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H&r Block Taxes 2011

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H&r Block Taxes 2011

H&r block taxes 2011 24. H&r block taxes 2011   Contributions Table of Contents Introduction Useful Items - You may want to see: Organizations That Qualify To Receive Deductible ContributionsTypes of Qualified Organizations Contributions You Can DeductContributions From Which You Benefit Expenses Paid for Student Living With You Out-of-Pocket Expenses in Giving Services Contributions You Cannot DeductContributions to Individuals Contributions to Nonqualified Organizations Contributions From Which You Benefit Value of Time or Services Personal Expenses Appraisal Fees Contributions of PropertyException. H&r block taxes 2011 Household items. H&r block taxes 2011 Deduction more than $500. H&r block taxes 2011 Form 1098-C. H&r block taxes 2011 Filing deadline approaching and still no Form 1098-C. H&r block taxes 2011 Exception 1—vehicle used or improved by organization. H&r block taxes 2011 Exception 2—vehicle given or sold to needy individual. H&r block taxes 2011 Deduction $500 or less. H&r block taxes 2011 Right to use property. H&r block taxes 2011 Tangible personal property. H&r block taxes 2011 Future interest. H&r block taxes 2011 Determining Fair Market Value Giving Property That Has Decreased in Value Giving Property That Has Increased in Value When To DeductChecks. H&r block taxes 2011 Text message. H&r block taxes 2011 Credit card. H&r block taxes 2011 Pay-by-phone account. H&r block taxes 2011 Stock certificate. H&r block taxes 2011 Promissory note. H&r block taxes 2011 Option. H&r block taxes 2011 Borrowed funds. H&r block taxes 2011 Limits on DeductionsCarryovers Records To KeepCash Contributions Noncash Contributions Out-of-Pocket Expenses How To Report Introduction This chapter explains how to claim a deduction for your charitable contributions. H&r block taxes 2011 It discusses the following topics. H&r block taxes 2011 The types of organizations to which you can make deductible charitable contributions. H&r block taxes 2011 The types of contributions you can deduct. H&r block taxes 2011 How much you can deduct. H&r block taxes 2011 What records you must keep. H&r block taxes 2011 How to report your charitable contributions. H&r block taxes 2011 A charitable contribution is a donation or gift to, or for the use of, a qualified organization. H&r block taxes 2011 It is voluntary and is made without getting, or expecting to get, anything of equal value. H&r block taxes 2011 Form 1040 required. H&r block taxes 2011    To deduct a charitable contribution, you must file Form 1040 and itemize deductions on Schedule A. H&r block taxes 2011 The amount of your deduction may be limited if certain rules and limits explained in this chapter apply to you. H&r block taxes 2011 The limits are explained in detail in Publication 526. H&r block taxes 2011 Useful Items - You may want to see: Publication 526 Charitable Contributions 561 Determining the Value of Donated Property Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 8283 Noncash Charitable Contributions Organizations That Qualify To Receive Deductible Contributions You can deduct your contributions only if you make them to a qualified organization. H&r block taxes 2011 Most organizations other than churches and governments must apply to the IRS to become a qualified organization. H&r block taxes 2011 How to check whether an organization can receive deductible charitable contributions. H&r block taxes 2011   You can ask any organization whether it is a qualified organization, and most will be able to tell you. H&r block taxes 2011 Or go to IRS. H&r block taxes 2011 gov. H&r block taxes 2011 Click on “Tools” and then on “Exempt Organizations Select Check” (www. H&r block taxes 2011 irs. H&r block taxes 2011 gov/Charities-&-Non-Profits/Exempt-Organizations-Select-Check). H&r block taxes 2011 This online tool will enable you to search for qualified organizations. H&r block taxes 2011 You can also call the IRS to find out if an organization is qualified. H&r block taxes 2011 Call 1-877-829-5500. H&r block taxes 2011 People who are deaf, hard of hearing, or have a speech disability and who have access to TTY/TDD equipment can call 1-800-829-4059. H&r block taxes 2011 Deaf or hard of hearing individuals can also contact the IRS through relay services such as the Federal Relay Service at www. H&r block taxes 2011 gsa. H&r block taxes 2011 gov/fedrelay. H&r block taxes 2011 Types of Qualified Organizations Generally, only the following types of organizations can be qualified organizations. H&r block taxes 2011 A community chest, corporation, trust, fund, or foundation organized or created in or under the laws of the United States, any state, the District of Columbia, or any possession of the United States (including Puerto Rico). H&r block taxes 2011 It must, however, be organized and operated only for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. H&r block taxes 2011 Certain organizations that foster national or international amateur sports competition also qualify. H&r block taxes 2011 War veterans' organizations, including posts, auxiliaries, trusts, or foundations, organized in the United States or any of its possessions (including Puerto Rico). H&r block taxes 2011 Domestic fraternal societies, orders, and associations operating under the lodge system. H&r block taxes 2011 (Your contribution to this type of organization is deductible only if it is to be used solely for charitable, religious, scientific, literary, or educational purposes, or for the prevention of cruelty to children or animals. H&r block taxes 2011 ) Certain nonprofit cemetery companies or corporations. H&r block taxes 2011 (Your contribution to this type of organization is not deductible if it can be used for the care of a specific lot or mausoleum crypt. H&r block taxes 2011 ) The United States or any state, the District of Columbia, a U. H&r block taxes 2011 S. H&r block taxes 2011 possession (including Puerto Rico), a political subdivision of a state or U. H&r block taxes 2011 S. H&r block taxes 2011 possession, or an Indian tribal government or any of its subdivisions that perform substantial government functions. H&r block taxes 2011 (Your contribution to this type of organization is only deductible if it is to be used solely for public purposes. H&r block taxes 2011 ) Examples. H&r block taxes 2011    The following list gives some examples of qualified organizations. H&r block taxes 2011 Churches, a convention or association of churches, temples, synagogues, mosques, and other religious organizations. H&r block taxes 2011 Most nonprofit charitable organizations such as the American Red Cross and the United Way. H&r block taxes 2011 Most nonprofit educational organizations, including the Boy Scouts of America, Girl Scouts of America, colleges, and museums. H&r block taxes 2011 This also includes nonprofit daycare centers that provide childcare to the general public if substantially all the childcare is provided to enable parents and guardians to be gainfully employed. H&r block taxes 2011 However, if your contribution is a substitute for tuition or other enrollment fee, it is not deductible as a charitable contribution, as explained later under Contributions You Cannot Deduct . H&r block taxes 2011 Nonprofit hospitals and medical research organizations. H&r block taxes 2011 Utility company emergency energy programs, if the utility company is an agent for a charitable organization that assists individuals with emergency energy needs. H&r block taxes 2011 Nonprofit volunteer fire companies. H&r block taxes 2011 Nonprofit organizations that develop and maintain public parks and recreation facilities. H&r block taxes 2011 Civil defense organizations. H&r block taxes 2011 Certain foreign charitable organizations. H&r block taxes 2011   Under income tax treaties with Canada, Israel, and Mexico, you may be able to deduct contributions to certain Canadian, Israeli, or Mexican charitable organizations. H&r block taxes 2011 Generally, you must have income from sources in that country. H&r block taxes 2011 For additional information on the deduction of contributions to Canadian charities, see Publication 597, Information on the United States–Canada Income Tax Treaty. H&r block taxes 2011 If you need more information on how to figure your contribution to Mexican and Israeli charities, see Publication 526. H&r block taxes 2011 Contributions You Can Deduct Generally, you can deduct contributions of money or property you make to, or for the use of, a qualified organization. H&r block taxes 2011 A contribution is “for the use of” a qualified organization when it is held in a legally enforceable trust for the qualified organization or in a similar legal arrangement. H&r block taxes 2011 The contributions must be made to a qualified organization and not set aside for use by a specific person. H&r block taxes 2011 If you give property to a qualified organization, you generally can deduct the fair market value of the property at the time of the contribution. H&r block taxes 2011 See Contributions of Property , later in this chapter. H&r block taxes 2011 Your deduction for charitable contributions generally cannot be more than 50% of your adjusted gross income (AGI), but in some cases 20% and 30% limits may apply. H&r block taxes 2011 See Limits on Deductions , later. H&r block taxes 2011 In addition, the total of your charitable contribution deduction and certain other itemized deductions may be limited. H&r block taxes 2011 See chapter 29. H&r block taxes 2011 Table 24-1 gives examples of contributions you can and cannot deduct. H&r block taxes 2011 Contributions From Which You Benefit If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. H&r block taxes 2011 Also see Contributions From Which You Benefit under Contributions You Cannot Deduct, later. H&r block taxes 2011 If you pay more than fair market value to a qualified organization for goods or services, the excess may be a charitable contribution. H&r block taxes 2011 For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. H&r block taxes 2011 Example 1. H&r block taxes 2011 You pay $65 for a ticket to a dinner-dance at a church. H&r block taxes 2011 Your entire $65 payment goes to the church. H&r block taxes 2011 The ticket to the dinner-dance has a fair market value of $25. H&r block taxes 2011 When you buy your ticket, you know that its value is less than your payment. H&r block taxes 2011 To figure the amount of your charitable contribution, subtract the value of the benefit you receive ($25) from your total payment ($65). H&r block taxes 2011 You can deduct $40 as a contribution to the church. H&r block taxes 2011 Example 2. H&r block taxes 2011 At a fundraising auction conducted by a charity, you pay $600 for a week's stay at a beach house. H&r block taxes 2011 The amount you pay is no more than the fair rental value. H&r block taxes 2011 You have not made a deductible charitable contribution. H&r block taxes 2011 Athletic events. H&r block taxes 2011   If you make a payment to, or for the benefit of, a college or university and, as a result, you receive the right to buy tickets to an athletic event in the athletic stadium of the college or university, you can deduct 80% of the payment as a charitable contribution. H&r block taxes 2011   If any part of your payment is for tickets (rather than the right to buy tickets), that part is not deductible. H&r block taxes 2011 Subtract the price of the tickets from your payment. H&r block taxes 2011 You can deduct 80% of the remaining amount as a charitable contribution. H&r block taxes 2011 Example 1. H&r block taxes 2011 You pay $300 a year for membership in a university's athletic scholarship program. H&r block taxes 2011 The only benefit of membership is that you have the right to buy one season ticket for a seat in a designated area of the stadium at the university's home football games. H&r block taxes 2011 You can deduct $240 (80% of $300) as a charitable contribution. H&r block taxes 2011 Table 24-1. H&r block taxes 2011 Examples of Charitable Contributions—A Quick Check Use the following lists for a quick check of whether you can deduct a contribution. H&r block taxes 2011 See the rest of this chapter for more information and additional rules and limits that may apply. H&r block taxes 2011 Deductible As  Charitable Contributions Not Deductible  As Charitable Contributions Money or property you give to:  Churches, synagogues, temples, mosques, and other religious organizations Federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park) Nonprofit schools and hospitals The Salvation Army, American Red Cross, CARE, Goodwill Industries, United Way, Boy Scouts of America, Girl Scouts of America, Boys and Girls Clubs of America, etc. H&r block taxes 2011 War veterans groups   Expenses paid for a student living with you, sponsored by a qualified organization  Out-of-pocket expenses when you serve a qualified organization as a volunteer Money or property you give to:  Civic leagues, social and sports clubs, labor unions, and chambers of commerce Foreign organizations (except certain Canadian, Israeli, and Mexican charities) Groups that are run for personal profit Groups whose purpose is to lobby for law changes Homeowners' associations Individuals Political groups or candidates for public office   Cost of raffle, bingo, or lottery tickets  Dues, fees, or bills paid to country clubs, lodges, fraternal orders, or similar groups  Tuition  Value of your time or services  Value of blood given to a blood bank    Example 2. H&r block taxes 2011 The facts are the same as in Example 1 except your $300 payment includes the purchase of one season ticket for the stated ticket price of $120. H&r block taxes 2011 You must subtract the usual price of a ticket ($120) from your $300 payment. H&r block taxes 2011 The result is $180. H&r block taxes 2011 Your deductible charitable contribution is $144 (80% of $180). H&r block taxes 2011 Charity benefit events. H&r block taxes 2011   If you pay a qualified organization more than fair market value for the right to attend a charity ball, banquet, show, sporting event, or other benefit event, you can deduct only the amount that is more than the value of the privileges or other benefits you receive. H&r block taxes 2011   If there is an established charge for the event, that charge is the value of your benefit. H&r block taxes 2011 If there is no established charge, the reasonable value of the right to attend the event is the value of your benefit. H&r block taxes 2011 Whether you use the tickets or other privileges has no effect on the amount you can deduct. H&r block taxes 2011 However, if you return the ticket to the qualified organization for resale, you can deduct the entire amount you paid for the ticket. H&r block taxes 2011    Even if the ticket or other evidence of payment indicates that the payment is a “contribution,” this does not mean you can deduct the entire amount. H&r block taxes 2011 If the ticket shows the price of admission and the amount of the contribution, you can deduct the contribution amount. H&r block taxes 2011 Example. H&r block taxes 2011 You pay $40 to see a special showing of a movie for the benefit of a qualified organization. H&r block taxes 2011 Printed on the ticket is “Contribution—$40. H&r block taxes 2011 ” If the regular price for the movie is $8, your contribution is $32 ($40 payment − $8 regular price). H&r block taxes 2011 Membership fees or dues. H&r block taxes 2011    You may be able to deduct membership fees or dues you pay to a qualified organization. H&r block taxes 2011 However, you can deduct only the amount that is more than the value of the benefits you receive. H&r block taxes 2011    You cannot deduct dues, fees, or assessments paid to country clubs and other social organizations. H&r block taxes 2011 They are not qualified organizations. H&r block taxes 2011 Certain membership benefits can be disregarded. H&r block taxes 2011   Both you and the organization can disregard the following membership benefits if you receive them in return for an annual payment of $75 or less. H&r block taxes 2011 Any rights or privileges, other than those discussed under Athletic events , earlier, that you can use frequently while you are a member, such as: Free or discounted admission to the organization's facilities or events, Free or discounted parking, Preferred access to goods or services, and Discounts on the purchase of goods and services. H&r block taxes 2011 Admission, while you are a member, to events open only to members of the organization, if the organization reasonably projects that the cost per person (excluding any allocated overhead) is not more than $10. H&r block taxes 2011 20. H&r block taxes 2011 Token items. H&r block taxes 2011   You do not have to reduce your contribution by the value of any benefit you receive if both of the following are true. H&r block taxes 2011 You receive only a small item or other benefit of token value. H&r block taxes 2011 The qualified organization correctly determines that the value of the item or benefit you received is not substantial and informs you that you can deduct your payment in full. H&r block taxes 2011 Written statement. H&r block taxes 2011   A qualified organization must give you a written statement if you make a payment of more than $75 that is partly a contribution and partly for goods or services. H&r block taxes 2011 The statement must say that you can deduct only the amount of your payment that is more than the value of the goods or services you received. H&r block taxes 2011 It must also give you a good faith estimate of the value of those goods or services. H&r block taxes 2011   The organization can give you the statement either when it solicits or when it receives the payment from you. H&r block taxes 2011 Exception. H&r block taxes 2011   An organization will not have to give you this statement if one of the following is true. H&r block taxes 2011 The organization is: A governmental organization described in (5) under Types of Qualified Organizations , earlier, or An organization formed only for religious purposes, and the only benefit you receive is an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in commercial transactions outside the donative context. H&r block taxes 2011 You receive only items whose value is not substantial as described under Token items , earlier. H&r block taxes 2011 You receive only membership benefits that can be disregarded, as described earlier. H&r block taxes 2011 Expenses Paid for Student Living With You You may be able to deduct some expenses of having a student live with you. H&r block taxes 2011 You can deduct qualifying expenses for a foreign or American student who: Lives in your home under a written agreement between you and a qualified organization as part of a program of the organization to provide educational opportunities for the student, Is not your relative or dependent, and Is a full-time student in the twelfth or any lower grade at a school in the United States. H&r block taxes 2011 You can deduct up to $50 a month for each full calendar month the student lives with you. H&r block taxes 2011 Any month when conditions (1) through (3) are met for 15 days or more counts as a full month. H&r block taxes 2011 For additional information, see Expenses Paid for Student Living With You in Publication 526. H&r block taxes 2011 Mutual exchange program. H&r block taxes 2011   You cannot deduct the costs of a foreign student living in your home under a mutual exchange program through which your child will live with a family in a foreign country. H&r block taxes 2011 Table 24-2. H&r block taxes 2011 Volunteers' Questions and Answers If you volunteer for a qualified organization, the following questions and answers may apply to you. H&r block taxes 2011 All of the rules explained in this chapter also apply. H&r block taxes 2011 See, in particular, Out-of-Pocket Expenses in Giving Services . H&r block taxes 2011 Question Answer I volunteer 6 hours a week in the office of a qualified organization. H&r block taxes 2011 The receptionist is paid $10 an hour for the same work. H&r block taxes 2011 Can I deduct $60 a week for my time?    No, you cannot deduct the value of your time or services. H&r block taxes 2011 The office is 30 miles from my home. H&r block taxes 2011 Can I deduct any of my car expenses for these trips? Yes, you can deduct the costs of gas and oil that are directly related to getting to and from the place where you volunteer. H&r block taxes 2011 If you don't want to figure your actual costs, you can deduct 14 cents for each mile. H&r block taxes 2011 I volunteer as a Red Cross nurse's aide at a hospital. H&r block taxes 2011 Can I deduct the cost of the uniforms I must wear? Yes, you can deduct the cost of buying and cleaning your uniforms if the hospital is a qualified organization, the uniforms are not suitable for everyday use, and you must wear them when volunteering. H&r block taxes 2011 I pay a babysitter to watch my children while I volunteer for a qualified organization. H&r block taxes 2011 Can I deduct these costs? No, you cannot deduct payments for childcare expenses as a charitable contribution, even if you would be unable to volunteer without childcare. H&r block taxes 2011 (If you have childcare expenses so you can work for pay, see chapter 32. H&r block taxes 2011 ) Out-of-Pocket Expenses in Giving Services Although you cannot deduct the value of your services given to a qualified organization, you may be able to deduct some amounts you pay in giving services to a qualified organization. H&r block taxes 2011 The amounts must be: Unreimbursed, Directly connected with the services, Expenses you had only because of the services you gave, and Not personal, living, or family expenses. H&r block taxes 2011 Table 24-2 contains questions and answers that apply to some individuals who volunteer their services. H&r block taxes 2011 Conventions. H&r block taxes 2011   If a qualified organization selects you to attend a convention as its representative, you can deduct unreimbursed expenses for travel, including reasonable amounts for meals and lodging, while away from home overnight in connection with the convention. H&r block taxes 2011 However, see Travel , later. H&r block taxes 2011   You cannot deduct personal expenses for sightseeing, fishing parties, theater tickets, or nightclubs. H&r block taxes 2011 You also cannot deduct transportation, meals and lodging, and other expenses for your spouse or children. H&r block taxes 2011    You cannot deduct your travel expenses in attending a church convention if you go only as a member of your church rather than as a chosen representative. H&r block taxes 2011 You can, however, deduct unreimbursed expenses that are directly connected with giving services for your church during the convention. H&r block taxes 2011 Uniforms. H&r block taxes 2011   You can deduct the cost and upkeep of uniforms that are not suitable for everyday use and that you must wear while performing donated services for a charitable organization. H&r block taxes 2011 Foster parents. H&r block taxes 2011   You may be able to deduct as a charitable contribution some of the costs of being a foster parent (foster care provider) if you have no profit motive in providing the foster care and are not, in fact, making a profit. H&r block taxes 2011 A qualified organization must select the individuals you take into your home for foster care. H&r block taxes 2011    You can deduct expenses that meet both of the following requirements. H&r block taxes 2011 They are unreimbursed out-of-pocket expenses to feed, clothe, and care for the foster child. H&r block taxes 2011 They are incurred primarily to benefit the qualified organization. H&r block taxes 2011   Unreimbursed expenses that you cannot deduct as charitable contributions may be considered support provided by you in determining whether you can claim the foster child as a dependent. H&r block taxes 2011 For details, see chapter 3. H&r block taxes 2011 Example. H&r block taxes 2011 You cared for a foster child because you wanted to adopt her, not to benefit the agency that placed her in your home. H&r block taxes 2011 Your unreimbursed expenses are not deductible as charitable contributions. H&r block taxes 2011 Car expenses. H&r block taxes 2011   You can deduct as a charitable contribution any unreimbursed out-of-pocket expenses, such as the cost of gas and oil, that are directly related to the use of your car in giving services to a charitable organization. H&r block taxes 2011 You cannot deduct general repair and maintenance expenses, depreciation, registration fees, or the costs of tires or insurance. H&r block taxes 2011    If you do not want to deduct your actual expenses, you can use a standard mileage rate of 14 cents a mile to figure your contribution. H&r block taxes 2011   You can deduct parking fees and tolls whether you use your actual expenses or the standard mileage rate. H&r block taxes 2011   You must keep reliable written records of your car expenses. H&r block taxes 2011 For more information, see Car expenses under Records To Keep, later. H&r block taxes 2011 Travel. H&r block taxes 2011   Generally, you can claim a charitable contribution deduction for travel expenses necessarily incurred while you are away from home performing services for a charitable organization only if there is no significant element of personal pleasure, recreation, or vacation in the travel. H&r block taxes 2011 This applies whether you pay the expenses directly or indirectly. H&r block taxes 2011 You are paying the expenses indirectly if you make a payment to the charitable organization and the organization pays for your travel expenses. H&r block taxes 2011   The deduction for travel expenses will not be denied simply because you enjoy providing services to the charitable organization. H&r block taxes 2011 Even if you enjoy the trip, you can take a charitable contribution deduction for your travel expenses if you are on duty in a genuine and substantial sense throughout the trip. H&r block taxes 2011 However, if you have only nominal duties, or if for significant parts of the trip you do not have any duties, you cannot deduct your travel expenses. H&r block taxes 2011 Example 1. H&r block taxes 2011 You are a troop leader for a tax-exempt youth group and you take the group on a camping trip. H&r block taxes 2011 You are responsible for overseeing the setup of the camp and for providing adult supervision for other activities during the entire trip. H&r block taxes 2011 You participate in the activities of the group and enjoy your time with them. H&r block taxes 2011 You oversee the breaking of camp and you transport the group home. H&r block taxes 2011 You can deduct your travel expenses. H&r block taxes 2011 Example 2. H&r block taxes 2011 You sail from one island to another and spend 8 hours a day counting whales and other forms of marine life. H&r block taxes 2011 The project is sponsored by a charitable organization. H&r block taxes 2011 In most circumstances, you cannot deduct your expenses. H&r block taxes 2011 Example 3. H&r block taxes 2011 You work for several hours each morning on an archaeological dig sponsored by a charitable organization. H&r block taxes 2011 The rest of the day is free for recreation and sightseeing. H&r block taxes 2011 You cannot take a charitable contribution deduction even though you work very hard during those few hours. H&r block taxes 2011 Example 4. H&r block taxes 2011 You spend the entire day attending a charitable organization's regional meeting as a chosen representative. H&r block taxes 2011 In the evening you go to the theater. H&r block taxes 2011 You can claim your travel expenses as charitable contributions, but you cannot claim the cost of your evening at the theater. H&r block taxes 2011 Daily allowance (per diem). H&r block taxes 2011   If you provide services for a charitable organization and receive a daily allowance to cover reasonable travel expenses, including meals and lodging while away from home overnight, you must include in income any part of the allowance that is more than your deductible travel expenses. H&r block taxes 2011 You may be able to deduct any necessary travel expenses that are more than the allowance. H&r block taxes 2011 Deductible travel expenses. H&r block taxes 2011   These include: Air, rail, and bus transportation, Out-of-pocket expenses for your car, Taxi fares or other costs of transportation between the airport or station and your hotel, Lodging costs, and The cost of meals. H&r block taxes 2011 Because these travel expenses are not business-related, they are not subject to the same limits as business-related expenses. H&r block taxes 2011 For information on business travel expenses, see Travel Expenses in chapter 26. H&r block taxes 2011 Contributions You Cannot Deduct There are some contributions you cannot deduct, such as those made to specific individuals and those made to nonqualified organizations. H&r block taxes 2011 (See Contributions to Individuals and Contributions to Nonqualified Organizations , next. H&r block taxes 2011 ) There are others you can deduct only part of, as discussed later under Contributions From Which You Benefit . H&r block taxes 2011 Contributions to Individuals You cannot deduct contributions to specific individuals, including the following. H&r block taxes 2011 Contributions to fraternal societies made for the purpose of paying medical or burial expenses of deceased members. H&r block taxes 2011 Contributions to individuals who are needy or worthy. H&r block taxes 2011 You cannot deduct these contributions even if you make them to a qualified organization for the benefit of a specific person. H&r block taxes 2011 But you can deduct a contribution to a qualified organization that helps needy or worthy individuals if you do not indicate that your contribution is for a specific person. H&r block taxes 2011 Example. H&r block taxes 2011 You can deduct contributions to a qualified organization for flood relief, hurricane relief, or other disaster relief. H&r block taxes 2011 However, you cannot deduct contributions earmarked for relief of a particular individual or family. H&r block taxes 2011 Payments to a member of the clergy that can be spent as he or she wishes, such as for personal expenses. H&r block taxes 2011 Expenses you paid for another person who provided services to a qualified organization. H&r block taxes 2011 Example. H&r block taxes 2011 Your son does missionary work. H&r block taxes 2011 You pay his expenses. H&r block taxes 2011 You cannot claim a deduction for your son's unreimbursed expenses related to his contribution of services. H&r block taxes 2011 Payments to a hospital that are for a specific patient's care or for services for a specific patient. H&r block taxes 2011 You cannot deduct these payments even if the hospital is operated by a city, a state, or other qualified organization. H&r block taxes 2011 Contributions to Nonqualified Organizations You cannot deduct contributions to organizations that are not qualified to receive tax-deductible contributions, including the following. H&r block taxes 2011 Certain state bar associations if: The bar is not a political subdivision of a state, The bar has private, as well as public, purposes, such as promoting the professional interests of members, and Your contribution is unrestricted and can be used for private purposes. H&r block taxes 2011 Chambers of commerce and other business leagues or organizations (but see chapter 28). H&r block taxes 2011 Civic leagues and associations. H&r block taxes 2011 Communist organizations. H&r block taxes 2011 Country clubs and other social clubs. H&r block taxes 2011 Most foreign organizations (other than certain Canadian, Israeli, or Mexican charitable organizations). H&r block taxes 2011 For details, see Publication 526. H&r block taxes 2011 Homeowners' associations. H&r block taxes 2011 Labor unions (but see chapter 28). H&r block taxes 2011 Political organizations and candidates. H&r block taxes 2011 Contributions From Which You Benefit If you receive or expect to receive a financial or economic benefit as a result of making a contribution to a qualified organization, you cannot deduct the part of the contribution that represents the value of the benefit you receive. H&r block taxes 2011 See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. H&r block taxes 2011 These contributions include the following. H&r block taxes 2011 Contributions for lobbying. H&r block taxes 2011 This includes amounts that you earmark for use in, or in connection with, influencing specific legislation. H&r block taxes 2011 Contributions to a retirement home for room, board, maintenance, or admittance. H&r block taxes 2011 Also, if the amount of your contribution depends on the type or size of apartment you will occupy, it is not a charitable contribution. H&r block taxes 2011 Costs of raffles, bingo, lottery, etc. H&r block taxes 2011 You cannot deduct as a charitable contribution amounts you pay to buy raffle or lottery tickets or to play bingo or other games of chance. H&r block taxes 2011 For information on how to report gambling winnings and losses, see Gambling winnings in chapter 12 and Gambling Losses Up to the Amount of Gambling Winnings in chapter 28. H&r block taxes 2011 Dues to fraternal orders and similar groups. H&r block taxes 2011 However, see Membership fees or dues , earlier, under Contributions You Can Deduct. H&r block taxes 2011 Tuition, or amounts you pay instead of tuition. H&r block taxes 2011 You cannot deduct as a charitable contribution amounts you pay as tuition even if you pay them for children to attend parochial schools or qualifying nonprofit daycare centers. H&r block taxes 2011 You also cannot deduct any fixed amount you must pay in addition to, or instead of, tuition to enroll in a private school, even if it is designated as a “donation. H&r block taxes 2011 ” Value of Time or Services You cannot deduct the value of your time or services, including: Blood donations to the American Red Cross or to blood banks, and The value of income lost while you work as an unpaid volunteer for a qualified organization. H&r block taxes 2011 Personal Expenses You cannot deduct personal, living, or family expenses, such as the following items. H&r block taxes 2011 The cost of meals you eat while you perform services for a qualified organization unless it is necessary for you to be away from home overnight while performing the services. H&r block taxes 2011 Adoption expenses, including fees paid to an adoption agency and the costs of keeping a child in your home before adoption is final (but see Adoption Credit in chapter 37, and the instructions for Form 8839, Qualified Adoption Expenses). H&r block taxes 2011 You also may be able to claim an exemption for the child. H&r block taxes 2011 See Adopted child in chapter 3. H&r block taxes 2011 Appraisal Fees You cannot deduct as a charitable contribution any fees you pay to find the fair market value of donated property (but see chapter 28). H&r block taxes 2011 Contributions of Property If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. H&r block taxes 2011 However, if the property has increased in value, you may have to make some adjustments to the amount of your deduction. H&r block taxes 2011 See Giving Property That Has Increased in Value , later. H&r block taxes 2011 For information about the records you must keep and the information you must furnish with your return if you donate property, see Records To Keep and How To Report , later. H&r block taxes 2011 Clothing and household items. H&r block taxes 2011   You cannot take a deduction for clothing or household items you donate unless the clothing or household items are in good used condition or better. H&r block taxes 2011 Exception. H&r block taxes 2011   You can take a deduction for a contribution of an item of clothing or household item that is not in good used condition or better if you deduct more than $500 for it and include a qualified appraisal of it with your return. H&r block taxes 2011 Household items. H&r block taxes 2011   Household items include: Furniture and furnishings, Electronics, Appliances, Linens, and Other similar items. H&r block taxes 2011   Household items do not include: Food, Paintings, antiques, and other objects of art, Jewelry and gems, and Collections. H&r block taxes 2011 Cars, boats, and airplanes. H&r block taxes 2011    The following rules apply to any donation of a qualified vehicle. H&r block taxes 2011 A qualified vehicle is: A car or any motor vehicle manufactured mainly for use on public streets, roads, and highways, A boat, or An airplane. H&r block taxes 2011 Deduction more than $500. H&r block taxes 2011   If you donate a qualified vehicle with a claimed fair market value of more than $500, you can deduct the smaller of: The gross proceeds from the sale of the vehicle by the organization, or The vehicle's fair market value on the date of the contribution. H&r block taxes 2011 If the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to figure the deductible amount, as described under Giving Property That Has Increased in Value , later. H&r block taxes 2011 Form 1098-C. H&r block taxes 2011   You must attach to your return Copy B of the Form 1098-C, Contributions of Motor Vehicles, Boats, and Airplanes, (or other statement containing the same information as Form 1098-C) you received from the organization. H&r block taxes 2011 The Form 1098-C (or other statement) will show the gross proceeds from the sale of the vehicle. H&r block taxes 2011   If you e-file your return, you must: Attach Copy B of Form 1098-C to Form 8453 and mail the forms to the IRS, or Include Copy B of Form 1098-C as a pdf attachment if your software program allows it. H&r block taxes 2011   If you do not attach Form 1098-C (or other statement), you cannot deduct your contribution. H&r block taxes 2011    You must get Form 1098-C (or other statement) within 30 days of the sale of the vehicle. H&r block taxes 2011 But if exception 1 or 2 (described later) applies, you must get Form 1098-C (or other statement) within 30 days of your donation. H&r block taxes 2011 Filing deadline approaching and still no Form 1098-C. H&r block taxes 2011   If the filing deadline is approaching and you still do not have a Form 1098-C, you have two choices. H&r block taxes 2011 Request an automatic 6-month extension of time to file your return. H&r block taxes 2011 You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. H&r block taxes 2011 S. H&r block taxes 2011 Individual Income Tax Return. H&r block taxes 2011  For more information, see Automatic Extension in chapter 1. H&r block taxes 2011 File the return on time without claiming the deduction for the qualified vehicle. H&r block taxes 2011 After receiving the Form 1098-C, file an amended return, Form 1040X, claiming the deduction. H&r block taxes 2011 Attach Copy B of Form 1098-C (or other statement) to the amended return. H&r block taxes 2011 For more information about amended returns, see Amended Returns and Claims for Refund in chapter 1. H&r block taxes 2011 Exceptions. H&r block taxes 2011   There are two exceptions to the rules just described for deductions of more than $500. H&r block taxes 2011 Exception 1—vehicle used or improved by organization. H&r block taxes 2011   If the qualified organization makes a significant intervening use of or material improvement to the vehicle before transferring it, you generally can deduct the vehicle's fair market value at the time of the contribution. H&r block taxes 2011 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. H&r block taxes 2011 The Form 1098-C (or other statement) will show whether this exception applies. H&r block taxes 2011 Exception 2—vehicle given or sold to needy individual. H&r block taxes 2011   If the qualified organization will give the vehicle, or sell it for a price well below fair market value, to a needy individual to further the organization's charitable purpose, you generally can deduct the vehicle's fair market value at the time of the contribution. H&r block taxes 2011 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. H&r block taxes 2011 The Form 1098-C (or other statement) will show whether this exception applies. H&r block taxes 2011   This exception does not apply if the organization sells the vehicle at auction. H&r block taxes 2011 In that case, you cannot deduct the vehicle's fair market value. H&r block taxes 2011 Example. H&r block taxes 2011 Anita donates a used car to a qualified organization. H&r block taxes 2011 She bought it 3 years ago for $9,000. H&r block taxes 2011 A used car guide shows the fair market value for this type of car is $6,000. H&r block taxes 2011 However, Anita gets a Form 1098-C from the organization showing the car was sold for $2,900. H&r block taxes 2011 Neither exception 1 nor exception 2 applies. H&r block taxes 2011 If Anita itemizes her deductions, she can deduct $2,900 for her donation. H&r block taxes 2011 She must attach Form 1098-C and Form 8283 to her return. H&r block taxes 2011 Deduction $500 or less. H&r block taxes 2011   If the qualified organization sells the vehicle for $500 or less and exceptions 1 and 2 do not apply, you can deduct the smaller of: $500, or The vehicle's fair market value on the date of the contribution. H&r block taxes 2011 But if the vehicle's fair market value was more than your cost or other basis, you may have to reduce the fair market value to get the deductible amount, as described under Giving Property That Has Increased in Value , later. H&r block taxes 2011   If the vehicle's fair market value is at least $250 but not more than $500, you must have a written statement from the qualified organization acknowledging your donation. H&r block taxes 2011 The statement must contain the information and meet the tests for an acknowledgment described under Deductions of At Least $250 But Not More Than $500 under Records To Keep, later. H&r block taxes 2011 Partial interest in property. H&r block taxes 2011   Generally, you cannot deduct a charitable contribution of less than your entire interest in property. H&r block taxes 2011 Right to use property. H&r block taxes 2011   A contribution of the right to use property is a contribution of less than your entire interest in that property and is not deductible. H&r block taxes 2011 For exceptions and more information, see Partial Interest in Property Not in Trust in Publication 561. H&r block taxes 2011 Future interests in tangible personal property. H&r block taxes 2011   You cannot deduct the value of a charitable contribution of a future interest in tangible personal property until all intervening interests in and rights to the actual possession or enjoyment of the property have either expired or been turned over to someone other than yourself, a related person, or a related organization. H&r block taxes 2011 Tangible personal property. H&r block taxes 2011   This is any property, other than land or buildings, that can be seen or touched. H&r block taxes 2011 It includes furniture, books, jewelry, paintings, and cars. H&r block taxes 2011 Future interest. H&r block taxes 2011   This is any interest that is to begin at some future time, regardless of whether it is designated as a future interest under state law. H&r block taxes 2011 Determining Fair Market Value This section discusses general guidelines for determining the fair market value of various types of donated property. H&r block taxes 2011 Publication 561 contains a more complete discussion. H&r block taxes 2011 Fair market value is the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. H&r block taxes 2011 Used clothing and household items. H&r block taxes 2011   The fair market value of used clothing and household goods is usually far less than what you paid for them when they were new. H&r block taxes 2011   For used clothing, you should claim as the value the price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops. H&r block taxes 2011 See Household Goods in Publication 561 for information on the valuation of household goods, such as furniture, appliances, and linens. H&r block taxes 2011 Example. H&r block taxes 2011 Dawn Greene donated a coat to a thrift store operated by her church. H&r block taxes 2011 She paid $300 for the coat 3 years ago. H&r block taxes 2011 Similar coats in the thrift store sell for $50. H&r block taxes 2011 The fair market value of the coat is $50. H&r block taxes 2011 Dawn's donation is limited to $50. H&r block taxes 2011 Cars, boats, and airplanes. H&r block taxes 2011   If you contribute a car, boat, or airplane to a charitable organization, you must determine its fair market value. H&r block taxes 2011 Certain commercial firms and trade organizations publish used car pricing guides, commonly called “blue books,” containing complete dealer sale prices or dealer average prices for recent model years. H&r block taxes 2011 The guides may be published monthly or seasonally and for different regions of the country. H&r block taxes 2011 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. H&r block taxes 2011 The prices are not “official” and these publications are not considered an appraisal of any specific donated property. H&r block taxes 2011 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. H&r block taxes 2011   You can also find used car pricing information on the Internet. H&r block taxes 2011 Example. H&r block taxes 2011 You donate a used car in poor condition to a local high school for use by students studying car repair. H&r block taxes 2011 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. H&r block taxes 2011 However, the guide shows the price for a private party sale of the car is only $750. H&r block taxes 2011 The fair market value of the car is considered to be $750. H&r block taxes 2011 Large quantities. H&r block taxes 2011   If you contribute a large number of the same item, fair market value is the price at which comparable numbers of the item are being sold. H&r block taxes 2011 Giving Property That Has Decreased in Value If you contribute property with a fair market value that is less than your basis in it, your deduction is limited to its fair market value. H&r block taxes 2011 You cannot claim a deduction for the difference between the property's basis and its fair market value. H&r block taxes 2011 Giving Property That Has Increased in Value If you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. H&r block taxes 2011 Your basis in property is generally what you paid for it. H&r block taxes 2011 See chapter 13 if you need more information about basis. H&r block taxes 2011 Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. H&r block taxes 2011 Ordinary income property. H&r block taxes 2011   Property is ordinary income property if you would have recognized ordinary income or short-term capital gain had you sold it at fair market value on the date it was contributed. H&r block taxes 2011 Examples of ordinary income property are inventory, works of art created by the donor, manuscripts prepared by the donor, and capital assets (defined in chapter 14) held 1 year or less. H&r block taxes 2011 Amount of deduction. H&r block taxes 2011   The amount you can deduct for a contribution of ordinary income property is its fair market value minus the amount that would be ordinary income or short-term capital gain if you sold the property for its fair market value. H&r block taxes 2011 Generally, this rule limits the deduction to your basis in the property. H&r block taxes 2011 Example. H&r block taxes 2011 You donate stock you held for 5 months to your church. H&r block taxes 2011 The fair market value of the stock on the day you donate it is $1,000, but you paid only $800 (your basis). H&r block taxes 2011 Because the $200 of appreciation would be short-term capital gain if you sold the stock, your deduction is limited to $800 (fair market value minus the appreciation). H&r block taxes 2011 Capital gain property. H&r block taxes 2011   Property is capital gain property if you would have recognized long-term capital gain had you sold it at fair market value on the date of the contribution. H&r block taxes 2011 It includes capital assets held more than 1 year, as well as certain real property and depreciable property used in your trade or business and, generally, held more than 1 year. H&r block taxes 2011 Amount of deduction — general rule. H&r block taxes 2011   When figuring your deduction for a contribution of capital gain property, you generally can use the fair market value of the property. H&r block taxes 2011 Exceptions. H&r block taxes 2011   In certain situations, you must reduce the fair market value by any amount that would have been long-term capital gain if you had sold the property for its fair market value. H&r block taxes 2011 Generally, this means reducing the fair market value to the property's cost or other basis. H&r block taxes 2011 Bargain sales. H&r block taxes 2011   A bargain sale of property is a sale or exchange for less than the property's fair market value. H&r block taxes 2011 A bargain sale to a qualified organization is partly a charitable contribution and partly a sale or exchange. H&r block taxes 2011 A bargain sale may result in a taxable gain. H&r block taxes 2011 More information. H&r block taxes 2011   For more information on donating appreciated property, see Giving Property That Has Increased in Value in Publication 526. H&r block taxes 2011 When To Deduct You can deduct your contributions only in the year you actually make them in cash or other property (or in a later carryover year, as explained later under Carryovers ). H&r block taxes 2011 This applies whether you use the cash or an accrual method of accounting. H&r block taxes 2011 Time of making contribution. H&r block taxes 2011   Usually, you make a contribution at the time of its unconditional delivery. H&r block taxes 2011 Checks. H&r block taxes 2011   A check you mail to a charity is considered delivered on the date you mail it. H&r block taxes 2011 Text message. H&r block taxes 2011   Contributions made by text message are deductible in the year you send the text message if the contribution is charged to your telephone or wireless account. H&r block taxes 2011 Credit card. H&r block taxes 2011    Contributions charged on your credit card are deductible in the year you make the charge. H&r block taxes 2011 Pay-by-phone account. H&r block taxes 2011    Contributions made through a pay-by-phone account are considered delivered on the date the financial institution pays the amount. H&r block taxes 2011 Stock certificate. H&r block taxes 2011   A properly endorsed stock certificate is considered delivered on the date of mailing or other delivery to the charity or to the charity's agent. H&r block taxes 2011 However, if you give a stock certificate to your agent or to the issuing corporation for transfer to the name of the charity, your contribution is not delivered until the date the stock is transferred on the books of the corporation. H&r block taxes 2011 Promissory note. H&r block taxes 2011   If you issue and deliver a promissory note to a charity as a contribution, it is not a contribution until you make the note payments. H&r block taxes 2011 Option. H&r block taxes 2011    If you grant a charity an option to buy real property at a bargain price, it is not a contribution until the organization exercises the option. H&r block taxes 2011 Borrowed funds. H&r block taxes 2011   If you contribute borrowed funds, you can deduct the contribution in the year you deliver the funds to the charity, regardless of when you repay the loan. H&r block taxes 2011 Limits on Deductions The amount you can deduct for charitable contributions cannot be more than 50% of your adjusted gross income (AGI). H&r block taxes 2011 Your deduction may be further limited to 30% or 20% of your AGI, depending on the type of property you give and the type of organization you give it to. H&r block taxes 2011 If your total contributions for the year are 20% or less of your AGI, these limits do not apply to you. H&r block taxes 2011 The limits are discussed in detail under Limits on Deductions in Publication 526. H&r block taxes 2011 A higher limit applies to certain qualified conservation contributions. H&r block taxes 2011 See Publication 526 for details. H&r block taxes 2011 Carryovers You can carry over any contributions you cannot deduct in the current year because they exceed your adjusted-gross-income limits. H&r block taxes 2011 You can deduct the excess in each of the next 5 years until it is used up, but not beyond that time. H&r block taxes 2011 For more information, see Carryovers in Publication 526. H&r block taxes 2011 Records To Keep You must keep records to prove the amount of the contributions you make during the year. H&r block taxes 2011 The kind of records you must keep depends on the amount of your contributions and whether they are: Cash contributions, Noncash contributions, or Out-of-pocket expenses when donating your services. H&r block taxes 2011 Note. H&r block taxes 2011 An organization generally must give you a written statement if it receives a payment from you that is more than $75 and is partly a contribution and partly for goods or services. H&r block taxes 2011 (See Contributions From Which You Benefit under Contributions You Can Deduct, earlier. H&r block taxes 2011 ) Keep the statement for your records. H&r block taxes 2011 It may satisfy all or part of the recordkeeping requirements explained in the following discussions. H&r block taxes 2011 Cash Contributions Cash contributions include those paid by cash, check, electronic funds transfer, debit card, credit card, or payroll deduction. H&r block taxes 2011 You cannot deduct a cash contribution, regardless of the amount, unless you keep one of the following. H&r block taxes 2011 A bank record that shows the name of the qualified organization, the date of the contribution, and the amount of the contribution. H&r block taxes 2011 Bank records may include: A canceled check, A bank or credit union statement, or A credit card statement. H&r block taxes 2011 A receipt (or a letter or other written communication) from the qualified organization showing the name of the organization, the date of the contribution, and the amount of the contribution. H&r block taxes 2011 The payroll deduction records described next. H&r block taxes 2011 Payroll deductions. H&r block taxes 2011   If you make a contribution by payroll deduction, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the date and amount of the contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization. H&r block taxes 2011 If your employer withheld $250 or more from a single paycheck, see Contributions of $250 or More , next. H&r block taxes 2011 Contributions of $250 or More You can claim a deduction for a contribution of $250 or more only if you have an acknowledgment of your contribution from the qualified organization or certain payroll deduction records. H&r block taxes 2011 If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that lists each contribution and the date of each contribution and shows your total contributions. H&r block taxes 2011 Amount of contribution. H&r block taxes 2011   In figuring whether your contribution is $250 or more, do not combine separate contributions. H&r block taxes 2011 For example, if you gave your church $25 each week, your weekly payments do not have to be combined. H&r block taxes 2011 Each payment is a separate contribution. H&r block taxes 2011   If contributions are made by payroll deduction, the deduction from each paycheck is treated as a separate contribution. H&r block taxes 2011   If you made a payment that is partly for goods and services, as described earlier under Contributions From Which You Benefit , your contribution is the amount of the payment that is more than the value of the goods and services. H&r block taxes 2011 Acknowledgment. H&r block taxes 2011   The acknowledgment must meet these tests. H&r block taxes 2011 It must be written. H&r block taxes 2011 It must include: The amount of cash you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), A description and good faith estimate of the value of any goods or services described in (b) (other than intangible religious benefits), and A statement that the only benefit you received was an intangible religious benefit, if that was the case. H&r block taxes 2011 The acknowledgment does not need to describe or estimate the value of an intangible religious benefit. H&r block taxes 2011 An intangible religious benefit is a benefit that generally is not sold in commercial transactions outside a donative (gift) context. H&r block taxes 2011 An example is admission to a religious ceremony. H&r block taxes 2011 You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. H&r block taxes 2011   If the acknowledgment does not show the date of the contribution, you must also have a bank record or receipt, as described earlier, that does show the date of the contribution. H&r block taxes 2011 If the acknowledgment shows the date of the contribution and meets the other tests just described, you do not need any other records. H&r block taxes 2011 Payroll deductions. H&r block taxes 2011   If you make a contribution by payroll deduction and your employer withholds $250 or more from a single paycheck, you must keep: A pay stub, Form W-2, or other document furnished by your employer that shows the amount withheld as a contribution, and A pledge card or other document prepared by or for the qualified organization that shows the name of the organization and states the organization does not provide goods or services in return for any contribution made to it by payroll deduction. H&r block taxes 2011 A single pledge card may be kept for all contributions made by payroll deduction regardless of amount as long as it contains all the required information. H&r block taxes 2011   If the pay stub, Form W-2, pledge card, or other document does not show the date of the contribution, you must have another document that does show the date of the contribution. H&r block taxes 2011 If the pay stub, Form W-2, pledge card, or other document shows the date of the contribution, you do not need any other records except those just described in (1) and (2). H&r block taxes 2011 Noncash Contributions For a contribution not made in cash, the records you must keep depend on whether your deduction for the contribution is: Less than $250, At least $250 but not more than $500, Over $500 but not more than $5,000, or Over $5,000. H&r block taxes 2011 Amount of deduction. H&r block taxes 2011   In figuring whether your deduction is $500 or more, combine your claimed deductions for all similar items of property donated to any charitable organization during the year. H&r block taxes 2011   If you received goods or services in return, as described earlier in Contributions From Which You Benefit , reduce your contribution by the value of those goods or services. H&r block taxes 2011 If you figure your deduction by reducing the fair market value of the donated property by its appreciation, as described earlier in Giving Property That Has Increased in Value , your contribution is the reduced amount. H&r block taxes 2011 Deductions of Less Than $250 If you make any noncash contribution, you must get and keep a receipt from the charitable organization showing: The name of the charitable organization, The date and location of the charitable contribution, and A reasonably detailed description of the property. H&r block taxes 2011 A letter or other written communication from the charitable organization acknowledging receipt of the contribution and containing the information in (1), (2), and (3) will serve as a receipt. H&r block taxes 2011 You are not required to have a receipt where it is impractical to get one (for example, if you leave property at a charity's unattended drop site). H&r block taxes 2011 Additional records. H&r block taxes 2011   You must also keep reliable written records for each item of contributed property. H&r block taxes 2011 Your written records must include the following information. H&r block taxes 2011 The name and address of the organization to which you contributed. H&r block taxes 2011 The date and location of the contribution. H&r block taxes 2011 A description of the property in detail reasonable under the circumstances. H&r block taxes 2011 For a security, keep the name of the issuer, the type of security, and whether it is regularly traded on a stock exchange or in an over-the-counter market. H&r block taxes 2011 The fair market value of the property at the time of the contribution and how you figured the fair market value. H&r block taxes 2011 If it was determined by appraisal, keep a signed copy of the appraisal. H&r block taxes 2011 The cost or other basis of the property, if you must reduce its fair market value by appreciation. H&r block taxes 2011 Your records should also include the amount of the reduction and how you figured it. H&r block taxes 2011 The amount you claim as a deduction for the tax year as a result of the contribution, if you contribute less than your entire interest in the property during the tax year. H&r block taxes 2011 Your records must include the amount you claimed as a deduction in any earlier years for contributions of other interests in this property. H&r block taxes 2011 They must also include the name and address of each organization to which you contributed the other interests, the place where any such tangible property is located or kept, and the name of any person in possession of the property, other than the organization to which you contributed it. H&r block taxes 2011 The terms of any conditions attached to the contribution of property. H&r block taxes 2011 Deductions of At Least $250 But Not More Than $500 If you claim a deduction of at least $250 but not more than $500 for a noncash charitable contribution, you must get and keep an acknowledgment of your contribution from the qualified organization. H&r block taxes 2011 If you made more than one contribution of $250 or more, you must have either a separate acknowledgment for each or one acknowledgment that shows your total contributions. H&r block taxes 2011 The acknowledgment must contain the information in items (1) through (3) under Deductions of Less Than $250 , earlier, and your written records must include the information listed in that discussion under Additional records . H&r block taxes 2011 The acknowledgment must also meet these tests. H&r block taxes 2011 It must be written. H&r block taxes 2011 It must include: A description (but not necessarily the value) of any property you contributed, Whether the qualified organization gave you any goods or services as a result of your contribution (other than certain token items and membership benefits), and A description and good faith estimate of the value of any goods or services described in (b). H&r block taxes 2011 If the only benefit you received was an intangible religious benefit (such as admission to a religious ceremony) that generally is not sold in a commercial transaction outside the donative context, the acknowledgment must say so and does not need to describe or estimate the value of the benefit. H&r block taxes 2011 You must get it on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. H&r block taxes 2011 Deductions Over $500 You are required to give additional information if you claim a deduction over $500 for noncash charitable contributions. H&r block taxes 2011 See Records To Keep in Publication 526 for more information. H&r block taxes 2011 Out-of-Pocket Expenses If you give services to a qualified organization and have unreimbursed out-of-pocket expenses related to those services, the following two rules apply. H&r block taxes 2011 You must have adequate records to prove the amount of the expenses. H&r block taxes 2011 If any of your unreimbursed out-of-pocket expenses, considered separately, are $250 or more (for example, you pay $250 or more for an airline ticket to attend a convention of a qualified organization as a chosen representative), you must get an acknowledgment from the qualified organization that contains: A description of the services you provided, A statement of whether or not the organization provided you any goods or services to reimburse you for the expenses you incurred, A description and a good faith estimate of the value of any goods or services (other than intangible religious benefits) provided to reimburse you, and A statement that the only benefit you received was an intangible religious benefit, if that was the case. H&r block taxes 2011 The acknowledgment does not need to describe or estimate the value of an intangible religious benefit (defined earlier under Acknowledgment ). H&r block taxes 2011 You must get the acknowledgment on or before the earlier of: The date you file your return for the year you make the contribution, or The due date, including extensions, for filing the return. H&r block taxes 2011 Car expenses. H&r block taxes 2011   If you claim expenses directly related to use of your car in giving services to a qualified organization, you must keep reliable written records of your expenses. H&r block taxes 2011 Whether your records are considered reliable depends on all the facts and circumstances. H&r block taxes 2011 Generally, they may be considered reliable if you made them regularly and at or near the time you had the expenses. H&r block taxes 2011   For example, your records might show the name of the organization you were serving and the dates you used your car for a charitable purpose. H&r block taxes 2011 If you use the standard mileage rate of 14 cents a mile, your records must show the miles you drove your car for the charitable purpose. H&r block taxes 2011 If you deduct your actual expenses, your records must show the costs of operating the car that are directly related to a charitable purpose. H&r block taxes 2011   See Car expenses under Out-of-Pocket Expenses in Giving Services, earlier, for the expenses you can deduct. H&r block taxes 2011 How To Report Report your charitable contributions on Schedule A (Form 1040). H&r block taxes 2011 If your total deduction for all noncash contributions for the year is over $500, you must also file Form 8283. H&r block taxes 2011 See How To Report in Publication 526 for more information. H&r block taxes 2011 Prev  Up  Next   Home   More Online Publications
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Page Last Reviewed or Updated: 13-Mar-2014

The H&r Block Taxes 2011

H&r block taxes 2011 5. H&r block taxes 2011   Exemptions, Deductions, and Credits Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Items Related to Excluded Income Exemptions Contributions to Foreign Charitable Organizations Moving ExpensesAllocation of Moving Expenses Forms To File Contributions to Individual Retirement Arrangements Taxes of Foreign Countries and U. H&r block taxes 2011 S. H&r block taxes 2011 PossessionsCredit for Foreign Income Taxes Deduction for Foreign Income Taxes Deduction for Other Foreign Taxes How To Report Deductions Topics - This chapter discusses: The rules concerning items related to excluded income, Exemptions, Contributions to foreign charitable organizations, Moving expenses, Contributions to individual retirement arrangements (IRAs), Taxes of foreign countries and U. H&r block taxes 2011 S. H&r block taxes 2011 possessions, and How to report deductions. H&r block taxes 2011 Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 514 Foreign Tax Credit for Individuals 521 Moving Expenses 523 Selling Your Home 590 Individual Retirement Arrangements (IRAs) 597 Information on the United States—Canada Income Tax Treaty Form (and Instructions) 1116 Foreign Tax Credit 2106 Employee Business Expenses 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 3903 Moving Expenses Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business SS-5 Application for a Social Security Card W-7 Application for IRS Individual Taxpayer Identification Number See chapter 7 for information about getting these publications and forms. H&r block taxes 2011 Items Related to Excluded Income U. H&r block taxes 2011 S. H&r block taxes 2011 citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. H&r block taxes 2011 If you choose to exclude foreign earned income or housing amounts, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. H&r block taxes 2011 This includes any expenses, losses, and other normally deductible items that are allocable to the excluded income. H&r block taxes 2011 You can deduct only those expenses connected with earning includible income. H&r block taxes 2011 These rules apply only to items definitely related to the excluded earned income and they do not apply to other items that are not definitely related to any particular type of gross income. H&r block taxes 2011 These rules do not apply to items such as: Personal exemptions, Qualified retirement contributions, Alimony payments, Charitable contributions, Medical expenses, Mortgage interest, or Real estate taxes on your personal residence. H&r block taxes 2011 For purposes of these rules, your housing deduction is not treated as allocable to your excluded income, but the deduction for self- employment tax is. H&r block taxes 2011 If you receive foreign earned income in a tax year after the year in which you earned it, you may have to file an amended return for the earlier year to properly adjust the amounts of deductions, credits, or exclusions allocable to your foreign earned income and housing exclusions. H&r block taxes 2011 Example. H&r block taxes 2011 In 2012, you had $90,400 of foreign earned income and $9,500 of deductions allocable to your foreign earned income. H&r block taxes 2011 You did not have a housing exclusion. H&r block taxes 2011 Because you excluded all of your foreign earned income, you would not have been able to claim any of the deductions on your 2012 return. H&r block taxes 2011 In 2013, you received a $12,000 bonus for work you did abroad in 2012. H&r block taxes 2011 You can exclude $4,700 of the bonus because the limit on the foreign earned income exclusion for 2012 was $95,100 and you have already excluded $90,400. H&r block taxes 2011 Since you must include $7,300 of the bonus ($12,000 − $4,700) for work you did in 2012 in income, you can file an amended return for 2012 to claim $677 of the deductions. H&r block taxes 2011 This is the deductions allocable to the foreign earned income ($9,500) multiplied by the includible portion of the foreign earned income ($7,300) and divided by the total foreign earned income for 2012 ($102,400). H&r block taxes 2011 Exemptions You can claim an exemption for your nonresident alien spouse on your separate return, provided your spouse has no gross income for U. H&r block taxes 2011 S. H&r block taxes 2011 tax purposes and is not the dependent of another U. H&r block taxes 2011 S. H&r block taxes 2011 taxpayer. H&r block taxes 2011 You also can claim exemptions for individuals who qualify as your dependents. H&r block taxes 2011 To be your dependent, the individual must be a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen, U. H&r block taxes 2011 S. H&r block taxes 2011 national, U. H&r block taxes 2011 S. H&r block taxes 2011 resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins. H&r block taxes 2011 Children. H&r block taxes 2011   Children usually are citizens or residents of the same country as their parents. H&r block taxes 2011 If you were a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen when your child was born, your child generally is a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen. H&r block taxes 2011 This is true even if the child's other parent is a nonresident alien, the child was born in a foreign country, and the child lives abroad with the other parent. H&r block taxes 2011   If you have a legally adopted child who is not a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen, U. H&r block taxes 2011 S. H&r block taxes 2011 resident, or U. H&r block taxes 2011 S. H&r block taxes 2011 national, the child meets the citizen requirement if you are a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen or U. H&r block taxes 2011 S. H&r block taxes 2011 national and the child lived with you as a member of your household all year. H&r block taxes 2011 Social security number. H&r block taxes 2011   You must include on your return the social security number (SSN) of each dependent for whom you claim an exemption. H&r block taxes 2011 To get a social security number for a dependent, apply at a Social Security office or U. H&r block taxes 2011 S. H&r block taxes 2011 consulate. H&r block taxes 2011 You must provide original or certified copies of documents to verify the dependent's age, identity, and citizenship, and complete Form SS-5. H&r block taxes 2011   If you do not have an SSN for a child who was born in 2013 and died in 2013, attach a copy of the child's birth certificate to your tax return. H&r block taxes 2011 Print “Died” in column (2) of line 6c of your Form 1040 or Form 1040A. H&r block taxes 2011   If your dependent is a nonresident alien who is not eligible to get a social security number, you must list the dependent's individual taxpayer identification number (ITIN) instead of an SSN. H&r block taxes 2011 To apply for an ITIN, file Form W-7 with the IRS. H&r block taxes 2011 It usually takes 6 to 10 weeks to get an ITIN. H&r block taxes 2011 Enter your dependent's ITIN wherever an SSN is requested on your tax return. H&r block taxes 2011 More information. H&r block taxes 2011   For more information about exemptions, see Publication 501. H&r block taxes 2011 Contributions to Foreign Charitable Organizations If you make contributions directly to a foreign church or other foreign charitable organization, you generally cannot deduct them. H&r block taxes 2011 Exceptions are explained under Canadian, Mexican, and Israeli charities, later. H&r block taxes 2011 You can deduct contributions to a U. H&r block taxes 2011 S. H&r block taxes 2011 organization that transfers funds to a charitable foreign organization if the U. H&r block taxes 2011 S. H&r block taxes 2011 organization controls the use of the funds by the foreign organization or if the foreign organization is just an administrative arm of the U. H&r block taxes 2011 S. H&r block taxes 2011 organization. H&r block taxes 2011 Canadian, Mexican, and Israeli charities. H&r block taxes 2011   Under the income tax treaties with Canada, Mexico and Israel, you may be able to deduct contributions to certain Canadian, Mexican, and Israeli charitable organizations. H&r block taxes 2011 Generally, you must have income from sources in Canada, Mexico, or Israel, and the organization must meet certain requirements. H&r block taxes 2011 See Publication 597, Information on the United States-Canada Income Tax Treaty, and Publication 526, Charitable Contributions, for more information. H&r block taxes 2011 Moving Expenses If you moved to a new home in 2013 because of your job or business, you may be able to deduct the expenses of your move. H&r block taxes 2011 Generally, to be deductible, the moving expenses must have been paid or incurred in connection with starting work at a new job location. H&r block taxes 2011 See Publication 521 for a complete discussion of the deduction for moving expenses and information about moves within the United States. H&r block taxes 2011 Foreign moves. H&r block taxes 2011   A foreign move is a move in connection with the start of work at a new job location outside the United States and its possessions. H&r block taxes 2011 A foreign move does not include a move back to the United States or its possessions. H&r block taxes 2011 Allocation of Moving Expenses When your new place of work is in a foreign country, your moving expenses are directly connected with the income earned in that foreign country. H&r block taxes 2011 If you exclude all or part of the income that you earn at the new location under the foreign earned income exclusion or the foreign housing exclusion, you cannot deduct the part of your moving expense that is allocable to the excluded income. H&r block taxes 2011 Also, you cannot deduct the part of the moving expense related to the excluded income for a move from a foreign country to the United States if you receive a reimbursement that you are able to treat as compensation for services performed in the foreign country. H&r block taxes 2011 Year to which expense is connected. H&r block taxes 2011   The moving expense is connected with earning the income (including reimbursements, as discussed in chapter 4 under Reimbursement of moving expenses ) either entirely in the year of the move or in 2 years. H&r block taxes 2011 It is connected with earning the income entirely in the year of the move if you qualify for the foreign earned income exclusion under the bona fide residence test or physical presence test for at least 120 days during that tax year. H&r block taxes 2011   If you do not qualify under either the bona fide residence test or the physical presence test for at least 120 days during the year of the move, the expense is connected with earning the income in 2 years. H&r block taxes 2011 The moving expense is connected with the year of the move and the following year if the move is from the United States to a foreign country. H&r block taxes 2011 The moving expense is connected with the year of the move and the preceding year if the move is from a foreign country to the United States. H&r block taxes 2011 Amount allocable to excluded income. H&r block taxes 2011   To figure the amount of your moving expense that is allocable to your excluded foreign earned income (and not deductible), you must multiply your total moving expense deduction by a fraction. H&r block taxes 2011 The numerator (top number) of the fraction is the total of your excluded foreign earned income and housing amounts for both years and the denominator (bottom number) of the fraction is your total foreign earned income for both years. H&r block taxes 2011 Example. H&r block taxes 2011 On November 1, 2012, you transfer to Monaco. H&r block taxes 2011 Your tax home is in Monaco, and you are a bona fide resident of Monaco for the entire tax year 2013. H&r block taxes 2011 In 2012, you paid $6,000 for allowable moving expenses for your move from the United States to Monaco. H&r block taxes 2011 You were fully reimbursed (under a nonaccountable plan) for these expenses in the same year. H&r block taxes 2011 The reimbursement is included in your income. H&r block taxes 2011 Your only other income consists of $16,000 wages earned in 2012 after the date of your move, and $100,100 wages earned in Monaco for 2013. H&r block taxes 2011 Because you did not meet the bona fide residence test for at least 120 days during 2012, the year of the move, the moving expenses are for services you performed in both 2012 and the following year, 2013. H&r block taxes 2011 Your total foreign earned income for both years is $122,100, consisting of $16,000 wages for 2012, $100,100 wages for 2013, and $6,000 moving expense reimbursement for both years. H&r block taxes 2011 You have no housing exclusion. H&r block taxes 2011 The total amount you can exclude is $113,190, consisting of the $97,600 full-year exclusion for 2013 and a $15,590 part-year exclusion for 2012 ($95,100 times the fraction of 60 qualifying bona fide residence days over 366 total days in the year). H&r block taxes 2011 To find the part of your moving expenses that is not deductible, multiply your $6,000 total expenses by the fraction $113,190 over $122,100. H&r block taxes 2011 The result, $5,562, is your nondeductible amount. H&r block taxes 2011    You must report the full amount of the moving expense reimbursement in the year in which you received the reimbursement. H&r block taxes 2011 In the preceding example, this year was 2012. H&r block taxes 2011 You attribute the reimbursement to both 2012 and 2013 only to figure the amount of foreign earned income eligible for exclusion for each year. H&r block taxes 2011 Move between foreign countries. H&r block taxes 2011   If you move between foreign countries, your moving expense is allocable to income earned in the year of the move if you qualified under either the bona fide residence test or the physical presence test for a period that includes at least 120 days in the year of the move. H&r block taxes 2011 New place of work in U. H&r block taxes 2011 S. H&r block taxes 2011   If your new place of work is in the United States, the deductible moving expenses are directly connected with the income earned in the United States. H&r block taxes 2011 If you treat a reimbursement from your employer as foreign earned income (see the discussion in chapter 4), you must allocate deductible moving expenses to foreign earned income. H&r block taxes 2011 Storage expenses. H&r block taxes 2011   These expenses are attributable to work you do during the year in which you incur the storage expenses. H&r block taxes 2011 You cannot deduct the amount allocable to excluded income. H&r block taxes 2011 Moving Expense Attributable to Foreign Earnings in 2 Years If your moving expense deduction is attributable to your foreign earnings in 2 years (the year of the move and the following year), you should request an extension of time to file your return for the year of the move until after the end of the second year. H&r block taxes 2011 By then, you should have all the information needed to properly figure the moving expense deduction. H&r block taxes 2011 See Extensions under When To File and Pay in chapter 1. H&r block taxes 2011 If you do not request an extension, you should figure the part of the moving expense that you cannot deduct because it is allocable to the foreign earned income you are excluding. H&r block taxes 2011 You do this by multiplying the moving expense by a fraction, the numerator (top number) of which is your excluded foreign earned income for the year of the move, and the denominator (bottom number) of which is your total foreign earned income for the year of the move. H&r block taxes 2011 Once you know your foreign earnings and exclusion for the following year, you must either: Adjust the moving expense deduction by filing an amended return for the year of the move, or Recapture any additional unallowable amount as income on your return for the following year. H&r block taxes 2011 If, after you make the final computation, you have an additional amount of allowable moving expense deduction, you can claim this only on an amended return for the year of the move. H&r block taxes 2011 You cannot claim it on the return for the second year. H&r block taxes 2011 Forms To File Report your moving expenses on Form 3903. H&r block taxes 2011 Report your moving expense deduction on line 26 of Form 1040. H&r block taxes 2011 If you must reduce your moving expenses by the amount allocable to excluded income (as explained later under How To Report Deductions ), attach a statement to your return showing how you figured this amount. H&r block taxes 2011 For more information about figuring moving expenses, see Publication 521. H&r block taxes 2011 Contributions to Individual Retirement Arrangements Contributions to your individual retirement arrangements (IRAs) that are traditional IRAs or Roth IRAs are generally limited to the lesser of $5,500 ($6,500 if 50 or older) or your compensation that is includible in your gross income for the tax year. H&r block taxes 2011 In determining compensation for this purpose, do not take into account amounts you exclude under either the foreign earned income exclusion or the foreign housing exclusion. H&r block taxes 2011 Do not reduce your compensation by the foreign housing deduction. H&r block taxes 2011 If you are covered by an employer retirement plan at work, your deduction for your contributions to your traditional IRAs is generally limited based on your modified adjusted gross income. H&r block taxes 2011 This is your adjusted gross income figured without taking into account the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. H&r block taxes 2011 Other modifications are also required. H&r block taxes 2011 For more information on IRAs, see Publication 590. H&r block taxes 2011 Taxes of Foreign Countries and U. H&r block taxes 2011 S. H&r block taxes 2011 Possessions You can take either a credit or a deduction for income taxes paid to a foreign country or a U. H&r block taxes 2011 S. H&r block taxes 2011 possession. H&r block taxes 2011 Taken as a deduction, foreign income taxes reduce your taxable income. H&r block taxes 2011 Taken as a credit, foreign income taxes reduce your tax liability. H&r block taxes 2011 You must treat all foreign income taxes the same way. H&r block taxes 2011 If you take a credit for any foreign income taxes, you cannot deduct any foreign income taxes. H&r block taxes 2011 However, you may be able to deduct other foreign taxes. H&r block taxes 2011 See Deduction for Other Foreign Taxes, later. H&r block taxes 2011 There is no rule to determine whether it is to your advantage to take a deduction or a credit for foreign income taxes. H&r block taxes 2011 In most cases, it is to your advantage to take foreign income taxes as a tax credit, which you subtract directly from your U. H&r block taxes 2011 S. H&r block taxes 2011 tax liability, rather than as a deduction in figuring taxable income. H&r block taxes 2011 However, if foreign income taxes were imposed at a high rate and the proportion of foreign income to U. H&r block taxes 2011 S. H&r block taxes 2011 income is small, a lower final tax may result from deducting the foreign income taxes. H&r block taxes 2011 In any event, you should figure your tax liability both ways and then use the one that is better for you. H&r block taxes 2011 You can make or change your choice within 10 years from the due date for filing the tax return on which you are entitled to take either the deduction or the credit. H&r block taxes 2011 Foreign income taxes. H&r block taxes 2011   These are generally income taxes you pay to any foreign country or possession of the United States. H&r block taxes 2011 Foreign income taxes on U. H&r block taxes 2011 S. H&r block taxes 2011 return. H&r block taxes 2011   Foreign income taxes can only be taken as a credit on Form 1040, line 47, or as an itemized deduction on Schedule A. H&r block taxes 2011 These amounts cannot be included as withheld income taxes on Form 1040, line 62. H&r block taxes 2011 Foreign taxes paid on excluded income. H&r block taxes 2011   You cannot take a credit or deduction for foreign income taxes paid on earnings you exclude from tax under any of the following. H&r block taxes 2011 Foreign earned income exclusion. H&r block taxes 2011 Foreign housing exclusion. H&r block taxes 2011 Possession exclusion. H&r block taxes 2011 If your wages are completely excluded, you cannot deduct or take a credit for any of the foreign taxes paid on your wages. H&r block taxes 2011   If only part of your wages is excluded, you cannot deduct or take a credit for the foreign income taxes allocable to the excluded part. H&r block taxes 2011 You find the taxes allocable to your excluded wages by applying a fraction to the foreign taxes paid on foreign earned income received during the tax year. H&r block taxes 2011 The numerator (top number) of the fraction is your excluded foreign earned income received during the tax year minus deductible expenses allocable to that income (not including the foreign housing deduction). H&r block taxes 2011 The denominator (bottom number) of the fraction is your total foreign earned income received during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). H&r block taxes 2011   If foreign law taxes both earned income and some other type of income and the taxes on the other type cannot be separated, the denominator of the fraction is the total amount of income subject to foreign tax minus deductible expenses allocable to that income. H&r block taxes 2011    If you take a foreign tax credit for tax on income you could have excluded under your choice to exclude foreign earned income or your choice to exclude foreign housing costs, one or both of the choices may be considered revoked. H&r block taxes 2011 Credit for Foreign Income Taxes If you take the foreign tax credit, you may have to file Form 1116 with Form 1040. H&r block taxes 2011 Form 1116 is used to figure the amount of foreign tax paid or accrued that can be claimed as a foreign tax credit. H&r block taxes 2011 Do not include the amount of foreign tax paid or accrued as withheld federal income taxes on Form 1040, line 62. H&r block taxes 2011 The foreign income tax for which you can claim a credit is the amount of legal and actual tax liability you pay or accrue during the year. H&r block taxes 2011 The amount for which you can claim a credit is not necessarily the amount withheld by the foreign country. H&r block taxes 2011 You cannot take a foreign tax credit for income tax you paid to a foreign country that would be refunded by the foreign country if you made a claim for refund. H&r block taxes 2011 Subsidies. H&r block taxes 2011   If a foreign country returns your foreign tax payments to you in the form of a subsidy, you cannot claim a foreign tax credit based on these payments. H&r block taxes 2011 This rule applies to a subsidy provided by any means that is determined, directly or indirectly, by reference to the amount of tax, or to the base used to figure the tax. H&r block taxes 2011   Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. H&r block taxes 2011 A credit is also not allowed if the subsidy is given to a person related to you, or persons who participated in a transaction or a related transaction with you. H&r block taxes 2011 Limit The foreign tax credit is limited to the part of your total U. H&r block taxes 2011 S. H&r block taxes 2011 tax that is in proportion to your taxable income from sources outside the United States compared to your total taxable income. H&r block taxes 2011 The allowable foreign tax credit cannot be more than your actual foreign tax liability. H&r block taxes 2011 Exemption from limit. H&r block taxes 2011   You will not be subject to this limit and will not have to file Form 1116 if you meet all three of the following requirements. H&r block taxes 2011 Your only foreign source income for the year is passive income (dividends, interest, royalties, etc. H&r block taxes 2011 ) that is reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT). H&r block taxes 2011 Your foreign taxes for the year that qualify for the credit are not more than $300 ($600 if you are filing a joint return) and are reported on a payee statement. H&r block taxes 2011 You elect this procedure. H&r block taxes 2011 If you make this election, you cannot carry back or carry over any unused foreign tax to or from this year. H&r block taxes 2011 Separate limit. H&r block taxes 2011   You must figure the limit on a separate basis with regard to “passive category income” and “general category income” (see the instructions for Form 1116). H&r block taxes 2011 Figuring the limit. H&r block taxes 2011   In figuring taxable income in each category, you take into account only the amount that you must include in income on your federal tax return. H&r block taxes 2011 Do not take any excluded amount into account. H&r block taxes 2011   To determine your taxable income in each category, deduct expenses and losses that are definitely related to that income. H&r block taxes 2011   Other expenses (such as itemized deductions or the standard deduction) not definitely related to specific items of income must be apportioned to the foreign income in each category by multiplying them by a fraction. H&r block taxes 2011 The numerator (top number) of the fraction is your gross foreign income in the separate limit category. H&r block taxes 2011 The denominator (bottom number) of the fraction is your gross income from all sources. H&r block taxes 2011 For this purpose, gross income includes income that is excluded under the foreign earned income provisions but does not include any other exempt income. H&r block taxes 2011 You must use special rules for deducting interest expenses. H&r block taxes 2011 For more information on allocating and apportioning your deductions, see Publication 514. H&r block taxes 2011 Exemptions. H&r block taxes 2011   Do not take the deduction for exemptions for yourself, your spouse, or your dependents in figuring taxable income for purposes of the limit. H&r block taxes 2011 Recapture of foreign losses. H&r block taxes 2011   If you have an overall foreign loss and the loss reduces your U. H&r block taxes 2011 S. H&r block taxes 2011 source income (resulting in a reduction of your U. H&r block taxes 2011 S. H&r block taxes 2011 tax liability), you must recapture the loss in later years when you have taxable income from foreign sources. H&r block taxes 2011 This is done by treating a part of your taxable income from foreign sources in later years as U. H&r block taxes 2011 S. H&r block taxes 2011 source income. H&r block taxes 2011 This reduces the numerator of the limiting fraction and the resulting foreign tax credit limit. H&r block taxes 2011 Recapture of domestic losses. H&r block taxes 2011   If you have an overall domestic loss (resulting in no U. H&r block taxes 2011 S. H&r block taxes 2011 tax liability), you cannot claim a foreign tax credit for taxes paid during that year. H&r block taxes 2011 You must recapture the loss in later years when you have U. H&r block taxes 2011 S. H&r block taxes 2011 source taxable income. H&r block taxes 2011 This is done by treating a part of your taxable income from U. H&r block taxes 2011 S. H&r block taxes 2011 sources in later years as foreign source income. H&r block taxes 2011 This increases the numerator of the limiting fraction and the resulting foreign tax credit limit. H&r block taxes 2011 Foreign tax credit carryback and carryover. H&r block taxes 2011   The amount of foreign income tax not allowed as a credit because of the limit can be carried back 1 year and carried forward 10 years. H&r block taxes 2011   More information on figuring the foreign tax credit can be found in Publication 514. H&r block taxes 2011 Deduction for Foreign Income Taxes Instead of taking the foreign tax credit, you can deduct foreign income taxes as an itemized deduction on Schedule A (Form 1040). H&r block taxes 2011 You can deduct only foreign income taxes paid on income that is subject to U. H&r block taxes 2011 S. H&r block taxes 2011 tax. H&r block taxes 2011 You cannot deduct foreign taxes paid on earnings you exclude from tax under any of the following. H&r block taxes 2011 Foreign earned income exclusion. H&r block taxes 2011 Foreign housing exclusion. H&r block taxes 2011 Possession exclusion. H&r block taxes 2011 Example. H&r block taxes 2011 You are a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen and qualify to exclude your foreign earned income. H&r block taxes 2011 Your excluded wages in Country X are $70,000 on which you paid income tax of $10,000. H&r block taxes 2011 You received dividends from Country X of $2,000 on which you paid income tax of $600. H&r block taxes 2011 You can deduct the $600 tax payment because the dividends relating to it are subject to U. H&r block taxes 2011 S. H&r block taxes 2011 tax. H&r block taxes 2011 Because you exclude your wages, you cannot deduct the income tax of $10,000. H&r block taxes 2011 If you exclude only a part of your wages, see the earlier discussion under Foreign taxes paid on excluded income. H&r block taxes 2011 Deduction for Other Foreign Taxes You can deduct real property taxes you pay that are imposed on you by a foreign country. H&r block taxes 2011 You take this deduction on Schedule A (Form 1040). H&r block taxes 2011 You cannot deduct other foreign taxes, such as personal property taxes, unless you incurred the expenses in a trade or business or in the production of income. H&r block taxes 2011 On the other hand, you generally can deduct personal property taxes when you pay them to U. H&r block taxes 2011 S. H&r block taxes 2011 possessions. H&r block taxes 2011 But if you claim the possession exclusion, see Publication 570. H&r block taxes 2011 The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. H&r block taxes 2011 You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes imposed by a foreign country. H&r block taxes 2011 How To Report Deductions If you exclude foreign earned income or housing amounts, how you show your deductions on your tax return and how you figure the amount allocable to your excluded income depends on whether the expenses are used in figuring adjusted gross income (Form 1040, line 38) or are itemized deductions. H&r block taxes 2011 If you have deductions used in figuring adjusted gross income, enter the total amount for each of these items on the appropriate lines and schedules of Form 1040. H&r block taxes 2011 Generally, you figure the amount of a deduction related to the excluded income by multiplying the deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. H&r block taxes 2011 Enter the amount of the deduction(s) related to excluded income on line 44 of Form 2555. H&r block taxes 2011 If you have itemized deductions related to excluded income, enter on Schedule A (Form 1040) only the part not related to excluded income. H&r block taxes 2011 You figure that amount by subtracting from the total deduction the amount related to excluded income. H&r block taxes 2011 Generally, you figure the amount that is related to the excluded income by multiplying the total deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. H&r block taxes 2011 Attach a statement to your return showing how you figured the deductible amount. H&r block taxes 2011 Example 1. H&r block taxes 2011 You are a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen employed as an accountant. H&r block taxes 2011 Your tax home is in Germany for the entire tax year. H&r block taxes 2011 You meet the physical presence test. H&r block taxes 2011 Your foreign earned income for the year was $122,000 and your investment income was $10,380. H&r block taxes 2011 After excluding $97,600, your AGI is $34,780. H&r block taxes 2011 You had unreimbursed business expenses of $2,500 for travel and entertainment in earning your foreign income, of which $500 was for meals and entertainment. H&r block taxes 2011 These expenses are deductible only as miscellaneous deductions on Schedule A (Form 1040). H&r block taxes 2011 You also have $500 of miscellaneous expenses that are not related to your foreign income that you enter on line 23 of Schedule A. H&r block taxes 2011 You must fill out Form 2106. H&r block taxes 2011 On that form, reduce your deductible meal and entertainment expenses by 50% ($250). H&r block taxes 2011 You must reduce the remaining $2,250 of travel and entertainment expenses by 80% ($1,800) because you excluded 80% ($97,600/$122,000) of your foreign earned income. H&r block taxes 2011 You carry the remaining total of $450 to line 21 of Schedule A. H&r block taxes 2011 Add the $450 to the $500 that you have on line 23 and enter the total ($950) on line 24. H&r block taxes 2011 On line 26 of Schedule A, enter $696, which is 2% of your adjusted gross income of $34,780 (line 38, Form 1040) and subtract it from the amount on line 24. H&r block taxes 2011 Enter $254 on line 27 of Schedule A. H&r block taxes 2011 Example 2. H&r block taxes 2011 You are a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen, have a tax home in Spain, and meet the physical presence test. H&r block taxes 2011 You are self-employed and personal services produce the business income. H&r block taxes 2011 Your gross income was $116,931, business expenses $66,895, and net income (profit) $50,036. H&r block taxes 2011 You choose the foreign earned income exclusion and exclude $97,600 of your gross income. H&r block taxes 2011 Since your excluded income is 83. H&r block taxes 2011 47% of your total income, 83. H&r block taxes 2011 47% of your business expenses are not deductible. H&r block taxes 2011 Report your total income and expenses on Schedule C (Form 1040). H&r block taxes 2011 On Form 2555 you will show the following: Line 20a, $116,931, gross income, Lines 42 and 43, $97,600, foreign earned income exclusion, and Line 44, $55,837 (83. H&r block taxes 2011 47% × $66,895) business expenses attributable to the exclusion. H&r block taxes 2011 In this situation (Example 2), you cannot use Form 2555-EZ since you had self-employment income and business expenses. H&r block taxes 2011 Example 3. H&r block taxes 2011 Assume in Example 2 that both capital and personal services combine to produce the business income. H&r block taxes 2011 No more than 30% of your net income, or $15,011, assuming that this amount is a reasonable allowance for your services, is considered earned and can be excluded. H&r block taxes 2011 Your exclusion of $15,011 is 12. H&r block taxes 2011 84% of your gross income ($15,011 ÷ $116,931). H&r block taxes 2011 Because you excluded 12. H&r block taxes 2011 84% of your total income, $8,589 (. H&r block taxes 2011 1284 x $66,895) of your business expenses is attributable to the excluded income and is not deductible. H&r block taxes 2011 Example 4. H&r block taxes 2011 You are a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen, have a tax home in Brazil, and meet the physical presence test. H&r block taxes 2011 You are self-employed and both capital and personal services combine to produce business income. H&r block taxes 2011 Your gross income was $146,000, business expenses were $172,000, and your net loss was $26,000. H&r block taxes 2011 A reasonable allowance for the services you performed for the business is $77,000. H&r block taxes 2011 Because you incurred a net loss, the earned income limit of 30% of your net profit does not apply. H&r block taxes 2011 The $77,000 is foreign earned income. H&r block taxes 2011 If you choose to exclude the $77,000, you exclude 52. H&r block taxes 2011 74% of your gross income ($77,000 ÷ $146,000), and 52. H&r block taxes 2011 74% of your business expenses ($90,713) is attributable to that income and is not deductible. H&r block taxes 2011 Show your total income and expenses on Schedule C (Form 1040). H&r block taxes 2011 On Form 2555, exclude $77,000 and show $90,713 on line 44. H&r block taxes 2011 Subtract line 44 from line 43, and enter the difference as a negative (in parentheses) on line 45. H&r block taxes 2011 Because this amount is negative, enter it as a positive (no parentheses) on line 21, Form 1040, and combine it with your other income to arrive at total income on line 22 of Form 1040. H&r block taxes 2011 In this situation (Example 4), you would probably not want to choose the foreign earned income exclusion if this was the first year you were eligible. H&r block taxes 2011 If you had chosen the exclusion in an earlier year, you might want to revoke the choice for this year. H&r block taxes 2011 To do so would mean that you could not claim the exclusion again for the next 5 tax years without IRS approval. H&r block taxes 2011 See Choosing the Exclusion in chapter 4. H&r block taxes 2011 Example 5. H&r block taxes 2011 You are a U. H&r block taxes 2011 S. H&r block taxes 2011 citizen, have a tax home in Panama, and meet the bona fide residence test. H&r block taxes 2011 You have been performing services for clients as a partner in a firm that provides services exclusively in Panama. H&r block taxes 2011 Capital investment is not material in producing the partnership's income. H&r block taxes 2011 Under the terms of the partnership agreement, you are to receive 50% of the net profits. H&r block taxes 2011 The partnership received gross income of $244,000 and incurred operating expenses of $98,250. H&r block taxes 2011 Of the net profits of $145,750, you received $72,875 as your distributive share. H&r block taxes 2011 You choose to exclude $97,600 of your share of the gross income. H&r block taxes 2011 Because you exclude 80% ($97,600 ÷ $122,000) of your share of the gross income, you cannot deduct $39,300, 80% of your share of the operating expenses (. H&r block taxes 2011 80 × $49,125). H&r block taxes 2011 Report $72,875, your distributive share of the partnership net profit, on Schedule E (Form 1040), Supplemental Income and Loss. H&r block taxes 2011 On Form 2555, show $97,600 on line 42 and show $39,300 on line 44. H&r block taxes 2011 Your exclusion on Form 2555 is $58,300. H&r block taxes 2011 In this situation (Example 5), you cannot use Form 2555-EZ since you had earned income other than salaries and wages and you had business expenses. H&r block taxes 2011 Prev  Up  Next   Home   More Online Publications