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Free Taxes 2012

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Free Taxes 2012

Free taxes 2012 37. Free taxes 2012   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. Free taxes 2012  The maximum adoption credit is $12,970 for 2013. Free taxes 2012 See Adoption Credit . Free taxes 2012 Plug-in electric vehicle credit. Free taxes 2012  This credit has expired. Free taxes 2012 Credit for prior year minimum tax. Free taxes 2012  The refundable portion of the credit for prior year minimum tax has expired. Free taxes 2012 Excess withholding of social security and railroad retirement tax. Free taxes 2012  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. Free taxes 2012 2% of wages up to $113,700. Free taxes 2012 If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. Free taxes 2012 See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . Free taxes 2012 Introduction This chapter discusses the following nonrefundable credits. Free taxes 2012 Adoption credit. Free taxes 2012 Alternative motor vehicle credit. Free taxes 2012 Alternative fuel vehicle refueling property credit. Free taxes 2012 Credit to holders of tax credit bonds. Free taxes 2012 Foreign tax credit. Free taxes 2012 Mortgage interest credit. Free taxes 2012 Nonrefundable credit for prior year minimum tax. Free taxes 2012 Plug-in electric drive motor vehicle credit. Free taxes 2012 Residential energy credits. Free taxes 2012 Retirement savings contributions credit. Free taxes 2012 This chapter also discusses the following refundable credits. Free taxes 2012 Credit for tax on undistributed capital gain. Free taxes 2012 Health coverage tax credit. Free taxes 2012 Credit for excess social security tax or railroad retirement tax withheld. Free taxes 2012 Several other credits are discussed in other chapters in this publication. Free taxes 2012 Child and dependent care credit (chapter 32). Free taxes 2012 Credit for the elderly or the disabled (chapter 33). Free taxes 2012 Child tax credit (chapter 34). Free taxes 2012 Education credits (chapter 35). Free taxes 2012 Earned income credit (chapter 36). Free taxes 2012 Nonrefundable credits. Free taxes 2012   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. Free taxes 2012 These credits may reduce your tax to zero. Free taxes 2012 If these credits are more than your tax, the excess is not refunded to you. Free taxes 2012 Refundable credits. Free taxes 2012   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. Free taxes 2012 These credits are added to the federal income tax withheld and any estimated tax payments you made. Free taxes 2012 If this total is more than your total tax, the excess will be refunded to you. Free taxes 2012 Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. Free taxes 2012 However, if the total of these credits is more than your tax, the excess is not refunded to you. Free taxes 2012 Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. Free taxes 2012 The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. Free taxes 2012 If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. Free taxes 2012 If your modified AGI is $234,580 or more, you cannot take the credit. Free taxes 2012 Qualified adoption expenses. Free taxes 2012   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. Free taxes 2012 These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. Free taxes 2012 Nonqualified expenses. Free taxes 2012   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. Free taxes 2012 Eligible child. Free taxes 2012   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. Free taxes 2012 Child with special needs. Free taxes 2012   An eligible child is a child with special needs if all three of the following apply. Free taxes 2012 The child was a citizen or resident of the United States (including U. Free taxes 2012 S. Free taxes 2012 possessions) at the time the adoption process began. Free taxes 2012 A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. Free taxes 2012 The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Free taxes 2012 Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. Free taxes 2012 When to take the credit. Free taxes 2012   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. Free taxes 2012 If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. Free taxes 2012 See the Instructions for Form 8839 for more specific information on when to take the credit. Free taxes 2012 Foreign child. Free taxes 2012   If the child is not a U. Free taxes 2012 S. Free taxes 2012 citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. Free taxes 2012 You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. Free taxes 2012 How to take the credit. Free taxes 2012   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. Free taxes 2012 Include the credit in your total for Form 1040, line 53. Free taxes 2012 Check box c and enter “8839” on the line next to that box. Free taxes 2012 More information. Free taxes 2012   For more information, see the Instructions for Form 8839. Free taxes 2012 Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. Free taxes 2012 Amount of credit. Free taxes 2012   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. Free taxes 2012 In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. Free taxes 2012   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. Free taxes 2012 How to take the credit. Free taxes 2012   To take the credit, you must complete Form 8910 and attach it to your Form 1040. Free taxes 2012 Include the credit in your total for Form 1040, line 53. Free taxes 2012 Check box c and enter “8910” on the line next to that box. Free taxes 2012 More information. Free taxes 2012   For more information on the credit, see the Instructions for Form 8910. Free taxes 2012 Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. Free taxes 2012 Qualified alternative fuel vehicle refueling property. Free taxes 2012   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. Free taxes 2012 To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. Free taxes 2012 To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. Free taxes 2012   The following are alternative fuels. Free taxes 2012 Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. Free taxes 2012 Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. Free taxes 2012 Electricity. Free taxes 2012 Amount of the credit. Free taxes 2012   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. Free taxes 2012 For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Free taxes 2012 How to take the credit. Free taxes 2012   To take the credit, you must complete Form 8911 and attach it to your Form 1040. Free taxes 2012 Include the credit in your total for Form 1040, line 53. Free taxes 2012 Check box c and enter “8911” on the line next to that box. Free taxes 2012 More information. Free taxes 2012   For more information on the credit, see the Form 8911 instructions. Free taxes 2012 Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. Free taxes 2012 You may be able to take a credit if you are a holder of one of the following bonds. Free taxes 2012 Clean renewable energy bonds (issued before 2010). Free taxes 2012 New clean renewable energy bonds. Free taxes 2012 Qualified energy conservation bonds. Free taxes 2012 Qualified school construction bonds. Free taxes 2012 Qualified zone academy bonds. Free taxes 2012 Build America bonds. Free taxes 2012 In some instances, an issuer may elect to receive a credit for interest paid on the bond. Free taxes 2012 If the issuer makes this election, you cannot also claim a credit. Free taxes 2012 Interest income. Free taxes 2012   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. Free taxes 2012 How to take the credit. Free taxes 2012   Complete Form 8912 and attach it to your Form 1040. Free taxes 2012 Include the credit in your total for Form 1040, line 53. Free taxes 2012 Check box c and enter “8912” on the line next to that box. Free taxes 2012 More information. Free taxes 2012   For more information, see the Instructions for Form 8912. Free taxes 2012 Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. Free taxes 2012 S. Free taxes 2012 possession as a credit against your U. Free taxes 2012 S. Free taxes 2012 income tax. Free taxes 2012 Or, you can deduct them as an itemized deduction (see chapter 22). Free taxes 2012 You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. Free taxes 2012 S. Free taxes 2012 tax under any of the following. Free taxes 2012 Foreign earned income exclusion. Free taxes 2012 Foreign housing exclusion. Free taxes 2012 Income from Puerto Rico exempt from U. Free taxes 2012 S. Free taxes 2012 tax. Free taxes 2012 Possession exclusion. Free taxes 2012 Limit on the credit. Free taxes 2012   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. Free taxes 2012 S. Free taxes 2012 tax liability (Form 1040, line 44), multiplied by a fraction. Free taxes 2012 The numerator of the fraction is your taxable income from sources outside the United States. Free taxes 2012 The denominator is your total taxable income from U. Free taxes 2012 S. Free taxes 2012 and foreign sources. Free taxes 2012 See Publication 514 for more information. Free taxes 2012 How to take the credit. Free taxes 2012   Complete Form 1116 and attach it to your Form 1040. Free taxes 2012 Enter the credit on Form 1040, line 47. Free taxes 2012 Exception. Free taxes 2012   You do not have to complete Form 1116 to take the credit if all of the following apply. Free taxes 2012 All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). Free taxes 2012 If you had dividend income from shares of stock, you held those shares for at least 16 days. Free taxes 2012 You are not filing Form 4563 or excluding income from sources within Puerto Rico. Free taxes 2012 The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). Free taxes 2012 All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. Free taxes 2012 More information. Free taxes 2012   For more information on the credit and these requirements, see the Instructions for Form 1116. Free taxes 2012 Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. Free taxes 2012 If you qualify, you can take the credit each year for part of the home mortgage interest you pay. Free taxes 2012 Who qualifies. Free taxes 2012   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Free taxes 2012 Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Free taxes 2012 Amount of credit. Free taxes 2012   Figure your credit on Form 8396. Free taxes 2012 If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Free taxes 2012   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Free taxes 2012 To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Free taxes 2012      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. Free taxes 2012   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. Free taxes 2012 If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. Free taxes 2012 See Publication 530 for more information. Free taxes 2012 Carryforward. Free taxes 2012   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. Free taxes 2012 If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Free taxes 2012   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Free taxes 2012 How to take the credit. Free taxes 2012    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. Free taxes 2012 Be sure to include any credit carryforward from 2010, 2011, and 2012. Free taxes 2012   Include the credit in your total for Form 1040, line 53. Free taxes 2012 Check box c and enter “8396” on the line next to that box. Free taxes 2012 Reduced home mortgage interest deduction. Free taxes 2012   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Free taxes 2012 You must do this even if part of that amount is to be carried forward to 2014. Free taxes 2012 For more information about the home mortgage interest deduction, see chapter 23. Free taxes 2012 Recapture of federal mortgage subsidy. Free taxes 2012   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. Free taxes 2012 The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. Free taxes 2012 See the Instructions for Form 8828 and chapter 15 for more information. Free taxes 2012 More information. Free taxes 2012   For more information on the credit, see the Form 8396 instructions. Free taxes 2012 Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. Free taxes 2012 If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. Free taxes 2012 This is called the alternative minimum tax. Free taxes 2012 The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. Free taxes 2012 If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. Free taxes 2012 You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. Free taxes 2012 How to take the credit. Free taxes 2012    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. Free taxes 2012 Include the credit in your total for Form 1040, line 53, and check box b. Free taxes 2012 You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. Free taxes 2012 More information. Free taxes 2012   For more information on the credit, see the Instructions for Form 8801. Free taxes 2012 Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. Free taxes 2012 Qualified plug-in electric drive motor vehicle. Free taxes 2012   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Free taxes 2012 Qualified two- or three-wheeled plug-in electric vehicle. Free taxes 2012   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. Free taxes 2012 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Free taxes 2012 Certification and other requirements. Free taxes 2012   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. Free taxes 2012 However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. Free taxes 2012   The following requirements must also be met to qualify for the credit. Free taxes 2012 You are the owner of the vehicle. Free taxes 2012 If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. Free taxes 2012 You placed the vehicle in service during 2013. Free taxes 2012 The vehicle is manufactured primarily for use on public streets, roads, and highways. Free taxes 2012 The original use of the vehicle began with you. Free taxes 2012 You acquired the vehicle for your use or to lease to others, and not for resale. Free taxes 2012 In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. Free taxes 2012 You use the vehicle primarily in the United States. Free taxes 2012 How to take the credit. Free taxes 2012   To take the credit, you must complete Form 8936 and attach it to your Form 1040. Free taxes 2012 Include the credit in your total for Form 1040, line 53. Free taxes 2012 Check box c and enter “8936” on the line next to that box. Free taxes 2012 More information. Free taxes 2012   For more information on the credit, see the Form 8936 instructions. Free taxes 2012 Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. Free taxes 2012 Nonbusiness energy property credit. Free taxes 2012 Residential energy efficient property credit. Free taxes 2012 If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. Free taxes 2012 Nonbusiness energy property credit. Free taxes 2012   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. Free taxes 2012   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. Free taxes 2012    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. Free taxes 2012   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. Free taxes 2012 Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. Free taxes 2012 Exterior window (including skylights). Free taxes 2012 Exterior doors. Free taxes 2012 Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. Free taxes 2012   Residential energy property is any of the following. Free taxes 2012 Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. Free taxes 2012 Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. Free taxes 2012 Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. Free taxes 2012 Residential energy efficient property credit. Free taxes 2012   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. Free taxes 2012 The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. Free taxes 2012 Basis reduction. Free taxes 2012   You must reduce the basis of your home by the amount of any credit allowed. Free taxes 2012 How to take the credit. Free taxes 2012   Complete Form 5695 and attach it to your Form 1040. Free taxes 2012 Enter the credit on Form 1040, line 52. Free taxes 2012 More information. Free taxes 2012   For more information on these credits, see the Form 5695 instructions. Free taxes 2012 Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. Free taxes 2012 However, you cannot take the credit if either of the following applies. Free taxes 2012 The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). Free taxes 2012 The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). Free taxes 2012 Student. Free taxes 2012   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. Free taxes 2012 School. Free taxes 2012   A school includes a technical, trade, or mechanical school. Free taxes 2012 It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Free taxes 2012 How to take the credit. Free taxes 2012   Figure the credit on Form 8880. Free taxes 2012 Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. Free taxes 2012 More information. Free taxes 2012   For more information on the credit, see the Form 8880 instructions. Free taxes 2012 Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. Free taxes 2012 If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. Free taxes 2012 Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. Free taxes 2012 If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. Free taxes 2012 The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. Free taxes 2012 How to take the credit. Free taxes 2012   To take the credit, attach Copy B of Form 2439 to your Form 1040. Free taxes 2012 Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. Free taxes 2012 More information. Free taxes 2012   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. Free taxes 2012 Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. Free taxes 2012 You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. Free taxes 2012 You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. Free taxes 2012 S. Free taxes 2012 Treasury–HCTC. Free taxes 2012 ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. Free taxes 2012 You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). Free taxes 2012 You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. Free taxes 2012 S. Free taxes 2012 military health system (TRICARE). Free taxes 2012 You were not imprisoned under federal, state, or local authority. Free taxes 2012 Your employer did not pay 50% or more of the cost of coverage. Free taxes 2012 You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. Free taxes 2012 But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. Free taxes 2012 If you meet all of these conditions, you may be able to take a credit of up to 72. Free taxes 2012 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. Free taxes 2012 You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. Free taxes 2012 The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. Free taxes 2012 You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Free taxes 2012 If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. Free taxes 2012 TAA recipient. Free taxes 2012   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). Free taxes 2012 Example. Free taxes 2012 You received a trade adjustment allowance for January 2013. Free taxes 2012 You were an eligible TAA recipient on the first day of January and February. Free taxes 2012 Alternative TAA recipient. Free taxes 2012   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. Free taxes 2012 Example. Free taxes 2012 You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. Free taxes 2012 The program was established by the Department of Labor. Free taxes 2012 You were an eligible alternative TAA recipient on the first day of October and November. Free taxes 2012 RTAA recipient. Free taxes 2012   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. Free taxes 2012 PBGC pension recipient. Free taxes 2012   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. Free taxes 2012 You were age 55 or older on the first day of the month. Free taxes 2012 You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Free taxes 2012 If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. Free taxes 2012 How to take the credit. Free taxes 2012   To take the credit, complete Form 8885 and attach it to your Form 1040. Free taxes 2012 Include your credit in the total for Form 1040, line 71, and check box c. Free taxes 2012   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. Free taxes 2012 For details, see Publication 502 or Form 8885. Free taxes 2012 More information. Free taxes 2012   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. Free taxes 2012 Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. Free taxes 2012 If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Free taxes 2012 If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. Free taxes 2012 If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. Free taxes 2012 2% rate. Free taxes 2012 You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. Free taxes 2012 For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. Free taxes 2012 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. Free taxes 2012 45%) or the Additional Medicare Tax rate (. Free taxes 2012 9%). Free taxes 2012 The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. Free taxes 2012 Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. Free taxes 2012 40 RRTA tier 2 $84,300 $3,709. Free taxes 2012 20 All wages are subject to Medicare tax withholding. Free taxes 2012   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Free taxes 2012 Be sure to attach a copy of all of your W-2 forms. Free taxes 2012 Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. Free taxes 2012 Employer's error. Free taxes 2012   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. Free taxes 2012 The employer should adjust the tax for you. Free taxes 2012 If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. Free taxes 2012 Joint return. Free taxes 2012   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. Free taxes 2012 Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. Free taxes 2012 How to figure the credit if you did not work for a railroad. Free taxes 2012   If you did not work for a railroad during 2013, figure the credit as follows: 1. Free taxes 2012 Add all social security tax withheld (but not more than $7,049. Free taxes 2012 40 for each employer). Free taxes 2012 Enter the total here   2. Free taxes 2012 Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Free taxes 2012 Add lines 1 and 2. Free taxes 2012 If $7,049. Free taxes 2012 40 or less, stop here. Free taxes 2012 You cannot take  the credit   4. Free taxes 2012 Social security tax limit 7,049. Free taxes 2012 40 5. Free taxes 2012 Credit. Free taxes 2012 Subtract line 4 from line 3. Free taxes 2012 Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. Free taxes 2012 You are married and file a joint return with your spouse who had no gross income in 2013. Free taxes 2012 During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. Free taxes 2012 Social security tax of $3,720 was withheld. Free taxes 2012 You also worked for another employer in 2013 and earned $55,000 in wages. Free taxes 2012 $3,410 of social security tax was withheld from these wages. Free taxes 2012 Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. Free taxes 2012 60 for the excess social security tax withheld. Free taxes 2012 1. Free taxes 2012 Add all social security tax withheld (but not more than $7,049. Free taxes 2012 40 for each employer). Free taxes 2012 Enter the total here $7,130. Free taxes 2012 00 2. Free taxes 2012 Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. Free taxes 2012 Add lines 1 and 2. Free taxes 2012 If $7,049. Free taxes 2012 40 or less, stop here. Free taxes 2012 You cannot take the credit 7,130. Free taxes 2012 00 4. Free taxes 2012 Social security tax limit 7,049. Free taxes 2012 40 5. Free taxes 2012 Credit. Free taxes 2012 Subtract line 4 from line 3. Free taxes 2012 Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. Free taxes 2012 60 How to figure the credit if you worked for a railroad. Free taxes 2012   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. Free taxes 2012 Add all social security and tier 1 RRTA tax withheld at the 6. Free taxes 2012 2% rate (but not more than $7,049. Free taxes 2012 40 for each employer). Free taxes 2012 Enter the total here   2. Free taxes 2012 Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Free taxes 2012 Add lines 1 and 2. Free taxes 2012 If $7,049. Free taxes 2012 40 or less, stop here. Free taxes 2012 You cannot take  the credit   4. Free taxes 2012 Social security and tier 1 RRTA  tax limit 7,049. Free taxes 2012 40 5. Free taxes 2012 Credit. Free taxes 2012 Subtract line 4 from line 3. Free taxes 2012 Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. Free taxes 2012   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. Free taxes 2012 More information. Free taxes 2012   For more information on the credit, see Publication 505. Free taxes 2012 Prev  Up  Next   Home   More Online Publications
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Free taxes 2012 3. Free taxes 2012   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). Free taxes 2012 There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. Free taxes 2012 There are also the limitations which may need to be applied if you have a net loss on Schedule E. Free taxes 2012 There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. Free taxes 2012 You may also have a gain or loss related to your rental property from a casualty or theft. Free taxes 2012 This is considered separately from the income and expense information you report on Schedule E. Free taxes 2012 Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). Free taxes 2012 However, do not use that schedule to report a not-for-profit activity. Free taxes 2012 See Not Rented for Profit , in chapter 4. Free taxes 2012 There are also other rental situations in which forms other than Schedule E would be used. Free taxes 2012 Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. Free taxes 2012 , you normally report your rental income and expenses on Schedule E, Part I. Free taxes 2012 List your total income, expenses, and depreciation for each rental property. Free taxes 2012 Be sure to enter the number of fair rental and personal use days on line 2. Free taxes 2012 If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. Free taxes 2012 Complete lines 1 and 2 for each property. Free taxes 2012 However, fill in lines 23a through 26 on only one Schedule E. Free taxes 2012 On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. Free taxes 2012 To find out if you need to attach Form 4562, see Form 4562 , later. Free taxes 2012 If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. Free taxes 2012 Form 6198, At-Risk Limitations. Free taxes 2012 See At-Risk Rules , later. Free taxes 2012 Also see Publication 925. Free taxes 2012 Form 8582, Passive Activity Loss Limitations. Free taxes 2012 See Passive Activity Limits , later. Free taxes 2012 Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. Free taxes 2012 If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. Free taxes 2012 Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). Free taxes 2012 Form 4562. Free taxes 2012   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. Free taxes 2012 Otherwise, figure your depreciation on your own worksheet. Free taxes 2012 You do not have to attach these computations to your return, but you should keep them in your records for future reference. Free taxes 2012   See Publication 946 for information on preparing Form 4562. Free taxes 2012 Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. Free taxes 2012 Providing substantial services. Free taxes 2012   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. Free taxes 2012 Use Form 1065, U. Free taxes 2012 S. Free taxes 2012 Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). Free taxes 2012 Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. Free taxes 2012 For information, see Publication 334, Tax Guide for Small Business. Free taxes 2012 Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. Free taxes 2012 For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. Free taxes 2012 Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. Free taxes 2012 This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. Free taxes 2012 If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). Free taxes 2012 You will not be required to file Form 1065 for any year the election is in effect. Free taxes 2012 Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. Free taxes 2012 If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. Free taxes 2012 For more information on qualified joint ventures, go to IRS. Free taxes 2012 gov and enter “qualified joint venture” in the search box. Free taxes 2012 Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. Free taxes 2012 You must consider these rules in the order shown below. Free taxes 2012 Both are discussed in this section. Free taxes 2012 At-risk rules. Free taxes 2012 These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. Free taxes 2012 This applies only if the real property was placed in service after 1986. Free taxes 2012 Passive activity limits. Free taxes 2012 Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. Free taxes 2012 However, there are exceptions. Free taxes 2012 At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. Free taxes 2012 Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. Free taxes 2012 In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. Free taxes 2012 You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. Free taxes 2012 Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. Free taxes 2012 See Publication 925 for a discussion of the at-risk rules. Free taxes 2012 Form 6198. Free taxes 2012   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. Free taxes 2012 Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. Free taxes 2012 For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. Free taxes 2012 For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. Free taxes 2012 Deductions or losses from passive activities are limited. Free taxes 2012 You generally cannot offset income, other than passive income, with losses from passive activities. Free taxes 2012 Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. Free taxes 2012 Any excess loss or credit is carried forward to the next tax year. Free taxes 2012 Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. Free taxes 2012 For a detailed discussion of these rules, see Publication 925. Free taxes 2012 Real estate professionals. Free taxes 2012   If you are a real estate professional, complete line 43 of Schedule E. Free taxes 2012      You qualify as a real estate professional for the tax year if you meet both of the following requirements. Free taxes 2012 More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. Free taxes 2012 You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. Free taxes 2012 If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. Free taxes 2012 For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. Free taxes 2012   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. Free taxes 2012 You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. Free taxes 2012   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. Free taxes 2012 However, you can count your spouse's participation in an activity in determining if you materially participated. Free taxes 2012 Real property trades or businesses. Free taxes 2012   A real property trade or business is a trade or business that does any of the following with real property. Free taxes 2012 Develops or redevelops it. Free taxes 2012 Constructs or reconstructs it. Free taxes 2012 Acquires it. Free taxes 2012 Converts it. Free taxes 2012 Rents or leases it. Free taxes 2012 Operates or manages it. Free taxes 2012 Brokers it. Free taxes 2012 Choice to treat all interests as one activity. Free taxes 2012   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. Free taxes 2012 You can make this choice for any year that you qualify as a real estate professional. Free taxes 2012 If you forgo making the choice for one year, you can still make it for a later year. Free taxes 2012   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. Free taxes 2012 This is true even if you are not a real estate professional in any intervening year. Free taxes 2012 (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. Free taxes 2012 )   See the Instructions for Schedule E for information about making this choice. Free taxes 2012 Material participation. Free taxes 2012   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. Free taxes 2012 For details, see Publication 925 or the Instructions for Schedule C. Free taxes 2012 Participating spouse. Free taxes 2012   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. Free taxes 2012 Do this even if your spouse owns no interest in the activity or files a separate return for the year. Free taxes 2012 Form 8582. Free taxes 2012    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. Free taxes 2012 See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. Free taxes 2012   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. Free taxes 2012 Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. Free taxes 2012 Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Free taxes 2012 Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. Free taxes 2012 This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. Free taxes 2012 Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. Free taxes 2012 Example. Free taxes 2012 Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. Free taxes 2012 $2,000 of Jane's $3,500 loss offsets her passive income. Free taxes 2012 The remaining $1,500 loss can be deducted from her $40,000 wages. Free taxes 2012 The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. Free taxes 2012 Active participation. Free taxes 2012   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. Free taxes 2012 Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. Free taxes 2012 Example. Free taxes 2012 Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. Free taxes 2012 Mike had advertised and rented the house to the current tenant himself. Free taxes 2012 He also collected the rents, which usually came by mail. Free taxes 2012 All repairs were either made or contracted out by Mike. Free taxes 2012 Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. Free taxes 2012 Maximum special allowance. Free taxes 2012   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. Free taxes 2012   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. Free taxes 2012 If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. Free taxes 2012   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. Free taxes 2012 Modified adjusted gross income (MAGI). Free taxes 2012   This is your adjusted gross income from Form 1040, U. Free taxes 2012 S. Free taxes 2012 Individual Income Tax Return, line 38, or Form 1040NR, U. Free taxes 2012 S. Free taxes 2012 Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. Free taxes 2012 S. Free taxes 2012 savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). Free taxes 2012 Form 8582 not required. Free taxes 2012   Do not complete Form 8582 if you meet all of the following conditions. Free taxes 2012 Your only passive activities were rental real estate activities in which you actively participated. Free taxes 2012 Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). Free taxes 2012 If married filing separately, you lived apart from your spouse all year. Free taxes 2012 You have no prior year unallowed losses from these (or any other passive) activities. Free taxes 2012 You have no current or prior year unallowed credits from passive activities. Free taxes 2012 Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). Free taxes 2012 You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. Free taxes 2012   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. Free taxes 2012 On lines 23a through 23e of your Schedule E, enter the applicable amounts. Free taxes 2012 Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. Free taxes 2012 You may be able to deduct the loss on your income tax return. Free taxes 2012 Casualty. Free taxes 2012   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Free taxes 2012 Such events include a storm, fire, or earthquake. Free taxes 2012 Theft. Free taxes 2012   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. Free taxes 2012 Gain from casualty or theft. Free taxes 2012   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. Free taxes 2012 Generally, you must report this gain. Free taxes 2012 However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. Free taxes 2012 To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. Free taxes 2012 In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. Free taxes 2012 The cost of the replacement property must be equal to or more than the net insurance or other payment you received. Free taxes 2012 More information. Free taxes 2012   For information on business and nonbusiness casualty and theft losses, see Publication 547. Free taxes 2012 How to report. Free taxes 2012    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. Free taxes 2012 Follow the Instructions for Form 4684 for where to carry your net gain or loss. Free taxes 2012 Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. Free taxes 2012 In 2013, she rented it all 12 months for a monthly rental fee of $1,125. Free taxes 2012 In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. Free taxes 2012 Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. Free taxes 2012 This means using the straight line method over a recovery period of 27. Free taxes 2012 5 years. Free taxes 2012 She uses Table 2-2d to find her depreciation percentage. Free taxes 2012 Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. Free taxes 2012 For year 6, the rate is 3. Free taxes 2012 636%. Free taxes 2012 Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. Free taxes 2012 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. Free taxes 2012 Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. Free taxes 2012 Marie also meets all of the requirements for not having to file Form 8582. Free taxes 2012 She uses Schedule E, Part I, to report her rental income and expenses. Free taxes 2012 She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. Free taxes 2012 Form 4562 is not required. Free taxes 2012 Prev  Up  Next   Home   More Online Publications