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Free State Tax Return Forms

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Free state tax return forms 4. Free state tax return forms   Deductions Table of Contents Standard DeductionStandard Deduction for Dependents Itemized DeductionsMedical and Dental Expenses Most taxpayers have a choice of taking a standard deduction or itemizing their deductions. Free state tax return forms You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions. Free state tax return forms If you have a choice, you should use the method that gives you the lower tax. Free state tax return forms Standard Deduction The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. Free state tax return forms Generally, the standard deduction amounts are adjusted each year for inflation. Free state tax return forms In most cases, you can use Worksheet 4-1 to figure your standard deduction amount. Free state tax return forms Persons not eligible for the standard deduction. Free state tax return forms   Your standard deduction is zero and you should itemize any deductions you have if: You are married and filing a separate return, and your spouse itemizes deductions, You are filing a tax return for a short tax year because of a change in your annual accounting period, or You are a nonresident or dual-status alien during the year. Free state tax return forms You are considered a dual-status alien if you were both a nonresident alien and a resident alien during the year. Free state tax return forms   If you are a nonresident alien who is married to a U. Free state tax return forms S. Free state tax return forms citizen or resident alien at the end of the year, you can choose to be treated as a U. Free state tax return forms S. Free state tax return forms resident. Free state tax return forms See Publication 519, U. Free state tax return forms S. Free state tax return forms Tax Guide for Aliens. Free state tax return forms If you make this choice, you can take the standard deduction. Free state tax return forms Decedent's final return. Free state tax return forms   The amount of the standard deduction for a decedent's final tax return is the same as it would have been had the decedent continued to live. Free state tax return forms However, if the decedent was not 65 or older at the time of death, the higher standard deduction for age cannot be claimed. Free state tax return forms Higher standard deduction for age (65 or older). Free state tax return forms   If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. Free state tax return forms You are considered age 65 on the day before your 65th birthday. Free state tax return forms Therefore, you can take a higher standard deduction for 2013 if you were born before January 2, 1949. Free state tax return forms Higher standard deduction for blindness. Free state tax return forms   If you are blind on the last day of the year and you do not itemize deductions, you are entitled to a higher standard deduction. Free state tax return forms You qualify for this benefit if you are totally or partly blind. Free state tax return forms Not totally blind. Free state tax return forms   If you are not totally blind, you must get a certified statement from an eye doctor (ophthalmologist or optometrist) that: You cannot see better than 20/200 in the better eye with glasses or contact lenses, or Your field of vision is not more than 20 degrees. Free state tax return forms   If your eye condition will never improve beyond these limits, the statement should include this fact. Free state tax return forms You must keep the statement in your records. Free state tax return forms   If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify. Free state tax return forms Spouse 65 or older or blind. Free state tax return forms   You can take the higher standard deduction if your spouse is age 65 or older or blind and: You file a joint return, or You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and an exemption for your spouse could not be claimed by another taxpayer. Free state tax return forms    You cannot claim the higher standard deduction for an individual other than yourself and your spouse. Free state tax return forms Example. Free state tax return forms This example illustrates how to determine your standard deduction using Worksheet 4-1. Free state tax return forms Bill and Lisa are filing a joint return for 2013. Free state tax return forms Both are over age 65. Free state tax return forms Neither is blind, and neither can be claimed as a dependent. Free state tax return forms They do not itemize deductions, so they use Worksheet 4-1. Free state tax return forms Because they are married filing jointly, they enter $12,200 on line 1. Free state tax return forms They check the “No” box on line 2, so they also enter $12,200 on line 4. Free state tax return forms Because they are both over age 65, they enter $2,400 ($1,200 × 2) on line 5. Free state tax return forms They enter $14,600 ($12,200 + $2,400) on line 6, so their standard deduction is $14,600. Free state tax return forms Standard Deduction for Dependents The standard deduction for an individual for whom an exemption can be claimed on another person's tax return is generally limited to the greater of: $1,000, or The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,100). Free state tax return forms However, the standard deduction may be higher if the individual is 65 or older or blind. Free state tax return forms If an exemption for you (or your spouse if you are filing jointly) can be claimed on someone else's return, use Worksheet 4-1, if applicable, to determine your standard deduction. Free state tax return forms Worksheet 4-1. Free state tax return forms 2013 Standard Deduction Worksheet Caution. Free state tax return forms If you are married filing separately and your spouse itemizes deductions, or if you are a dual-status alien, do not complete this worksheet. Free state tax return forms If you were born before January 2, 1949, and/or blind, check the correct number of boxes below. Free state tax return forms Put the total number of boxes checked in box c and go to line 1. Free state tax return forms a. Free state tax return forms You   Born before  January 2, 1949     Blind b. Free state tax return forms Your spouse, if claiming  spouse's exemption   Born before January 2, 1949     Blind c. Free state tax return forms Total boxes checked             1. Free state tax return forms Enter the amount shown below for your filing status. Free state tax return forms               Single or married filing separately — $6,100 Married filing jointly or Qualifying widow(er) — $12,200 Head of household — $8,950   1. Free state tax return forms           2. Free state tax return forms Can you (or your spouse if filing jointly) be claimed as a dependent on someone else's return?  No. Free state tax return forms Skip line 3; enter the amount from line 1 on line 4. Free state tax return forms   Yes. Free state tax return forms Go to line 3. Free state tax return forms         3. Free state tax return forms Is your earned income* more than $650?               Yes. Free state tax return forms Add $350 to your earned income. Free state tax return forms Enter the total   3. Free state tax return forms         No. Free state tax return forms Enter $1,000 4. Free state tax return forms Enter the smaller of line 1 or line 3 4. Free state tax return forms   5. Free state tax return forms If born before January 2, 1949, or blind, multiply the number in box c by $1,200 ($1,500 if single or head of household). Free state tax return forms Enter the result here. Free state tax return forms Otherwise, enter -0- 5. Free state tax return forms   6. Free state tax return forms Add lines 4 and 5. Free state tax return forms This is your standard deduction for 2013. Free state tax return forms 6. Free state tax return forms   * Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Free state tax return forms It also includes any amount received as a scholarship that you must include in your income. Free state tax return forms Generally, your earned income is the total of the amount(s) you reported on Form 1040, lines 7, 12, and 18, minus the amount, if any, on line 27 (or the amount you reported on Form 1040A, line 7). Free state tax return forms Itemized Deductions Some individuals should itemize their deductions because it will save them money. Free state tax return forms Others should itemize because they do not qualify for the standard deduction. Free state tax return forms See the discussion under Standard Deduction , earlier, to decide if it would be to your advantage to itemize deductions. Free state tax return forms You may be subject to a limit on some of your itemized deductions if your adjusted gross income is more than $150,000. Free state tax return forms For more information, see Overall limitation, later. Free state tax return forms Medical and dental expenses, some taxes, certain interest expenses, charitable contributions, casualty and theft losses, and certain other miscellaneous expenses may be itemized as deductions on Schedule A (Form 1040). Free state tax return forms You may benefit from itemizing your deductions on Schedule A (Form 1040) if you: Cannot take the standard deduction, Had uninsured medical or dental expenses that are more than 10% of your adjusted gross income (or more than 7. Free state tax return forms 5% of your adjusted gross income if either you or your spouse is age 65 or older), Paid interest on your home, Paid real estate or personal property taxes, Paid mortgage insurance premiums, Paid state and local income or general sales taxes, Had large unreimbursed employee business expenses or other miscellaneous deductions, Had large uninsured casualty or theft losses, Made large contributions to qualified charities (see Publication 526, Charitable Contributions), or Have total itemized deductions that are more than the standard deduction that applies to you. Free state tax return forms See the Schedule A (Form 1040) instructions for more information. Free state tax return forms Overall limitation. Free state tax return forms   You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than: $150,000, if married filing separately, $250,000, if single, $275,000, if head of household, or $300,000, if married filing jointly or qualifying widow(er). Free state tax return forms  If your adjusted gross income exceeds the applicable amount, you will use the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040) to figure your total itemized deductions. Free state tax return forms Medical and Dental Expenses You can deduct certain medical and dental expenses you paid for yourself, your spouse, and your dependent(s) if you itemize your deductions on Schedule A (Form 1040). Free state tax return forms Table 4-1 shows some common items that you can or cannot include in figuring your medical expense deduction. Free state tax return forms For more information, see the following discussions of selected items, which are presented in alphabetical order. Free state tax return forms A more extensive list of items and further details can be found in Publication 502, Medical and Dental Expenses. Free state tax return forms Table 4-1. Free state tax return forms Medical and Dental Expenses Checklist You can include: You cannot include: Bandages Capital expenses for equipment or improvements to your home needed for medical care (see Publication 502) Certain weight-loss expenses for obesity Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. Free state tax return forms ) Lead-based paint removal (see Publication 502) Long-term care contracts, qualified (see Publication 502) Meals and lodging provided by a hospital during medical treatment Medical and hospital insurance premiums Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Publication 502) Special items (artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids, crutches, wheelchair, etc. Free state tax return forms ) Special education for mentally or physically disabled persons (see Publication 502) Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services (see Publication 502) Contributions to Archer MSAs (see Publication 969) Bottled water Diaper service Expenses for your general health (even if following your doctor's advice) such as: —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pretax basis) (see Publication 502) Funeral, burial, or cremation expenses Health savings account payments for medical expenses (see Publication 502) Illegal operation or treatment Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. Free state tax return forms Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases (see Publication 502) Surgery for purely cosmetic reasons (see Publication 502) Toothpaste, toiletries, cosmetics, etc. Free state tax return forms Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease You can deduct only the amount of your medical and dental expenses that is more than 10% of your adjusted gross income (or that is more than 7. Free state tax return forms 5% of your adjusted gross income if you or your spouse is age 65 or older). Free state tax return forms What to include. Free state tax return forms   Generally, you can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Free state tax return forms If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Free state tax return forms If you use a pay-by-phone or online account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Free state tax return forms You can include medical expenses you charge to your credit card in the year the charge is made. Free state tax return forms It does not matter when you actually pay the amount charged. Free state tax return forms Home Improvements You can include in medical expenses amounts you pay for home improvements if their main purpose is medical care for you, your spouse, or your dependent. Free state tax return forms Only reasonable costs to accommodate a home to your disabled condition (or that of your spouse or your dependent(s) who live with you) are considered medical care. Free state tax return forms Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. Free state tax return forms Publication 502 contains additional information and examples, including a capital expense worksheet, to assist you in figuring the amount of the capital expense that you can include in your medical expenses. Free state tax return forms Also, see Publication 502 for information about deductible operating and upkeep expenses related to such capital expense items, and for information about improvements, for medical reasons, to property rented by a person with disabilities. Free state tax return forms Household Help You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor. Free state tax return forms This is a personal expense that is not deductible. Free state tax return forms However, you may be able to include certain expenses paid to a person providing nursing-type services. Free state tax return forms For more information, see Nursing Services , later. Free state tax return forms Also, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Free state tax return forms For more information, see Qualified long-term care services under Long-Term Care, later. Free state tax return forms Hospital Services You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. Free state tax return forms This includes amounts paid for meals and lodging. Free state tax return forms Also, see Meals and Lodging , later. Free state tax return forms Long-Term Care You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts. Free state tax return forms Qualified long-term care services. Free state tax return forms   Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are: Required by a chronically ill individual, and Provided under a plan of care prescribed by a licensed health care practitioner. Free state tax return forms Chronically ill individual. Free state tax return forms    An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions. Free state tax return forms He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Free state tax return forms Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Free state tax return forms He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Free state tax return forms Maintenance and personal care services. Free state tax return forms    Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment). Free state tax return forms Qualified long-term care insurance contracts. Free state tax return forms   A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. Free state tax return forms The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses. Free state tax return forms   The amount of qualified long-term care premiums you can include is limited. Free state tax return forms You can include the following as medical expenses on Schedule A (Form 1040). Free state tax return forms Qualified long-term care premiums up to the following amounts. Free state tax return forms Age 40 or under – $360. Free state tax return forms Age 41 to 50 – $680. Free state tax return forms Age 51 to 60 – $1,360. Free state tax return forms Age 61 to 70 – $3,640. Free state tax return forms Age 71 or over – $4,550. Free state tax return forms Unreimbursed expenses for qualified long-term care services. Free state tax return forms Note. Free state tax return forms The limit on premiums is for each person. Free state tax return forms Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if your main reason for being there is to receive medical care. Free state tax return forms You may be able to include in medical expenses the cost of lodging (but not meals) not provided in a hospital or similar institution. Free state tax return forms You can include the cost of such lodging while away from home if all of the following requirements are met. Free state tax return forms The lodging is primarily for, and essential to, medical care. Free state tax return forms The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Free state tax return forms The lodging is not lavish or extravagant under the circumstances. Free state tax return forms There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Free state tax return forms The amount you include in medical expenses for lodging cannot be more than $50 per night for each person. Free state tax return forms You can include lodging for a person traveling with the person receiving the medical care. Free state tax return forms For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Free state tax return forms (Meals are not included. Free state tax return forms ) Nursing home. Free state tax return forms   You can include in medical expenses the cost of medical care in a nursing home or a home for the aged for yourself, your spouse, or your dependent(s). Free state tax return forms This includes the cost of meals and lodging in the home if a main reason for being there is to get medical care. Free state tax return forms   Do not include the cost of meals and lodging if the reason for being in the home is personal. Free state tax return forms However, you can include in medical expenses the part of the cost that is for medical or nursing care. Free state tax return forms Medical Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Free state tax return forms Policies can provide payment for: Hospitalization, surgical fees, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Qualified long-term care insurance contracts (subject to the additional limits included in the discussion on qualified long-term care insurance contracts under Long-Term Care , earlier). Free state tax return forms If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Free state tax return forms The cost of the medical portion must be separately stated in the insurance contract or given to you in a separate statement. Free state tax return forms Medicare Part A. Free state tax return forms   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare Part A. Free state tax return forms The payroll tax paid for Medicare Part A is not a medical expense. Free state tax return forms If you are not covered under social security (or were not a government employee who paid Medicare tax), you can enroll voluntarily in Medicare Part A. Free state tax return forms In this situation you can include the premiums you paid for Medicare Part A as a medical expense. Free state tax return forms Medicare Part B. Free state tax return forms   Medicare Part B is a supplemental medical insurance. Free state tax return forms Premiums you pay for Medicare Part B are a medical expense. Free state tax return forms If you applied for it at age 65 or after you became disabled, you can include in medical expenses the monthly premiums you paid. Free state tax return forms If you were over age 65 or disabled when you first enrolled, check with your local Social Security Administration office, or go to their website at www. Free state tax return forms SSA. Free state tax return forms gov, to find out your premium. Free state tax return forms Medicare Part D. Free state tax return forms   Medicare Part D is a voluntary prescription drug insurance program for persons with Medicare Part A or Part B. Free state tax return forms You can include as a medical expense premiums you pay for Medicare Part D. Free state tax return forms Prepaid insurance premiums. Free state tax return forms   Insurance premiums you pay before you are age 65 for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Free state tax return forms Medicines You can include in medical expenses amounts you pay for prescribed medicines and drugs. Free state tax return forms A prescribed drug is one that requires a prescription by a doctor for its use by an individual. Free state tax return forms You can also include amounts you pay for insulin. Free state tax return forms Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. Free state tax return forms Imported medicines and drugs. Free state tax return forms   If you import medicines or drugs from other countries, see Medicines and Drugs From Other Countries, under What Expenses Are Not Includible, in Publication 502. Free state tax return forms Nursing Services You can include in medical expenses wages and other amounts you pay for nursing services. Free state tax return forms The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. Free state tax return forms This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. Free state tax return forms These services can be provided in your home or another care facility. Free state tax return forms Generally, only the amount spent for nursing services is a medical expense. Free state tax return forms If the attendant also provides personal and household services, amounts paid to the attendant must be divided between the time spent performing household and personal services and the time spent for nursing services. Free state tax return forms However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Free state tax return forms See Maintenance and personal care services under Qualified long-term care services, earlier. Free state tax return forms Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. Free state tax return forms See Child and Dependent Care Credit , later, and Publication 503, Child and Dependent Care Expenses. Free state tax return forms You can also include in medical expenses part of the amount you pay for that attendant's meals. Free state tax return forms Divide the food expense among the household members to find the cost of the attendant's food. Free state tax return forms Then divide that cost in the same manner as in the preceding paragraph. Free state tax return forms If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. Free state tax return forms This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant. Free state tax return forms Employment taxes. Free state tax return forms   You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for a nurse, attendant, or other person who provides medical care. Free state tax return forms If the attendant also provides personal and household services, you can include as a medical expense only the amount of employment taxes paid for medical services as explained earlier under Nursing Services. Free state tax return forms For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide. Free state tax return forms Transportation You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Free state tax return forms Car expenses. Free state tax return forms    You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. Free state tax return forms You cannot include depreciation, insurance, general repair, or maintenance expenses. Free state tax return forms   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents a mile. Free state tax return forms   You can also include parking fees and tolls. Free state tax return forms You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. Free state tax return forms You can also include:    Bus, taxi, train, or plane fares or ambulance service, and Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone. Free state tax return forms Do not include transportation expenses if, for purely personal reasons, you choose to travel to another city for an operation or other medical care prescribed by your doctor. Free state tax return forms Prev  Up  Next   Home   More Online Publications
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Tax Relief for Victims of Severe Storms, Tornadoes, Straight-line Winds and Flooding in Tennessee

AL/TN-2012-14TN, March 19, 2012

NASHVILLE — Victims of the severe storms, tornadoes, straight-line winds, and flooding that began on Feb. 29, 2012 in parts of Tennessee may qualify for tax relief from the Internal Revenue Service.

The President has declared Bradley, Claiborne, Cumberland, DeKalb, Hamilton, Jackson, McMinn, Monroe, Overton and Polk counties a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Feb. 29, and on or before May 31, have been postponed to May 31, 2012. This includes the April 17 deadline for filing 2011 individual income tax returns, making income tax payments and making 2011 contributions to an individual retirement account (IRA).  

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Feb. 29, and on or before March 15, as long as the deposits are made by March 15, 2012.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and are entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until May 31 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Feb. 29 and on or before May 31.

The IRS also gives affected taxpayers until May 31 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Feb. 29 and on or before May 31.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Feb. 29 and on or before March 15 provided the taxpayer makes these deposits by March 15.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “Tennessee/Severe Storms, Tornadoes, Straight-line Winds, and Flooding” at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, irs.gov, or order them by calling 800-TAX-FORM (800-829-3676). The IRS toll-free number for general tax questions is 800-829-1040.

Related Information

Page Last Reviewed or Updated: 03-Feb-2014

The Free State Tax Return Forms

Free state tax return forms 6. Free state tax return forms   Basis of Assets Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Cost BasisReal Property Allocating the Basis Uniform Capitalization Rules Adjusted BasisIncreases to Basis Decreases to Basis Basis Other Than CostTaxable Exchanges Involuntary Conversions Nontaxable Exchanges Property Received as a Gift Property Transferred From a Spouse Inherited Property Property Distributed From a Partnership or Corporation Introduction Your basis is the amount of your investment in property for tax purposes. Free state tax return forms Use basis to figure the gain or loss on the sale, exchange, or other disposition of property. Free state tax return forms Also use basis to figure depreciation, amortization, depletion, and casualty losses. Free state tax return forms If you use property for both business or investment purposes and for personal purposes, you must allocate the basis based on the use. Free state tax return forms Only the basis allocated to the business or investment use of the property can be depreciated. Free state tax return forms Your original basis in property is adjusted (increased or decreased) by certain events. Free state tax return forms For example, if you make improvements to the property, increase your basis. Free state tax return forms If you take deductions for depreciation, or casualty losses, or claim certain credits, reduce your basis. Free state tax return forms Keep accurate records of all items that affect the basis of your assets. Free state tax return forms For information on keeping records, see chapter 1. Free state tax return forms Topics - This chapter discusses: Cost basis Adjusted basis Basis other than cost Useful Items - You may want to see: Publication 535 Business Expenses 544 Sales and Other Dispositions of Assets 551 Basis of Assets 946 How To Depreciate Property See chapter 16 for information about getting publications and forms. Free state tax return forms Cost Basis The basis of property you buy is usually its cost. Free state tax return forms Cost is the amount you pay in cash, debt obligations, other property, or services. Free state tax return forms Your cost includes amounts you pay for sales tax, freight, installation, and testing. Free state tax return forms The basis of real estate and business assets will include other items, discussed later. Free state tax return forms Basis generally does not include interest payments. Free state tax return forms However, see Carrying charges and Capitalized interest in chapter 4 of Publication 535. Free state tax return forms You also may have to capitalize (add to basis) certain other costs related to buying or producing property. Free state tax return forms Under the uniform capitalization rules, discussed later, you may have to capitalize direct costs and certain indirect costs of producing property. Free state tax return forms Loans with low or no interest. Free state tax return forms   If you buy property on a time-payment plan that charges little or no interest, the basis of your property is your stated purchase price minus the amount considered to be unstated interest. Free state tax return forms You generally have unstated interest if your interest rate is less than the applicable federal rate. Free state tax return forms See the discussion of unstated interest in Publication 537, Installment Sales. Free state tax return forms Real Property Real property, also called real estate, is land and generally anything built on, growing on, or attached to land. Free state tax return forms If you buy real property, certain fees and other expenses you pay are part of your cost basis in the property. Free state tax return forms Some of these expenses are discussed next. Free state tax return forms Lump sum purchase. Free state tax return forms   If you buy improvements, such as buildings, and the land on which they stand for a lump sum, allocate your cost basis between the land and improvements. Free state tax return forms Allocate the cost basis according to the respective fair market values (FMVs) of the land and improvements at the time of purchase. Free state tax return forms Figure the basis of each asset by multiplying the lump sum by a fraction. Free state tax return forms The numerator is the FMV of that asset and the denominator is the FMV of the whole property at the time of purchase. Free state tax return forms Fair market value (FMV). Free state tax return forms   FMV is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Free state tax return forms Sales of similar property on or about the same date may help in figuring the FMV of the property. Free state tax return forms If you are not certain of the FMV of the land and improvements, you can allocate the basis according to their assessed values for real estate tax purposes. Free state tax return forms Real estate taxes. Free state tax return forms   If you pay the real estate taxes the seller owed on real property you bought, and the seller did not reimburse you, treat those taxes as part of your basis. Free state tax return forms   If you reimburse the seller for taxes the seller paid for you, you generally can deduct that amount as a tax expense. Free state tax return forms Whether or not you reimburse the seller, do not include that amount in the basis of your property. Free state tax return forms Settlement costs. Free state tax return forms   Your basis includes the settlement fees and closing costs for buying the property. Free state tax return forms See Publication 551 for a detailed list of items you can and cannot include in basis. Free state tax return forms   Do not include fees and costs for getting a loan on the property. Free state tax return forms Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Free state tax return forms Points. Free state tax return forms   If you pay points to get a loan (including a mortgage, second mortgage, or line-of-credit), do not add the points to the basis of the related property. Free state tax return forms You may be able to deduct the points currently or over the term of the loan. Free state tax return forms For more information about deducting points, see Points in chapter 4 of Publication 535. Free state tax return forms Assumption of a mortgage. Free state tax return forms   If you buy property and assume (or buy the property subject to) an existing mortgage, your basis includes the amount you pay for the property plus the amount you owe on the mortgage. Free state tax return forms Example. Free state tax return forms If you buy a farm for $100,000 cash and assume a mortgage of $400,000, your basis is $500,000. Free state tax return forms Constructing assets. Free state tax return forms   If you build property or have assets built for you, your expenses for this construction are part of your basis. Free state tax return forms Some of these expenses include the following costs: Land, Labor and materials, Architect's fees, Building permit charges, Payments to contractors, Payments for rental equipment, and Inspection fees. Free state tax return forms   In addition, if you use your own employees, farm materials, and equipment to build an asset, do not deduct the following expenses. Free state tax return forms You must capitalize them (include them in the asset's basis). Free state tax return forms Employee wages paid for the construction work, reduced by any employment credits allowed. Free state tax return forms Depreciation on equipment you own while it is used in the construction. Free state tax return forms Operating and maintenance costs for equipment used in the construction. Free state tax return forms The cost of business supplies and materials used in the construction. Free state tax return forms    Do not include the value of your own labor, or any other labor you did not pay for, in the basis of any property you construct. Free state tax return forms Allocating the Basis In some instances, the rules for determining basis apply to a group of assets acquired in the same transaction or to property that consists of separate items. Free state tax return forms To determine the basis of these assets or separate items, there must be an allocation of basis. Free state tax return forms Group of assets acquired. Free state tax return forms   If you buy multiple assets for a lump sum, allocate the amount you pay among the assets. Free state tax return forms Use this allocation to figure your basis for depreciation and gain or loss on a later disposition of any of these assets. Free state tax return forms You and the seller may agree in the sales contract to a specific allocation of the purchase price among the assets. Free state tax return forms If this allocation is based on the value of each asset and you and the seller have adverse tax interests, the allocation generally will be accepted. Free state tax return forms Farming business acquired. Free state tax return forms   If you buy a group of assets that makes up a farming business, there are special rules you must use to allocate the purchase price among the assets. Free state tax return forms Generally, reduce the purchase price by any cash received. Free state tax return forms Allocate the remaining purchase price to the other business assets received in proportion to (but not more than) their FMV and in a certain order. Free state tax return forms See Trade or Business Acquired under Allocating the Basis in Publication 551 for more information. Free state tax return forms Transplanted embryo. Free state tax return forms   If you buy a cow that is pregnant with a transplanted embryo, allocate to the basis of the cow the part of the purchase price equal to the FMV of the cow without the implant. Free state tax return forms Allocate the rest of the purchase price to the basis of the calf. Free state tax return forms Neither the cost allocated to the cow nor the cost allocated to the calf is deductible as a current business expense. Free state tax return forms Uniform Capitalization Rules Under the uniform capitalization rules, you must include certain direct and indirect costs in the basis of property you produce or in your inventory costs, rather than claim them as a current deduction. Free state tax return forms You recover these costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Free state tax return forms Generally, you are subject to the uniform capitalization rules if you do any of the following: Produce real or tangible personal property, or Acquire property for resale. Free state tax return forms However, this rule does not apply to personal property if your average annual gross receipts for the 3-tax-year period ending with the year preceding the current tax year are $10 million or less. Free state tax return forms You produce property if you construct, build, install, manufacture, develop, improve, or create the property. Free state tax return forms You are not subject to the uniform capitalization rules if the property is produced for personal use. Free state tax return forms In a farming business, you produce property if you raise or grow any agricultural or horticultural commodity, including plants and animals. Free state tax return forms Plants. Free state tax return forms   A plant produced in a farming business includes the following items: A fruit, nut, or other crop-bearing tree; An ornamental tree; A vine; A bush; Sod; and The crop or yield of a plant that will have more than one crop or yield. Free state tax return forms Animals. Free state tax return forms   An animal produced in a farming business includes any stock, poultry or other bird, and fish or other sea life. Free state tax return forms The direct and indirect costs of producing plants or animals include preparatory costs and preproductive period costs. Free state tax return forms Preparatory costs include the acquisition costs of the seed, seedling, plant, or animal. Free state tax return forms For plants, preproductive period costs include the costs of items such as irrigation, pruning, frost protection, spraying, and harvesting. Free state tax return forms For animals, preproductive period costs include the costs of items such as feed, maintaining pasture or pen areas, breeding, veterinary services, and bedding. Free state tax return forms Exceptions. Free state tax return forms   In a farming business, the uniform capitalization rules do not apply to: Any animal, Any plant with a preproductive period of 2 years or less, or Any costs of replanting certain plants lost or damaged due to casualty. Free state tax return forms   Exceptions (1) and (2) do not apply to a corporation, partnership, or tax shelter required to use an accrual method of accounting. Free state tax return forms See Accrual Method Required under Accounting Methods in chapter 2. Free state tax return forms   In addition, you can elect not to use the uniform capitalization rules for plants with a preproductive period of more than 2 years. Free state tax return forms If you make this election, special rules apply. Free state tax return forms This election cannot be made by a corporation, partnership, or tax shelter required to use an accrual method of accounting. Free state tax return forms This election also does not apply to any costs incurred for the planting, cultivation, maintenance, or development of any citrus or almond grove (or any part thereof) within the first 4 years the trees were planted. Free state tax return forms    If you elect not to use the uniform capitalization rules, you must use the alternative depreciation system for all property used in any of your farming businesses and placed in service in any tax year during which the election is in effect. Free state tax return forms See chapter 7, for additional information on depreciation. Free state tax return forms Example. Free state tax return forms You grow trees that have a preproductive period of more than 2 years. Free state tax return forms The trees produce an annual crop. Free state tax return forms You are an individual and the uniform capitalization rules apply to your farming business. Free state tax return forms You must capitalize the direct costs and an allocable part of indirect costs incurred due to the production of the trees. Free state tax return forms You are not required to capitalize the costs of producing the annual crop because its preproductive period is 2 years or less. Free state tax return forms Preproductive period of more than 2 years. Free state tax return forms   The preproductive period of plants grown in commercial quantities in the United States is based on their nationwide weighted average preproductive period. Free state tax return forms Plants producing the crops or yields shown in Table 6-1 have a nationwide weighted average preproductive period of more than 2 years. Free state tax return forms Other plants (not shown in Table 6-1) may also have a nationwide weighted average preproductive period of more than 2 years. Free state tax return forms More information. Free state tax return forms   For more information on the uniform capitalization rules that apply to property produced in a farming business, see Regulations section 1. Free state tax return forms 263A-4. Free state tax return forms Table 6-1. Free state tax return forms Plants With a Preproductive Period of More Than 2 Years Plants producing the following crops or yields have a nationwide weighted average preproductive period of more than 2 years. Free state tax return forms Almonds Apples Apricots Avocados Blueberries Cherries Chestnuts Coffee beans Currants Dates Figs Grapefruit Grapes Guavas Kiwifruit Kumquats Lemons Limes Macadamia nuts Mangoes Nectarines Olives Oranges Peaches Pears Pecans Persimmons Pistachio nuts Plums Pomegranates Prunes Tangelos Tangerines Tangors Walnuts Adjusted Basis Before figuring gain or loss on a sale, exchange, or other disposition of property or figuring allowable depreciation, depletion, or amortization, you must usually make certain adjustments to the cost basis or basis other than cost (discussed later) of the property. Free state tax return forms The adjustments to the original basis are increases or decreases to the cost basis or other basis which result in the adjusted basis of the property. Free state tax return forms Increases to Basis Increase the basis of any property by all items properly added to a capital account. Free state tax return forms These include the cost of any improvements having a useful life of more than 1 year. Free state tax return forms The following costs increase the basis of property. Free state tax return forms The cost of extending utility service lines to property. Free state tax return forms Legal fees, such as the cost of defending and perfecting title. Free state tax return forms Legal fees for seeking a decrease in an assessment levied against property to pay for local improvements. Free state tax return forms Assessments for items such as paving roads and building ditches that increase the value of the property assessed. Free state tax return forms Do not deduct these expenses as taxes. Free state tax return forms However, you can deduct as taxes amounts assessed for maintenance or repairs, or for meeting interest charges related to the improvements. Free state tax return forms If you make additions or improvements to business property, depreciate the basis of each addition or improvement as separate depreciable property using the rules that would apply to the original property if you had placed it in service at the same time you placed the addition or improvement in service. Free state tax return forms See chapter 7. Free state tax return forms Deducting vs. Free state tax return forms capitalizing costs. Free state tax return forms   Do not add to your basis costs you can deduct as current expenses. Free state tax return forms For example, amounts paid for incidental repairs or maintenance are deductible as business expenses and are not added to basis. Free state tax return forms However, you can elect either to deduct or to capitalize certain other costs. Free state tax return forms See chapter 7 in Publication 535. Free state tax return forms Decreases to Basis The following are some items that reduce the basis of property. Free state tax return forms Section 179 deduction. Free state tax return forms Deductions previously allowed or allowable for amortization, depreciation, and depletion. Free state tax return forms Alternative motor vehicle credit. Free state tax return forms See Form 8910. Free state tax return forms Alternative fuel vehicle refueling property credit. Free state tax return forms See Form 8911. Free state tax return forms Residential energy efficient property credits. Free state tax return forms See Form 5695. Free state tax return forms Investment credit (part or all) taken. Free state tax return forms Casualty and theft losses and insurance reimbursements. Free state tax return forms Payments you receive for granting an easement. Free state tax return forms Exclusion from income of subsidies for energy conservation measures. Free state tax return forms Certain canceled debt excluded from income. Free state tax return forms Rebates from a manufacturer or seller. Free state tax return forms Patronage dividends received from a cooperative association as a result of a purchase of property. Free state tax return forms See Patronage Dividends in chapter 3. Free state tax return forms Gas-guzzler tax. Free state tax return forms See Form 6197. Free state tax return forms Some of these items are discussed next. Free state tax return forms For a more detailed list of items that decrease basis, see section 1016 of the Internal Revenue Code and Publication 551. Free state tax return forms Depreciation and section 179 deduction. Free state tax return forms   The adjustments you must make to the basis of the property if you take the section 179 deduction or depreciate the property are explained next. Free state tax return forms For more information on these deductions, see chapter 7. Free state tax return forms Section 179 deduction. Free state tax return forms   If you take the section 179 expense deduction for all or part of the cost of qualifying business property, decrease the basis of the property by the deduction. Free state tax return forms Depreciation. Free state tax return forms   Decrease the basis of property by the depreciation you deducted or could have deducted on your tax returns under the method of depreciation you chose. Free state tax return forms If you took less depreciation than you could have under the method chosen, decrease the basis by the amount you could have taken under that method. Free state tax return forms If you did not take a depreciation deduction, reduce the basis by the full amount of the depreciation you could have taken. Free state tax return forms   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted plus the part of the excess depreciation you deducted that actually reduced your tax liability for any year. Free state tax return forms   See chapter 7 for information on figuring the depreciation you should have claimed. Free state tax return forms   In decreasing your basis for depreciation, take into account the amount deducted on your tax returns as depreciation and any depreciation you must capitalize under the uniform capitalization rules. Free state tax return forms Casualty and theft losses. Free state tax return forms   If you have a casualty or theft loss, decrease the basis of the property by any insurance or other reimbursement. Free state tax return forms Also, decrease it by any deductible loss not covered by insurance. Free state tax return forms See chapter 11 for information about figuring your casualty or theft loss. Free state tax return forms   You must increase your basis in the property by the amount you spend on clean-up costs (such as debris removal) and repairs that restore the property to its pre-casualty condition. Free state tax return forms To make this determination, compare the repaired property to the property before the casualty. Free state tax return forms Easements. Free state tax return forms   The amount you receive for granting an easement is usually considered to be proceeds from the sale of an interest in the real property. Free state tax return forms It reduces the basis of the affected part of the property. Free state tax return forms If the amount received is more than the basis of the part of the property affected by the easement, reduce your basis in that part to zero and treat the excess as a recognized gain. Free state tax return forms See Easements and rights-of-way in chapter 3. Free state tax return forms Exclusion from income of subsidies for energy conservation measures. Free state tax return forms   You can exclude from gross income any subsidy you received from a public utility company for the purchase or installation of an energy conservation measure for a dwelling unit. Free state tax return forms Reduce the basis of the property by the excluded amount. Free state tax return forms Canceled debt excluded from income. Free state tax return forms   If a debt you owe is canceled or forgiven, other than as a gift or bequest, you generally must include the canceled amount in your gross income for tax purposes. Free state tax return forms A debt includes any indebtedness for which you are liable or which attaches to property you hold. Free state tax return forms   You can exclude your canceled debt from income if the debt is any of the following. Free state tax return forms Debt canceled in a bankruptcy case or when you are insolvent. Free state tax return forms Qualified farm debt. Free state tax return forms Qualified real property business debt (provided you are not a C corporation). Free state tax return forms Qualified principal residence indebtedness. Free state tax return forms Discharge of certain indebtedness of a qualified individual because of Midwestern disasters. Free state tax return forms If you exclude canceled debt described in (1) or (2), you may have to reduce the basis of your depreciable and nondepreciable property. Free state tax return forms If you exclude canceled debt described in (3), you must only reduce the basis of your depreciable property by the excluded amount. Free state tax return forms   For more information about canceled debt in a bankruptcy case, see Publication 908, Bankruptcy Tax Guide. Free state tax return forms For more information about insolvency and canceled debt that is qualified farm debt or qualified principal residence indebtedness, see chapter 3. Free state tax return forms For more information about qualified real property business debt, see Publication 334, Tax Guide for Small Business. Free state tax return forms For more information about canceled debt in Midwestern disaster areas, see Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Areas. Free state tax return forms Basis Other Than Cost There are times when you cannot use cost as basis. Free state tax return forms In these situations, the fair market value or the adjusted basis of property may be used. Free state tax return forms Examples are discussed next. Free state tax return forms Property changed from personal to business or rental use. Free state tax return forms   When you hold property for personal use and then change it to business use or use it to produce rent, you must figure its basis for depreciation. Free state tax return forms An example of changing property from personal to business use would be changing the use of your pickup truck that you originally purchased for your personal use to use in your farming business. Free state tax return forms   The basis for depreciation is the lesser of: The FMV of the property on the date of the change, or Your adjusted basis on the date of the change. Free state tax return forms   If you later sell or dispose of this property, the basis you use will depend on whether you are figuring a gain or loss. Free state tax return forms The basis for figuring a gain is your adjusted basis in the property when you sell the property. Free state tax return forms Figure the basis for a loss starting with the smaller of your adjusted basis or the FMV of the property at the time of the change to business or rental use. Free state tax return forms Then make adjustments (increases and decreases) for the period after the change in the property's use, as discussed earlier under Adjusted Basis . Free state tax return forms Property received for services. Free state tax return forms   If you receive property for services, include the property's FMV in income. Free state tax return forms The amount you include in income becomes your basis. Free state tax return forms If the services were performed for a price agreed on beforehand, it will be accepted as the FMV of the property if there is no evidence to the contrary. Free state tax return forms Example. Free state tax return forms George Smith is an accountant and also operates a farming business. Free state tax return forms George agreed to do some accounting work for his neighbor in exchange for a dairy cow. Free state tax return forms The accounting work and the cow are each worth $1,500. Free state tax return forms George must include $1,500 in income for his accounting services. Free state tax return forms George's basis in the cow is $1,500. Free state tax return forms Taxable Exchanges A taxable exchange is one in which the gain is taxable, or the loss is deductible. Free state tax return forms A taxable gain or deductible loss also is known as a recognized gain or loss. Free state tax return forms A taxable exchange occurs when you receive cash or get property that is not similar or related in use to the property exchanged. Free state tax return forms If you receive property in exchange for other property in a taxable exchange, the basis of the property you receive is usually its FMV at the time of the exchange. Free state tax return forms Example. Free state tax return forms You trade a tract of farmland with an adjusted basis of $2,000 for a tractor that has an FMV of $6,000. Free state tax return forms You must report a taxable gain of $4,000 for the land. Free state tax return forms The tractor has a basis of $6,000. Free state tax return forms Involuntary Conversions If you receive property as a result of an involuntary conversion, such as a casualty, theft, or condemnation, figure the basis of the replacement property you receive using the basis of the converted property. Free state tax return forms Similar or related property. Free state tax return forms   If the replacement property is similar or related in service or use to the converted property, the replacement property's basis is the same as the old property's basis on the date of the conversion. Free state tax return forms However, make the following adjustments. Free state tax return forms Decrease the basis by the following amounts. Free state tax return forms Any loss you recognize on the involuntary conversion. Free state tax return forms Any money you receive that you do not spend on similar property. Free state tax return forms Increase the basis by the following amounts. Free state tax return forms Any gain you recognize on the involuntary conversion. Free state tax return forms Any cost of acquiring the replacement property. Free state tax return forms Money or property not similar or related. Free state tax return forms   If you receive money or property not similar or related in service or use to the converted property and you buy replacement property similar or related in service or use to the converted property, the basis of the replacement property is its cost decreased by the gain not recognized on the involuntary conversion. Free state tax return forms Allocating the basis. Free state tax return forms   If you buy more than one piece of replacement property, allocate your basis among the properties based on their respective costs. Free state tax return forms Basis for depreciation. Free state tax return forms   Special rules apply in determining and depreciating the basis of MACRS property acquired in an involuntary conversion. Free state tax return forms For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Free state tax return forms For more information about involuntary conversions, see chapter 11. Free state tax return forms Nontaxable Exchanges A nontaxable exchange is an exchange in which you are not taxed on any gain and you cannot deduct any loss. Free state tax return forms A nontaxable gain or loss also is known as an unrecognized gain or loss. Free state tax return forms If you receive property in a nontaxable exchange, its basis is usually the same as the basis of the property you transferred. Free state tax return forms Like-Kind Exchanges The exchange of property for the same kind of property is the most common type of nontaxable exchange. Free state tax return forms For an exchange to qualify as a like-kind exchange, you must hold for business or investment purposes both the property you transfer and the property you receive. Free state tax return forms There must also be an exchange of like-kind property. Free state tax return forms For more information, see Like-Kind Exchanges in  chapter 8. Free state tax return forms The basis of the property you receive generally is the same as the adjusted basis of the property you gave up. Free state tax return forms Example 1. Free state tax return forms You traded a truck you used in your farming business for a new smaller truck to use in farming. Free state tax return forms The adjusted basis of the old truck was $10,000. Free state tax return forms The FMV of the new truck is $30,000. Free state tax return forms Because this is a nontaxable exchange, you do not recognize any gain, and your basis in the new truck is $10,000, the same as the adjusted basis of the truck you traded. Free state tax return forms Example 2. Free state tax return forms You trade a field cultivator (adjusted basis of $8,000) for a planter (FMV of $9,000). Free state tax return forms You use both the field cultivator and the planter in your farming business. Free state tax return forms The basis of the planter you receive is $8,000, the same as the field cultivator traded Exchange expenses. Free state tax return forms   Exchange expenses generally are the closing costs that you pay. Free state tax return forms They include such items as brokerage commissions, attorney fees, and deed preparation fees. Free state tax return forms Add them to the basis of the like-kind property you receive. Free state tax return forms Property plus cash. Free state tax return forms   If you trade property in a like-kind exchange and also pay money, the basis of the property you receive is the adjusted basis of the property you gave up plus the money you paid. Free state tax return forms Example. Free state tax return forms You trade in a truck (adjusted basis of $3,000) for another truck (FMV of $7,500) and pay $4,000. Free state tax return forms Your basis in the new truck is $7,000 (the $3,000 adjusted basis of the old truck plus the $4,000 cash). Free state tax return forms Special rules for related persons. Free state tax return forms   If a like-kind exchange takes place directly or indirectly between related persons and either party disposes of the property within 2 years after the exchange, the exchange no longer qualifies for like-kind exchange treatment. Free state tax return forms Each person must report any gain or loss not recognized on the original exchange unless the loss is not deductible under the related party rules. Free state tax return forms Each person reports it on the tax return filed for the year in which the later disposition occurred. Free state tax return forms If this rule applies, the basis of the property received in the original exchange will be its FMV. Free state tax return forms For more information, see chapter 8. Free state tax return forms Exchange of business property. Free state tax return forms   Exchanging the property of one business for the property of another business generally is a multiple property exchange. Free state tax return forms For information on figuring basis, see Multiple Property Exchanges in chapter 1 of Publication 544. Free state tax return forms Basis for depreciation. Free state tax return forms   Special rules apply in determining and depreciating the basis of MACRS property acquired in a like-kind transaction. Free state tax return forms For information, see Figuring the Deduction for Property Acquired in a Nontaxable Exchange under Figuring Depreciation Under MACRS in chapter 7. Free state tax return forms Partially Nontaxable Exchanges A partially nontaxable exchange is an exchange in which you receive unlike property or money in addition to like-kind property. Free state tax return forms The basis of the property you receive is the same as the adjusted basis of the property you gave up with the following adjustments. Free state tax return forms Decrease the basis by the following amounts. Free state tax return forms Any money you receive. Free state tax return forms Any loss you recognize on the exchange. Free state tax return forms Increase the basis by the following amounts. Free state tax return forms Any additional costs you incur. Free state tax return forms Any gain you recognize on the exchange. Free state tax return forms If the other party to the exchange assumes your liabilities, treat the debt assumption as money you received in the exchange. Free state tax return forms Example 1. Free state tax return forms You trade farmland (basis of $100,000) for another tract of farmland (FMV of $110,000) and $30,000 cash. Free state tax return forms You realize a gain of $40,000. Free state tax return forms This is the FMV of the land received plus the cash minus the basis of the land you traded ($110,000 + $30,000 − $100,000). Free state tax return forms Include your gain in income (recognize gain) only to the extent of the cash received. Free state tax return forms Your basis in the land you received is figured as follows. Free state tax return forms Basis of land traded $100,000 Minus: Cash received (adjustment 1(a)) − 30,000   $70,000 Plus: Gain recognized (adjustment 2(b)) + 30,000 Basis of land received $100,000 Example 2. Free state tax return forms You trade a truck (adjusted basis of $22,750) for another truck (FMV of $20,000) and $10,000 cash. Free state tax return forms You realize a gain of $7,250. Free state tax return forms This is the FMV of the truck received plus the cash minus the adjusted basis of the truck you traded ($20,000 + $10,000 − $22,750). Free state tax return forms You include all the gain in your income (recognize gain) because the gain is less than the cash you received. Free state tax return forms Your basis in the truck you received is figured as follows. Free state tax return forms Adjusted basis of truck traded $22,750 Minus: Cash received (adjustment 1(a)) −10,000   $12,750 Plus: Gain recognized (adjustment 2(b)) + 7,250 Basis of truck received $20,000 Allocation of basis. Free state tax return forms   If you receive like-kind and unlike properties in the exchange, allocate the basis first to the unlike property, other than money, up to its FMV on the date of the exchange. Free state tax return forms The rest is the basis of the like-kind property. Free state tax return forms Example. Free state tax return forms You traded a tractor with an adjusted basis of $15,000 for another tractor that had an FMV of $12,500. Free state tax return forms You also received $1,000 cash and a truck that had an FMV of $3,000. Free state tax return forms The truck is unlike property. Free state tax return forms You realized a gain of $1,500. Free state tax return forms This is the FMV of the tractor received plus the FMV of the truck received plus the cash minus the adjusted basis of the tractor you traded ($12,500 + $3,000 + $1,000 − $15,000). Free state tax return forms You include in income (recognize) all $1,500 of the gain because it is less than the FMV of the unlike property plus the cash received. Free state tax return forms Your basis in the properties you received is figured as follows. Free state tax return forms Adjusted basis of old tractor $15,000 Minus: Cash received (adjustment 1(a)) − 1,000   $14,000 Plus: Gain recognized (adjustment 2(b)) + 1,500 Total basis of properties received $15,500 Allocate the total basis of $15,500 first to the unlike property—the truck ($3,000). Free state tax return forms This is the truck's FMV. Free state tax return forms The rest ($12,500) is the basis of the tractor. Free state tax return forms Sale and Purchase If you sell property and buy similar property in two mutually dependent transactions, you may have to treat the sale and purchase as a single nontaxable exchange. Free state tax return forms Example. Free state tax return forms You used a tractor on your farm for 3 years. Free state tax return forms Its adjusted basis is $22,000 and its FMV is $40,000. Free state tax return forms You are interested in a new tractor, which sells for $60,000. Free state tax return forms Ordinarily, you would trade your old tractor for the new one and pay the dealer $20,000. Free state tax return forms Your basis for depreciating the new tractor would then be $42,000 ($20,000 + $22,000, the adjusted basis of your old tractor). Free state tax return forms However, you want a higher basis for depreciating the new tractor, so you agree to pay the dealer $60,000 for the new tractor if he will pay you $40,000 for your old tractor. Free state tax return forms Because the two transactions are dependent on each other, you are treated as having exchanged your old tractor for the new one and paid $20,000 ($60,000 − $40,000). Free state tax return forms Your basis for depreciating the new tractor is $42,000, the same as if you traded the old tractor. Free state tax return forms Property Received as a Gift To figure the basis of property you receive as a gift, you must know its adjusted basis (defined earlier) to the donor just before it was given to you. Free state tax return forms You also must know its FMV at the time it was given to you and any gift tax paid on it. Free state tax return forms FMV equal to or greater than donor's adjusted basis. Free state tax return forms   If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis when you received the gift. Free state tax return forms Increase your basis by all or part of any gift tax paid, depending on the date of the gift. Free state tax return forms   Also, for figuring gain or loss from a sale or other disposition of the property, or for figuring depreciation, depletion, or amortization deductions on business property, you must increase or decrease your basis (the donor's adjusted basis) by any required adjustments to basis while you held the property. Free state tax return forms See Adjusted Basis , earlier. Free state tax return forms   If you received a gift during the tax year, increase your basis in the gift (the donor's adjusted basis) by the part of the gift tax paid on it due to the net increase in value of the gift. Free state tax return forms Figure the increase by multiplying the gift tax paid by the following fraction. Free state tax return forms Net increase in value of the gift Amount of the gift   The net increase in value of the gift is the FMV of the gift minus the donor's adjusted basis. Free state tax return forms The amount of the gift is its value for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Free state tax return forms Example. Free state tax return forms In 2013, you received a gift of property from your mother that had an FMV of $50,000. Free state tax return forms Her adjusted basis was $20,000. Free state tax return forms The amount of the gift for gift tax purposes was $36,000 ($50,000 minus the $14,000 annual exclusion). Free state tax return forms She paid a gift tax of $7,320. Free state tax return forms Your basis, $26,076, is figured as follows. Free state tax return forms Fair market value $50,000 Minus: Adjusted basis −20,000 Net increase in value $30,000 Gift tax paid $7,320 Multiplied by ($30,000 ÷ $36,000) × . Free state tax return forms 83 Gift tax due to net increase in value $6,076 Adjusted basis of property to your mother +20,000 Your basis in the property $26,076 Note. Free state tax return forms If you received a gift before 1977, your basis in the gift (the donor's adjusted basis) includes any gift tax paid on it. Free state tax return forms However, your basis cannot exceed the FMV of the gift when it was given to you. Free state tax return forms FMV less than donor's adjusted basis. Free state tax return forms   If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Free state tax return forms Your basis for figuring gain is the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Free state tax return forms Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property. Free state tax return forms (See Adjusted Basis , earlier. Free state tax return forms )   If you use the donor's adjusted basis for figuring a gain and get a loss, and then use the FMV for figuring a loss and get a gain, you have neither gain nor loss on the sale or other disposition of the property. Free state tax return forms Example. Free state tax return forms You received farmland as a gift from your parents when they retired from farming. Free state tax return forms At the time of the gift, the land had an FMV of $80,000. Free state tax return forms Your parents' adjusted basis was $100,000. Free state tax return forms After you received the land, no events occurred that would increase or decrease your basis. Free state tax return forms If you sell the land for $120,000, you will have a $20,000 gain because you must use the donor's adjusted basis at the time of the gift ($100,000) as your basis to figure a gain. Free state tax return forms If you sell the land for $70,000, you will have a $10,000 loss because you must use the FMV at the time of the gift ($80,000) as your basis to figure a loss. Free state tax return forms If the sales price is between $80,000 and $100,000, you have neither gain nor loss. Free state tax return forms For instance, if the sales price was $90,000 and you tried to figure a gain using the donor's adjusted basis ($100,000), you would get a $10,000 loss. Free state tax return forms If you then tried to figure a loss using the FMV ($80,000), you would get a $10,000 gain. Free state tax return forms Business property. Free state tax return forms   If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property. Free state tax return forms Property Transferred From a Spouse The basis of property transferred to you or transferred in trust for your benefit by your spouse is the same as your spouse's adjusted basis. Free state tax return forms The same rule applies to a transfer by your former spouse if the transfer is incident to divorce. Free state tax return forms However, for property transferred in trust, adjust your basis for any gain recognized by your spouse or former spouse if the liabilities assumed plus the liabilities to which the property is subject are more than the adjusted basis of the property transferred. Free state tax return forms The transferor must give you the records needed to determine the adjusted basis and holding period of the property as of the date of the transfer. Free state tax return forms For more information, see Property Settlements in Publication 504, Divorced or Separated Individuals. Free state tax return forms Inherited Property Your basis in property you inherited from a decedent, who died before January 1, 2010, or after December 31, 2010, is generally one of the following: The FMV of the property at the date of the decedent's death. Free state tax return forms If a federal estate return is filed, you can use its appraised value. Free state tax return forms The FMV on the alternate valuation date, if the personal representative for the estate elects to use alternate valuation. Free state tax return forms For information on the alternate valuation, see the Instructions for Form 706. Free state tax return forms The decedent's adjusted basis in land to the extent of the value that is excluded from the decedent's taxable estate as a qualified conservation easement. Free state tax return forms If a federal estate tax return does not have to be filed, your basis in the inherited property is its appraised value at the date of death for state inheritance or transmission taxes. Free state tax return forms Special-use valuation method. Free state tax return forms   Under certain conditions, when a person dies, the executor or personal representative of that person's estate may elect to value qualified real property at other than its FMV. Free state tax return forms If so, the executor or personal representative values the qualified real property based on its use as a farm or other closely held business. Free state tax return forms If the executor or personal representative elects this method of valuation for estate tax purposes, this value is the basis of the property for the qualified heirs. Free state tax return forms The qualified heirs should be able to get the necessary value from the executor or personal representative of the estate. Free state tax return forms   If you are a qualified heir who received special-use valuation property, increase your basis by any gain recognized by the estate or trust because of post-death appreciation. Free state tax return forms Post-death appreciation is the property's FMV on the date of distribution minus the property's FMV either on the date of the individual's death or on the alternate valuation date. Free state tax return forms Figure all FMVs without regard to the special-use valuation. Free state tax return forms   You may be liable for an additional estate tax if, within 10 years after the death of the decedent, you transfer the property or the property stops being used as a farm. Free state tax return forms This tax does not apply if you dispose of the property in a like-kind exchange or in an involuntary conversion in which all of the proceeds are reinvested in qualified replacement property. Free state tax return forms The tax also does not apply if you transfer the property to a member of your family and certain requirements are met. Free state tax return forms   You can elect to increase your basis in special-use valuation property if it becomes subject to the additional estate tax. Free state tax return forms To increase your basis, you must make an irrevocable election and pay interest on the additional estate tax figured from the date 9 months after the decedent's death until the date of payment of the additional estate tax. Free state tax return forms If you meet these requirements, increase your basis in the property to its FMV on the date of the decedent's death or the alternate valuation date. Free state tax return forms The increase in your basis is considered to have occurred immediately before the event that resulted in the additional estate tax. Free state tax return forms   You make the election by filing, with Form 706-A, United States Additional Estate Tax Return, a statement that: Contains your (and the estate's) name, address, and taxpayer identification number; Identifies the election as an election under section 1016(c) of the Internal Revenue Code; Specifies the property for which you are making the election; and Provides any additional information required by the Form 706-A instructions. Free state tax return forms   For more information, see Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, Form 706-A, and the related instructions. Free state tax return forms Property inherited from a decedent who died in 2010. Free state tax return forms   If you inherited property from a decedent who died in 2010, different rules may apply. Free state tax return forms See Publication 4895, Tax Treatment of Property Acquired From a Decendent Dying in 2010, for details. Free state tax return forms Property Distributed From a Partnership or Corporation The following rules apply to determine a partner's basis and a shareholder's basis in property distributed respectively from a partnership to the partner with respect to the partner's interest in the partnership and from a corporation to the shareholder with respect to the shareholder's ownership of stock in the corporation. Free state tax return forms Partner's basis. Free state tax return forms   Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed by a partnership to the partner is its adjusted basis to the partnership immediately before the distribution. Free state tax return forms However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. Free state tax return forms For more information, see Partner's Basis for Distributed Property in Publication 541, Partnerships. Free state tax return forms Shareholder's basis. Free state tax return forms   The basis of property distributed by a corporation to a shareholder is its fair market value. Free state tax return forms For more information about corporate distributions, see Distributions to Shareholders in Publication 542, Corporations. Free state tax return forms Prev  Up  Next   Home   More Online Publications