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Free Tax Act 2012

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Free Tax Act 2012

Free tax act 2012 Publication 17(SP) - Introductory Material Table of Contents Qué Hay de Nuevo Recordatorios IntroductionIconos. Free tax act 2012 Para pedir formularios y publicaciones. Free tax act 2012 Preguntas sobre los impuestos. Free tax act 2012 Todo material en esta publicación puede ser reimpreso gratuitamente. Free tax act 2012 Una referencia a El Impuesto Federal sobre los Ingresos (2013) sería apropiada. Free tax act 2012 Las explicaciones y ejemplos en esta publicación representan la interpretación del Servicio de Impuestos Internos (IRS, por sus siglas en inglés) con respecto a: Leyes tributarias promulgadas por el Congreso de los Estados Unidos, Reglamentos del Departamento del Tesoro de los Estados Unidos y Decisiones de los tribunales. Free tax act 2012 Sin embargo, la información provista no abarca cada situación y no se presenta con la intención de reemplazar la ley o cambiar su significado. Free tax act 2012 Esta publicación abarca ciertos temas sobre los cuales un tribunal puede haber dictado un fallo más favorable para los contribuyentes que la interpretación hecha por el IRS. Free tax act 2012 Hasta que estas interpretaciones divergentes sean resueltas por fallos o decretos de un tribunal superior o de alguna otra manera, esta publicación continuará presentando las interpretaciones hechas por el IRS. Free tax act 2012 Todos los contribuyentes tienen derechos importantes cuando tratan con el IRS. Free tax act 2012 Estos derechos están descritos en la sección titulada Derechos del Contribuyente , al final de esta publicación. Free tax act 2012 Qué Hay de Nuevo Esta sección resume ciertos cambios tributarios importantes que entraron en vigor en el año 2013. Free tax act 2012 La mayor parte de estos cambios se abordan en más detalle en esta publicación. Free tax act 2012 Acontecimientos futuros. Free tax act 2012  Si desea obtener la información más reciente sobre temas de ley tributaria que se explican en esta publicación, incluyendo toda información sobre legislación tributaria, acceda a www. Free tax act 2012 irs. Free tax act 2012 gov/pub17sp. Free tax act 2012 Impuesto Adicional del Medicare. Free tax act 2012  Comenzando en el año 2013, le corresponderá un Impuesto Adicional del Medicare de 0. Free tax act 2012 9% sobre los salarios, la compensación por jubilación ferroviaria (RRTA, por sus siglas en inglés) y el ingreso sobre el trabajo por cuenta propia que están sujetos al impuesto al Medicare. Free tax act 2012 El impuesto corresponde si estos ingresos son mayores que: $125,000, si es casado que presenta una declaración por separado, $250,000, si es casado que presenta una declaración conjunta o $200,000, si presenta la declaración utilizando cualquier otro estado civil para efectos de la declaración. Free tax act 2012 Si desea más información, vea el Formulario 8959 y sus Instrucciones, disponibles en inglés. Free tax act 2012 Impuesto sobre los ingresos netos de inversión. Free tax act 2012  Comenzando en el año 2013, usted podría estar sujeto al impuesto sobre los ingresos netos de inversión (NIIT, por sus siglas en inglés). Free tax act 2012 Este impuesto es el 3. Free tax act 2012 8% de la cantidad menor entre (a) su ingreso neto de inversión o (b) la cantidad en exceso de su ingreso bruto ajustado modificado sobre: $125,000, si es casado que presenta una declaración por separado, $250,000, si es casado que presenta una declaración conjunta o si es viudo calificado o $200,000, si presenta la declaración utilizando cualquier otro estado civil para efectos de la declaración. Free tax act 2012 Si desea más información, vea el Formulario 8960 y sus Instrucciones, disponibles en inglés. Free tax act 2012 Cambio en las tasas tributarias. Free tax act 2012  La tasa tributaria mayor es de 39. Free tax act 2012 6%. Free tax act 2012 Si desea más información, vea la Hoja de Trabajo para el Cálculo del Impuesto del Año 2013 o las Tasas Impositivas de 2013 , las cuales se encuentran al final de esta publicación. Free tax act 2012 Tasa tributaria sobre las ganancias netas de capital y dividendos calificados. Free tax act 2012  La tasa tributaria máxima de 15% sobre las ganancias netas de capital y los dividendos calificados ha aumentado a 20% para algunos contribuyentes. Free tax act 2012 Vea el capítulo 16 . Free tax act 2012 Gastos médicos y dentales. Free tax act 2012  Usted puede deducir solamente la parte de sus gastos médicos y dentales que sea mayor que el 10% de su ingreso bruto ajustado (7. Free tax act 2012 5% si usted o su cónyuge tiene 65 años de edad o más). Free tax act 2012 Vea el capítulo 21 . Free tax act 2012 Aumento de la cantidad de la exención personal para determinados contribuyentes. Free tax act 2012  La exención personal que le corresponde a usted ha aumentado a $3,900. Free tax act 2012 Pero, esta cantidad se reduce si su ingreso bruto ajustado es mayor que: $150,000, si es casado que presenta una declaración por separado, $250,000, si es soltero, $275,000, si es cabeza de familia o $300,000, si presenta la declaración utilizando cualquier otro estado civil para efectos de la declaración. Free tax act 2012 Vea el capítulo 3 . Free tax act 2012 Límite sobre las deducciones detalladas. Free tax act 2012  Usted puede que no tenga derecho de deducir todas sus deducciones detalladas si su ingreso bruto ajustado es mayor que: $150,000, si es casado que presenta una declaración por separado, $250,000, si es soltero, $275,000, si es cabeza de familia o $300,000, si presenta la declaración utilizando cualquier otro estado civil para efectos de la declaración. Free tax act 2012 Vea el capítulo 29 . Free tax act 2012 Matrimonio entre el mismo sexo. Free tax act 2012  Si tiene un cónyuge de su mismo sexo con quien usted se casó en un estado (o jurisdicción o país extranjero) que reconoce el matrimonio entre personas del mismo sexo, usted y su cónyuge tienen que utilizar el estado civil para efectos de la declaración de casados que presentan una declaración conjunta o casado que presenta la declaración por separado en su declaración del año 2013. Free tax act 2012 Utilice uno de estos estados civiles para efectos de la declaración aunque usted y su cónyuge en la actualidad vivan en un estado (o jurisdicción o país extranjero) en donde no se reconozca el matrimonio entre personas del mismo sexo. Free tax act 2012 Vea el capítulo 2 . Free tax act 2012 Si reúne ciertos requisitos, quizás podría presentar declaraciones enmendadas para cambiar su estado civil para efectos de la declaración para algunos años anteriores. Free tax act 2012 Si desea saber más detalles sobre declaraciones enmendadas, vea el capítulo 1 . Free tax act 2012 Cuenta flexible de ahorros para gastos médicos (FSA, por sus siglas en inglés). Free tax act 2012  Comenzando con los años del plan después de 2012, usted no puede hacer aportaciones mediante la reducción de salarios mayores de $2,500 a cuentas flexibles de ahorros para gastos médicos (FSA, por sus siglas en inglés). Free tax act 2012 Vea el capítulo 5 . Free tax act 2012 Créditos tributarios que vencen. Free tax act 2012  El crédito por vehículo eléctrico enchufable y la parte reembolsable del crédito del impuesto mínimo de años anteriores ha vencido. Free tax act 2012 Usted no puede reclamar ninguno de éstos en su declaración del año 2013. Free tax act 2012 Vea el capítulo 37 . Free tax act 2012 Esquemas de inversión de tipo Ponzi. Free tax act 2012  Hay nuevas reglas sobre cómo reclamar una deducción en el Formulario 4684, en inglés, debido a una pérdida por robo por un esquema de inversión de tipo Ponzi. Free tax act 2012 Vea el capítulo 25 . Free tax act 2012 Método simplificado para la deducción por oficina en el hogar. Free tax act 2012  Si usted puede tomar una deducción por tener una oficina en su hogar, quizás pueda utilizar un método simplificado para calcular dicha deducción. Free tax act 2012 Vea la Publicación 587, disponible en inglés. Free tax act 2012 Tarifas estándar por milla. Free tax act 2012  Para 2013, la tarifa estándar por milla permitida por el costo de operar su automóvil para uso comercial ha aumentado a 56½ centavos por milla. Free tax act 2012 Vea el capítulo 26 . Free tax act 2012 Para 2013, la tarifa estándar por milla permitida por el costo de operar su automóvil por razones médicas ha aumentado a 24 centavos por milla. Free tax act 2012 Vea el capítulo 21 . Free tax act 2012 Para 2013, la tarifa estándar por milla permitida por el costo de operar su automóvil para determinar los gastos de mudanza ha aumentado a 24 centavos por milla. Free tax act 2012 Vea la Publicación 521, Moving Expenses (Gastos de mudanza), en inglés. Free tax act 2012 Recordatorios A continuación aparecen recordatorios importantes y otros asuntos que le podrían ayudar a presentar su declaración de impuestos del año 2013. Free tax act 2012 Muchos de estos asuntos se explican más adelante en esta publicación. Free tax act 2012 Anote su número de Seguro Social (SSN, por sus siglas en inglés) en la declaración. Free tax act 2012  Anote su número de Seguro Social (SSN, por sus siglas en inglés) en el espacio correspondiente de la declaración de impuestos. Free tax act 2012 Si presentó una declaración conjunta de impuestos en el año 2012 y presenta una declaración conjunta en el año 2013 con el mismo cónyuge, escriba los nombres y números de Seguro Social en el mismo orden en que lo hizo en el año 2012. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Proteja su documentación tributaria contra el robo de identidad. Free tax act 2012  El robo de identidad ocurre cuando otra persona usa la información personal de usted sin su autorización para cometer fraude u otros delitos. Free tax act 2012 Dicha información personal podría ser su nombre, número de Seguro Social (SSN, por sus siglas en inglés) u otra información de identificación. Free tax act 2012 Un ladrón de identidad puede usar su SSN para obtener un empleo o puede presentar una declaración de impuestos usando su SSN robado para recibir un reembolso. Free tax act 2012 Si desea más información sobre el robo de identidad e información sobre cómo reducir su riesgo al robo de identidad, vea el capítulo 1 . Free tax act 2012 Números de identificación del contribuyente. Free tax act 2012  Tiene que proveer el número de identificación del contribuyente de cada persona por la cual reclama ciertos beneficios tributarios. Free tax act 2012 Este requisito se aplica aun en el caso en que la persona haya nacido en el año 2013. Free tax act 2012 Por lo general, este número es el número de Seguro Social de la persona. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Ingreso de fuentes en el extranjero. Free tax act 2012  Si es ciudadano de los Estados Unidos con ingresos provenientes de fuentes en el extranjero (ingresos del extranjero), tiene que declarar todos estos ingresos en su declaración de impuestos, a menos que estén exentos conforme a las leyes estadounidenses. Free tax act 2012 Esto es cierto tanto si vive dentro como fuera de los Estados Unidos e independientemente de si recibe o no un Formulario W-2 ó 1099 del pagador extranjero. Free tax act 2012 Esto corresponde al ingreso del trabajo (como salarios y propinas) y también al ingreso no derivado del trabajo (como intereses, dividendos, ganancias de capital, pensiones, alquileres y regalías). Free tax act 2012 Si reside fuera de los Estados Unidos, es posible que pueda excluir la totalidad o parte de su ingreso del trabajo procedente de fuentes en el extranjero. Free tax act 2012 Para más detalles, vea la Publicación 54, Tax Guide for U. Free tax act 2012 S. Free tax act 2012 Citizens and Resident Aliens Abroad (Guía tributaria para ciudadanos y residentes estadounidenses en el extranjero), en inglés. Free tax act 2012 Activos financieros extranjeros. Free tax act 2012  Si tuvo activos financieros extranjeros en el 2013, es posible que tenga que presentar el nuevo Formulario 8938 con su declaración. Free tax act 2012 Vea www. Free tax act 2012 IRS. Free tax act 2012 gov/form8938, en inglés, para más detalles. Free tax act 2012 Prórroga automática de 6 meses para presentar la declaración de impuestos. Free tax act 2012  Puede usar el Formulario 4868(SP), Solicitud de Prórroga Automática para Presentar la Declaración del Impuesto sobre el Ingreso Personal de los Estados Unidos (o el Formulario 4868, en inglés), para obtener una prórroga automática de 6 meses para presentar su declaración de impuestos. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Incluya su número de teléfono en la declaración. Free tax act 2012  Para resolver rápidamente cualquier pregunta que necesitemos hacerle para tramitar su declaración, nos gustaría poder llamarlo. Free tax act 2012 Anote el número de teléfono donde podamos llamarlo durante el día, al lado del espacio donde firma la declaración de impuestos y donde aparece su ocupación. Free tax act 2012 Si usted presenta una declaración conjunta, puede anotar el número de teléfono suyo o el de su cónyuge. Free tax act 2012 Pago de los impuestos. Free tax act 2012   Puede pagar sus impuestos a través de la Internet, a través del teléfono o por medio de cheque o giro. Free tax act 2012 Puede efectuar una transferencia directa de su cuenta bancaria o utilizar una tarjeta de crédito o débito. Free tax act 2012 Si presenta su declaración electrónicamente (por medio de e-file), puede programar un pago electrónico. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Maneras más rápidas de presentar su declaración. Free tax act 2012  El IRS ofrece maneras rápidas y fiables de presentar la información tributaria sin tener que presentar una declaración en papel. Free tax act 2012 Puede usar el sistema electrónico e-file del IRS para presentar su declaración de impuestos. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Presentación electrónica gratuita de la declaración. Free tax act 2012  Usted quizás pueda presentar su declaración de impuestos del año 2013 por Internet sin pagar cargo alguno. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Cambio de dirección. Free tax act 2012  Si cambia de dirección, debe notificarle al IRS. Free tax act 2012 Vea el tema titulado Cambio de Dirección , en el capítulo 1. Free tax act 2012 Reembolsos de una declaración presentada fuera de plazo. Free tax act 2012  Si a usted se le debe un reembolso pero no presentó una declaración, por lo general tendrá que presentar su declaración dentro de 3 años a partir de la fecha en que la declaración venció (incluidas prórrogas) para obtener ese reembolso. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Declaraciones de impuestos frívolas. Free tax act 2012  El IRS ha publicado una lista de posturas identificadas como frívolas. Free tax act 2012 La multa por presentar una declaración de impuestos frívola es de $5,000. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Reclamación errónea de reembolso o crédito. Free tax act 2012  Quizás tenga que pagar una multa si reclama erróneamente un reembolso o crédito. Free tax act 2012 Vea el capítulo 1 . Free tax act 2012 Información sobre la Ley de Confidencialidad de Información y la Ley de Reducción de Trámites. Free tax act 2012   La IRS Restructuring and Reform Act of 1998 (Ley de Reestructuración y Reforma del Servicio de Impuestos Internos de 1998), la Privacy Act of 1974 (Ley de Confidencialidad de Información de 1974) y la Paperwork Reduction Act of 1980 (Ley de Reducción de Trámites de 1980) requieren que, cuando le solicitemos información, le informemos primero sobre cuál es nuestro derecho legal para solicitar esa información, por qué la estamos solicitando, cómo se usará la información, qué podría suceder si no la recibimos y si su respuesta es voluntaria, necesaria para obtener un beneficio u obligatoria conforme a la ley. Free tax act 2012 Una explicación completa sobre este tema puede encontrarse en las instrucciones de los formularios. Free tax act 2012 Servicio a los contribuyentes. Free tax act 2012  Puede hacer una cita para recibir ayuda en persona en el Centro de Ayuda al Contribuyente más conveniente en el día laborable que más le convenga. Free tax act 2012 Vea el tema titulado Cómo Obtener Ayuda con los Impuestos , al final de esta publicación. Free tax act 2012 Mandato para preparadores de impuestos sobre el sistema e-file. Free tax act 2012  La mayoría de los preparadores de impuestos remunerados que preparan y presentan declaraciones tienen que presentar electrónicamente por medio del sistema e-file. Free tax act 2012 Puede ser que su preparador le comunique sobre este requisito y las opciones que están a disposición suya. Free tax act 2012 Inspector General del Tesoro para la Administración Tributaria. Free tax act 2012   Si desea denunciar confidencialmente la mala conducta, ineficacia, el fraude o abuso cometido por un empleado del IRS, puede llamar al 1-800-366-4484 (1-800-877-8339 para personas sordas, con limitación auditiva o que tienen impedimentos del habla, y que usen equipo TTY/TDD). Free tax act 2012 Puede mantenerse anónimo. Free tax act 2012 Fotografías de niños desaparecidos. Free tax act 2012  El IRS se enorgullece en colaborar con el National Center for Missing and Exploited Children (Centro Nacional de Búsqueda de Niños Desaparecidos y Explotados). Free tax act 2012 Las fotografías de niños desaparecidos que han sido seleccionadas por el Centro pueden aparacer en esta publicación en páginas que de otra manera estarían en blanco. Free tax act 2012 Usted puede ayudar a que estos niños regresen a sus hogares mirando sus fotografías y llamando al número gratuito 1-800-THE-LOST (1-800-843-5678) si reconoce a un niño. Free tax act 2012 Introduction Esta publicación abarca las reglas generales para la presentación de una declaración federal de impuestos sobre el ingreso. Free tax act 2012 La publicación complementa la información contenida en las instrucciones para el formulario de impuestos. Free tax act 2012 Igualmente explica las leyes tributarias para asegurar que usted pague sólo los impuestos que adeuda y nada más. Free tax act 2012 Cómo está organizada esta publicación. Free tax act 2012   Esta publicación sigue de cerca el Formulario 1040, U. Free tax act 2012 S. Free tax act 2012 Individual Income Tax Return (Declaración de impuestos de los Estados Unidos sobre los ingresos personales), disponible en inglés. Free tax act 2012 Está dividida en seis partes que abarcan distintas secciones del Formulario 1040. Free tax act 2012 Cada parte está subdividida en capítulos que normalmente explican una línea del formulario. Free tax act 2012 No se preocupe si presenta el Formulario 1040A o el Formulario 1040EZ. Free tax act 2012 Todo lo que está incluido en una línea de cualquiera de ambos formularios se incluye también en el Formulario 1040. Free tax act 2012   La tabla de contenido que aparece al comienzo de esta publicación y el índice que aparece al final le servirán de utilidad para encontrar la información que necesite. Free tax act 2012 Qué se incluye en esta publicación. Free tax act 2012   Esta publicación comienza con las reglas para la presentación de una declaración de impuestos. Free tax act 2012 La publicación explica: Quién tiene que presentar una declaración, Qué formulario se debe utilizar para declarar los impuestos, Cuándo es la fecha de vencimiento de la declaración, Cómo presentar su declaración usando el sistema electrónico e-file y Otra información general. Free tax act 2012 Esta publicación le ayudará a identificar el estado civil para propósitos de la declaración al cual tiene derecho. Free tax act 2012 Del mismo modo, le ayudará a determinar si puede reclamar algún dependiente y si los ingresos que recibe están sujetos a impuestos. Free tax act 2012 La publicación también explica la deducción estándar, las clases de gastos que quizás pueda deducir y varios créditos que quizás pueda tomar para reducir sus impuestos. Free tax act 2012   A lo largo de la publicación, hay ejemplos que muestran cómo se aplican las leyes tributarias en situaciones típicas. Free tax act 2012 También hay organigramas y tablas en la publicación que presentan información tributaria en una manera fácil de entender. Free tax act 2012   Muchos de los temas que se tratan en esta publicación son explicados en mayor detalle en otras publicaciones del IRS. Free tax act 2012 Se hace referencia a dichas publicaciones y se indica si están disponibles en español o en inglés. Free tax act 2012 Iconos. Free tax act 2012   En la publicación se utilizan pequeños símbolos gráficos, o sea iconos, para llamar su atención a información especial. Free tax act 2012 Vea la Tabla 1 , más adelante, para una explicación de cada icono usado en esta publicación. Free tax act 2012 Qué no se incluye en esta publicación. Free tax act 2012   Algunos materiales que le podrían ser útiles no se incluyen en esta publicación pero pueden encontrarse en el folleto de instrucciones del formulario de impuestos. Free tax act 2012 Esto incluye listas que identifican lo siguiente: Dónde declarar ciertas partidas que aparecen en documentos informativos y Temas tributarios grabados (temas TeleTax). Free tax act 2012   Si opera su propio negocio o si tiene otros ingresos del trabajo por cuenta propia, tales como del cuidado de niños o la venta de artesanía, vea las siguientes publicaciones para más información: Publicación 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) (Guía tributaria para pequeños negocios (para personas que usen el Anexo C o C-EZ)), en inglés. Free tax act 2012 Publicación 535, Business Expenses (Gastos de negocios), en inglés. Free tax act 2012 Publicación 587, Business Use of Your Home (Including Use by Daycare Providers) (Uso comercial de su vivienda (incluyendo el uso por proveedores del cuidado de niños)), en inglés. Free tax act 2012 Ayuda del IRS. Free tax act 2012   Existen muchas maneras en que puede obtener ayuda del IRS. Free tax act 2012 Éstas se explican bajo el tema titulado Cómo Obtener Ayuda con los Impuestos , al final de esta publicación. Free tax act 2012 Comentarios y sugerencias. Free tax act 2012   Agradeceremos sus comentarios acerca de esta publicación, así como sus sugerencias para ediciones futuras. Free tax act 2012   Puede enviar sus comentarios a la dirección siguiente:  Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free tax act 2012 NW, IR-6526 Washington, DC 20224   Contestamos muchas cartas por teléfono. Free tax act 2012 Por lo tanto, sería útil que incluyera en la correspondencia su número de teléfono, con el código de área, en donde nos podamos comunicar con usted durante el día. Free tax act 2012   Usted nos puede enviar comentarios desde la página web www. Free tax act 2012 irs. Free tax act 2012 gov/formspubs, en inglés, seleccionando Comment on Tax Forms and Publications (Enviar comentarios sobre los formularios y publicaciones de impuestos), bajo la sección More Information (Información adicional). Free tax act 2012   Aunque no le podemos contestar individualmente, agradecemos sus comentarios y sugerencias y los tendremos en cuenta para ediciones futuras de nuestros productos tributarios. Free tax act 2012 Para pedir formularios y publicaciones. Free tax act 2012   Visite www. Free tax act 2012 irs. Free tax act 2012 gov/formspubs para descargar formularios y publicaciones, llame al 1-800-829-3676 para pedir formularios y publicaciones o escriba a la dirección indicada a continuación y recibirá una respuesta dentro de 10 días después de que nosotros recibamos su solicitud. Free tax act 2012  Internal Revenue Service 1201 N. Free tax act 2012 Mitsubishi Motorway Bloomington, IL 61705-6613 Preguntas sobre los impuestos. Free tax act 2012   Si tiene una pregunta sobre los impuestos, verifique la información disponible en IRS. Free tax act 2012 gov/espanol o llame al 1-800-829-1040. Free tax act 2012 No podemos contestar preguntas sobre impuestos enviadas a ninguna de las dos direcciones indicadas anteriormente. Free tax act 2012 Misión del IRS. Free tax act 2012   Proveerles a los contribuyentes de los Estados Unidos de América un servicio de la más alta calidad al ayudarles a entender y cumplir con sus responsabilidades tributarias y, a la vez, hacer cumplir las leyes tributarias de manera íntegra y justa para todos. Free tax act 2012 Tabla 1. Free tax act 2012 Leyenda de los Iconos Icono Explicación Partidas que podrían causarle problemas en particular o una alerta sobre legislaciones pendientes que podrían entrar en vigor después de que se imprima esta publicación. Free tax act 2012 Un sitio en Internet o una dirección de correo electrónico. Free tax act 2012 Una dirección que podría necesitar. Free tax act 2012 Documentos que debería mantener en su documentación personal. Free tax act 2012 Cálculos que necesite realizar o una hoja de trabajo que pueda tener que completar y conservar para sus archivos. Free tax act 2012 Un número de teléfono importante. Free tax act 2012 Información que podría necesitar. Free tax act 2012 Prev  Up  Next   Home   More Online Publications
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The Bureau of Alcohol, Tobacco, Firearms, and Explosives enforces federal criminal laws regulating the firearms and explosives industries.

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The Free Tax Act 2012

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