includes business expenses for which you contest liability. Filing 1040 ez online However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained later under Uniform Capitalization Rules. Filing 1040 ez online Expenses paid in advance. Filing 1040 ez online   You can deduct an expense you pay in advance only in the year to which it applies. Filing 1040 ez online Example. Filing 1040 ez online You are a calendar year taxpayer and you pay $1,000 in 2013 for a business insurance policy effective for one year, beginning July 1. Filing 1040 ez online You can deduct $500 in 2013 and $500 in 2014. Filing 1040 ez online Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. Filing 1040 ez online The purpose of an accrual method of accounting is to match income and expenses in the correct year. Filing 1040 ez online Income—General Rule Under an accrual method, you generally include an amount in your gross income for the tax year in which all events that fix your right to receive the income have occurred and you can determine the amount with reasonable accuracy. Filing 1040 ez online Example. Filing 1040 ez online You are a calendar year accrual method taxpayer. Filing 1040 ez online You sold a computer on December 28, 2013. Filing 1040 ez online You billed the customer in the first week of January 2014, but you did not receive payment until February 2014. Filing 1040 ez online You must include the amount received for the computer in your 2013 income. Filing 1040 ez online Income—Special Rules The following are special rules that apply to advance payments, estimating income, and changing a payment schedule for services. Filing 1040 ez online Estimated income. Filing 1040 ez online   If you include a reasonably estimated amount in gross income, and later determine the exact amount is different, take the difference into account in the tax year in which you make the determination. Filing 1040 ez online Change in payment schedule for services. Filing 1040 ez online   If you perform services for a basic rate specified in a contract, you must accrue the income at the basic rate, even if you agree to receive payments at a lower rate until you complete the services and then receive the difference. Filing 1040 ez online Advance payments for services. Filing 1040 ez online   Generally, you report an advance payment for services to be performed in a later tax year as income in the year you receive the payment. Filing 1040 ez online However, if you receive an advance payment for services you agree to perform by the end of the next tax year, you can elect to postpone including the advance payment in income until the next tax year. Filing 1040 ez online However, you cannot postpone including any payment beyond that tax year. Filing 1040 ez online   For more information, see Advance Payment for Services under Accrual Method in Publication 538. Filing 1040 ez online That publication also explains special rules for reporting the following types of income. Filing 1040 ez online Advance payments for service agreements. Filing 1040 ez online Prepaid rent. Filing 1040 ez online Advance payments for sales. Filing 1040 ez online   Special rules apply to including income from advance payments on agreements for future sales or other dispositions of goods you hold primarily for sale to your customers in the ordinary course of your business. Filing 1040 ez online If the advance payments are for contracts involving both the sale and service of goods, it may be necessary to treat them as two agreements. Filing 1040 ez online An agreement includes a gift certificate that can be redeemed for goods. Filing 1040 ez online Treat amounts that are due and payable as amounts you received. Filing 1040 ez online   You generally include an advance payment in income for the tax year in which you receive it. Filing 1040 ez online However, you can use an alternative method. Filing 1040 ez online For information about the alternative method, see Publication 538. Filing 1040 ez online Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both the following apply. Filing 1040 ez online The all-events test has been met. Filing 1040 ez online The test has been met when: All events have occurred that fix the fact of liability, and The liability can be determined with reasonable accuracy. Filing 1040 ez online Economic performance has occurred. Filing 1040 ez online Economic performance. Filing 1040 ez online   You generally cannot deduct or capitalize a business expense until economic performance occurs. Filing 1040 ez online If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. Filing 1040 ez online If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Filing 1040 ez online An exception allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Filing 1040 ez online For more information on economic performance, see Economic Performance under Accrual Method in Publication 538. Filing 1040 ez online Example. Filing 1040 ez online You are a calendar year taxpayer and use an accrual method of accounting. Filing 1040 ez online You buy office supplies in December 2013. Filing 1040 ez online You receive the supplies and the bill in December, but you pay the bill in January 2014. Filing 1040 ez online You can deduct the expense in 2013 because all events that fix the fact of liability have occurred, the amount of the liability could be reasonably determined, and economic performance occurred in that year. Filing 1040 ez online Your office supplies may qualify as a recurring expense. Filing 1040 ez online In that case, you can deduct them in 2013 even if the supplies are not delivered until 2014 (when economic performance occurs). Filing 1040 ez online Keeping inventories. Filing 1040 ez online   When the production, purchase, or sale of merchandise is an income-producing factor in your business, you must generally take inventories into account at the beginning and the end of your tax year. Filing 1040 ez online If you must account for an inventory, you must generally use an accrual method of accounting for your purchases and sales. Filing 1040 ez online For more information, see Inventories , later. Filing 1040 ez online Special rule for related persons. Filing 1040 ez online   You cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until you make the payment and the corresponding amount is includible in the related person's gross income. Filing 1040 ez online Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. Filing 1040 ez online If a deduction is not allowed under this rule, the rule will continue to apply even if your relationship with the person ends before the expense or interest is includible in the gross income of that person. Filing 1040 ez online   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. Filing 1040 ez online For a list of other related persons, see section 267 of the Internal Revenue Code. Filing 1040 ez online Combination Method You can generally use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. Filing 1040 ez online However, the following restrictions apply. Filing 1040 ez online If an inventory is necessary to account for your income, you must generally use an accrual method for purchases and sales. Filing 1040 ez online (See, however, Inventories, later. Filing 1040 ez online ) You can use the cash method for all other items of income and expenses. Filing 1040 ez online If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Filing 1040 ez online If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Filing 1040 ez online If you use a combination method that includes the cash method, treat that combination method as the cash method. Filing 1040 ez online Inventories Generally, if you produce, purchase, or sell merchandise in your business, you must keep an inventory and use the accrual method for purchases and sales of merchandise. Filing 1040 ez online However, the following taxpayers can use the cash method of accounting even if they produce, purchase, or sell merchandise. Filing 1040 ez online These taxpayers can also account for inventoriable items as materials and supplies that are not incidental (discussed later). Filing 1040 ez online A qualifying taxpayer under Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Filing 1040 ez online A qualifying small business taxpayer under Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Filing 1040 ez online Qualifying taxpayer. Filing 1040 ez online   You are a qualifying taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 17, 1998, is $1 million or less. Filing 1040 ez online (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing by 3. Filing 1040 ez online ) Your business is not a tax shelter, as defined under section 448(d)(3) of the Internal Revenue Code. Filing 1040 ez online Qualifying small business taxpayer. Filing 1040 ez online   You are a qualifying small business taxpayer if: Your average annual gross receipts for each prior tax year ending on or after December 31, 2000, is more than $1 million but not more than $10 million. Filing 1040 ez online (Your average annual gross receipts for a tax year is figured by adding the gross receipts for that tax year and the 2 preceding tax years and dividing the total by 3. Filing 1040 ez online ) You are not prohibited from using the cash method under section 448 of the Internal Revenue Code. Filing 1040 ez online Your principal business activity is an eligible business (described in Publication 538 and Revenue Procedure 2002-28). Filing 1040 ez online Business not owned or not in existence for 3 years. Filing 1040 ez online   If you did not own your business for all of the 3-tax-year period used in figuring your average annual gross receipts, include the period of any predecessor. Filing 1040 ez online If your business has not been in existence for the 3-tax-year period, base your average on the period it has existed including any short tax years, annualizing the short tax year's gross receipts. Filing 1040 ez online Materials and supplies that are not incidental. Filing 1040 ez online   If you account for inventoriable items as materials and supplies that are not incidental, you will deduct the cost of the items you would otherwise include in inventory in the year you sell the items, or the year you pay for them, whichever is later. Filing 1040 ez online If you are a producer, you can use any reasonable method to estimate the raw material in your work in process and finished goods on hand at the end of the year to determine the raw material used to produce finished goods that were sold during the year. Filing 1040 ez online Changing accounting method. Filing 1040 ez online   If you are a qualifying taxpayer or qualifying small business taxpayer and want to change to the cash method or to account for inventoriable items as non-incidental materials and supplies, you must file Form 3115, Application for Change in Accounting Method. Filing 1040 ez online See Change in Accounting Method, later. Filing 1040 ez online More information. Filing 1040 ez online    For more information about the qualifying taxpayer exception, see Revenue Procedure 2001-10 in Internal Revenue Bulletin 2001-2. Filing 1040 ez online For more information about the qualifying small business taxpayer exception, see Revenue Procedure 2002-28 in Internal Revenue Bulletin 2002-18. Filing 1040 ez online Items included in inventory. Filing 1040 ez online   If you are required to account for inventories, include the following items when accounting for your inventory. Filing 1040 ez online Merchandise or stock in trade. Filing 1040 ez online Raw materials. Filing 1040 ez online Work in process. Filing 1040 ez online Finished products. Filing 1040 ez online Supplies that physically become a part of the item intended for sale. Filing 1040 ez online Valuing inventory. Filing 1040 ez online   You must value your inventory at the beginning and end of each tax year to determine your cost of goods sold (Schedule C, line 42). Filing 1040 ez online To determine the value of your inventory, you need a method for identifying the items in your inventory and a method for valuing these items. Filing 1040 ez online   Inventory valuation rules cannot be the same for all kinds of businesses. Filing 1040 ez online The method you use to value your inventory must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Filing 1040 ez online Your inventory practices must be consistent from year to year. Filing 1040 ez online More information. Filing 1040 ez online   For more information about inventories, see Publication 538. Filing 1040 ez online Uniform Capitalization Rules Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for production or resale activities. Filing 1040 ez online Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Filing 1040 ez online You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Filing 1040 ez online Activities subject to the uniform capitalization rules. Filing 1040 ez online   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Filing 1040 ez online Produce real or tangible personal property. Filing 1040 ez online For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Filing 1040 ez online Acquire property for resale. Filing 1040 ez online Exceptions. Filing 1040 ez online   These rules do not apply to the following property. Filing 1040 ez online Personal property you acquire for resale if your average annual gross receipts are $10 million or less. Filing 1040 ez online Property you produce if you meet either of the following conditions. Filing 1040 ez online Your indirect costs of producing the property are $200,000 or less. Filing 1040 ez online You use the cash method of accounting and do not account for inventories. Filing 1040 ez online For more information, see Inventories, earlier. Filing 1040 ez online Special Methods There are special methods of accounting for certain items of income or expense. Filing 1040 ez online These include the following. Filing 1040 ez online Amortization, discussed in chapter 8 of Publication 535, Business Expenses. Filing 1040 ez online Bad debts, discussed in chapter 10 of Publication 535. Filing 1040 ez online Depletion, discussed in chapter 9 of Publication 535. Filing 1040 ez online Depreciation, discussed in Publication 946, How To Depreciate Property. Filing 1040 ez online Installment sales, discussed in Publication 537, Installment Sales. Filing 1040 ez online Change in Accounting Method Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Filing 1040 ez online A change in your accounting method includes a change in: Your overall method, such as from cash to an accrual method, and Your treatment of any material item. Filing 1040 ez online To get approval, you must file Form 3115, Application for Change in Accounting Method. Filing 1040 ez online You can get IRS approval to change an accounting method under either the automatic change procedures or the advance consent request procedures. Filing 1040 ez online You may have to pay a user fee. Filing 1040 ez online For more information, see the form instructions. Filing 1040 ez online Automatic change procedures. Filing 1040 ez online   Certain taxpayers can presume to have IRS approval to change their method of accounting. Filing 1040 ez online The approval is granted for the tax year for which the taxpayer requests a change (year of change), if the taxpayer complies with the provisions of the automatic change procedures. Filing 1040 ez online No user fee is required for an application filed under an automatic change procedure generally covered in Revenue Procedure 2002-9. Filing 1040 ez online   Generally, you must use Form 3115 to request an automatic change. Filing 1040 ez online For more information, see the Instructions for Form 3115. Filing 1040 ez online Prev  Up  Next   Home   More Online Publications
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The Filing 1040 Ez Online

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