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Help Filing An Amended Tax Return

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Help Filing An Amended Tax Return

Help filing an amended tax return Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. Help filing an amended tax return Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. Help filing an amended tax return However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Help filing an amended tax return Even then, the deductible amount of these types of expenses may be limited. Help filing an amended tax return Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Help filing an amended tax return To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). Help filing an amended tax return Additional tests for employee use. Help filing an amended tax return   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. Help filing an amended tax return You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. Help filing an amended tax return If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Help filing an amended tax return Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Help filing an amended tax return The area used for business can be a room or other separately identifiable space. Help filing an amended tax return The space does not need to be marked off by a permanent partition. Help filing an amended tax return You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Help filing an amended tax return Example. Help filing an amended tax return You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Help filing an amended tax return Your family also uses the den for recreation. Help filing an amended tax return The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Help filing an amended tax return Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Help filing an amended tax return You use part of your home for the storage of inventory or product samples (discussed next). Help filing an amended tax return You use part of your home as a daycare facility, discussed later under Daycare Facility . Help filing an amended tax return Note. Help filing an amended tax return With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Help filing an amended tax return Storage of inventory or product samples. Help filing an amended tax return    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. Help filing an amended tax return However, you must meet all the following tests. Help filing an amended tax return You sell products at wholesale or retail as your trade or business. Help filing an amended tax return You keep the inventory or product samples in your home for use in your trade or business. Help filing an amended tax return Your home is the only fixed location of your trade or business. Help filing an amended tax return You use the storage space on a regular basis. Help filing an amended tax return The space you use is a separately identifiable space suitable for storage. Help filing an amended tax return Example. Help filing an amended tax return Your home is the only fixed location of your business of selling mechanics' tools at retail. Help filing an amended tax return You regularly use half of your basement for storage of inventory and product samples. Help filing an amended tax return You sometimes use the area for personal purposes. Help filing an amended tax return The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Help filing an amended tax return Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Help filing an amended tax return Incidental or occasional business use is not regular use. Help filing an amended tax return You must consider all facts and circumstances in determining whether your use is on a regular basis. Help filing an amended tax return Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. Help filing an amended tax return If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. Help filing an amended tax return Example. Help filing an amended tax return You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. Help filing an amended tax return You do not make investments as a broker or dealer. Help filing an amended tax return So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Help filing an amended tax return Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Help filing an amended tax return To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. Help filing an amended tax return To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. Help filing an amended tax return Your home office will qualify as your principal place of business if you meet the following requirements. Help filing an amended tax return You use it exclusively and regularly for administrative or management activities of your trade or business. Help filing an amended tax return You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Help filing an amended tax return If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Help filing an amended tax return However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. Help filing an amended tax return Administrative or management activities. Help filing an amended tax return   There are many activities that are administrative or managerial in nature. Help filing an amended tax return The following are a few examples. Help filing an amended tax return Billing customers, clients, or patients. Help filing an amended tax return Keeping books and records. Help filing an amended tax return Ordering supplies. Help filing an amended tax return Setting up appointments. Help filing an amended tax return Forwarding orders or writing reports. Help filing an amended tax return Administrative or management activities performed at other locations. Help filing an amended tax return   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Help filing an amended tax return You have others conduct your administrative or management activities at locations other than your home. Help filing an amended tax return (For example, another company does your billing from its place of business. Help filing an amended tax return ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. Help filing an amended tax return You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Help filing an amended tax return You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Help filing an amended tax return (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Help filing an amended tax return ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Help filing an amended tax return Please click here for the text description of the image. Help filing an amended tax return Can you deduct business use of the home expenses? Example 1. Help filing an amended tax return John is a self-employed plumber. Help filing an amended tax return Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Help filing an amended tax return He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. Help filing an amended tax return John writes up estimates and records of work completed at his customers' premises. Help filing an amended tax return He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Help filing an amended tax return John does not do his own billing. Help filing an amended tax return He uses a local bookkeeping service to bill his customers. Help filing an amended tax return John's home office qualifies as his principal place of business for deducting expenses for its use. Help filing an amended tax return He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. Help filing an amended tax return His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Help filing an amended tax return He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Help filing an amended tax return Example 2. Help filing an amended tax return Pamela is a self-employed sales representative for several different product lines. Help filing an amended tax return She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. Help filing an amended tax return She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Help filing an amended tax return Pamela's business is selling products to customers at various locations throughout her territory. Help filing an amended tax return To make these sales, she regularly visits customers to explain the available products and take orders. Help filing an amended tax return Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Help filing an amended tax return She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Help filing an amended tax return The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. Help filing an amended tax return She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. Help filing an amended tax return Example 3. Help filing an amended tax return Paul is a self-employed anesthesiologist. Help filing an amended tax return He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Help filing an amended tax return One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Help filing an amended tax return Paul very rarely uses the office the hospital provides. Help filing an amended tax return He uses a room in his home that he has converted to an office. Help filing an amended tax return He uses this room exclusively and regularly to conduct all the following activities. Help filing an amended tax return Contacting patients, surgeons, and hospitals regarding scheduling. Help filing an amended tax return Preparing for treatments and presentations. Help filing an amended tax return Maintaining billing records and patient logs. Help filing an amended tax return Satisfying continuing medical education requirements. Help filing an amended tax return Reading medical journals and books. Help filing an amended tax return Paul's home office qualifies as his principal place of business for deducting expenses for its use. Help filing an amended tax return He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. Help filing an amended tax return His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. Help filing an amended tax return His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. Help filing an amended tax return He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Help filing an amended tax return Example 4. Help filing an amended tax return Kathleen is employed as a teacher. Help filing an amended tax return She is required to teach and meet with students at the school and to grade papers and tests. Help filing an amended tax return The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. Help filing an amended tax return The school does not require her to work at home. Help filing an amended tax return Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Help filing an amended tax return She uses this home office exclusively and regularly for the administrative duties of her teaching job. Help filing an amended tax return Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. Help filing an amended tax return Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. Help filing an amended tax return More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Help filing an amended tax return Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. Help filing an amended tax return You must use the home office exclusively and regularly for one or more of the following purposes. Help filing an amended tax return As the principal place of business for one or more of your trades or businesses. Help filing an amended tax return As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. Help filing an amended tax return If your home office is a separate structure, in connection with one or more of your trades or businesses. Help filing an amended tax return You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Help filing an amended tax return e. Help filing an amended tax return , personal) activities. Help filing an amended tax return If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Help filing an amended tax return See Rental to employer , later, if you rent part of your home to your employer. Help filing an amended tax return Example. Help filing an amended tax return Tracy White is employed as a teacher. Help filing an amended tax return Her principal place of work is the school, which provides her office space to do her school work. Help filing an amended tax return She also has a mail order jewelry business. Help filing an amended tax return All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Help filing an amended tax return If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Help filing an amended tax return If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. Help filing an amended tax return As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Help filing an amended tax return She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. Help filing an amended tax return Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. Help filing an amended tax return You physically meet with patients, clients, or customers on your premises. Help filing an amended tax return Their use of your home is substantial and integral to the conduct of your business. Help filing an amended tax return Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Help filing an amended tax return Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Help filing an amended tax return The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. Help filing an amended tax return Example. Help filing an amended tax return June Quill, a self-employed attorney, works 3 days a week in her city office. Help filing an amended tax return She works 2 days a week in her home office used only for business. Help filing an amended tax return She regularly meets clients there. Help filing an amended tax return Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Help filing an amended tax return Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. Help filing an amended tax return The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Help filing an amended tax return Example. Help filing an amended tax return John Berry operates a floral shop in town. Help filing an amended tax return He grows the plants for his shop in a greenhouse behind his home. Help filing an amended tax return He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. Help filing an amended tax return Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. Help filing an amended tax return When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. Help filing an amended tax return Electing to use the simplified method. Help filing an amended tax return   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Help filing an amended tax return You choose whether or not to figure your deduction using the simplified method each taxable year. Help filing an amended tax return See Using the Simplified Method , later. Help filing an amended tax return Rental to employer. Help filing an amended tax return   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. Help filing an amended tax return You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Help filing an amended tax return However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. Help filing an amended tax return Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. Help filing an amended tax return You will also need to figure the percentage of your home used for business and the limit on the deduction. Help filing an amended tax return If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. Help filing an amended tax return If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. Help filing an amended tax return Part-year use. Help filing an amended tax return   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. Help filing an amended tax return For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. Help filing an amended tax return Expenses related to tax-exempt income. Help filing an amended tax return   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Help filing an amended tax return However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. Help filing an amended tax return No deduction is allowed for other expenses related to the tax-exempt allowance. Help filing an amended tax return   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. Help filing an amended tax return Actual Expenses You must divide the expenses of operating your home between personal and business use. Help filing an amended tax return The part of a home operating expense you can use to figure your deduction depends on both of the following. Help filing an amended tax return Whether the expense is direct, indirect, or unrelated. Help filing an amended tax return The percentage of your home used for business. Help filing an amended tax return Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Help filing an amended tax return Table 1. Help filing an amended tax return Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Help filing an amended tax return Deductible in full. Help filing an amended tax return *   Examples:  Painting or repairs  only in the area  used for business. Help filing an amended tax return Exception: May be only partially  deductible in a daycare facility. Help filing an amended tax return See Daycare Facility , later. Help filing an amended tax return Indirect Expenses for  keeping up and running your  entire home. Help filing an amended tax return Deductible based on the percentage of your home used for business. Help filing an amended tax return *   Examples:  Insurance, utilities, and  general repairs. Help filing an amended tax return   Unrelated Expenses only for  the parts of your  home not used  for business. Help filing an amended tax return Not deductible. Help filing an amended tax return   Examples:  Lawn care or painting  a room not used  for business. Help filing an amended tax return   *Subject to the deduction limit, discussed later. Help filing an amended tax return Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Help filing an amended tax return Certain expenses are deductible whether or not you use your home for business. Help filing an amended tax return If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. Help filing an amended tax return These expenses include the following. Help filing an amended tax return Real estate taxes. Help filing an amended tax return Qualified mortgage insurance premiums. Help filing an amended tax return Deductible mortgage interest. Help filing an amended tax return Casualty losses. Help filing an amended tax return Other expenses are deductible only if you use your home for business. Help filing an amended tax return You can use the business percentage of these expenses to figure your total business use of the home deduction. Help filing an amended tax return These expenses generally include (but are not limited to) the following. Help filing an amended tax return Depreciation (covered under Depreciating Your Home , later). Help filing an amended tax return Insurance. Help filing an amended tax return Rent paid for the use of property you do not own but use in your trade or business. Help filing an amended tax return Repairs. Help filing an amended tax return Security system. Help filing an amended tax return Utilities and services. Help filing an amended tax return Real estate taxes. Help filing an amended tax return   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. Help filing an amended tax return   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Help filing an amended tax return Deductible mortgage interest. Help filing an amended tax return   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Help filing an amended tax return You can include interest on a second mortgage in this computation. Help filing an amended tax return If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. Help filing an amended tax return For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Help filing an amended tax return Qualified mortgage insurance premiums. Help filing an amended tax return   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Help filing an amended tax return You can include premiums for insurance on a second mortgage in this computation. Help filing an amended tax return If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. Help filing an amended tax return For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Help filing an amended tax return Casualty losses. Help filing an amended tax return    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. Help filing an amended tax return A direct expense is the loss on the portion of the property you use only in your business. Help filing an amended tax return Use the entire loss to figure the business use of the home deduction. Help filing an amended tax return An indirect expense is the loss on property you use for both business and personal purposes. Help filing an amended tax return Use only the business portion to figure the deduction. Help filing an amended tax return An unrelated expense is the loss on property you do not use in your business. Help filing an amended tax return Do not use any of the loss to figure the deduction. Help filing an amended tax return Example. Help filing an amended tax return You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Help filing an amended tax return A storm damages your roof. Help filing an amended tax return This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. Help filing an amended tax return You would complete Form 4684, Casualties and Thefts, to report your loss. Help filing an amended tax return You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. Help filing an amended tax return Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. Help filing an amended tax return Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. Help filing an amended tax return Forms and worksheets to use. Help filing an amended tax return   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Help filing an amended tax return If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Help filing an amended tax return You will also need to get Form 4684. Help filing an amended tax return More information. Help filing an amended tax return   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Help filing an amended tax return Insurance. Help filing an amended tax return   You can deduct the cost of insurance that covers the business part of your home. Help filing an amended tax return However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. Help filing an amended tax return You can deduct the business percentage of the part that applies to the following year in that year. Help filing an amended tax return Rent. Help filing an amended tax return   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. Help filing an amended tax return To figure your deduction, multiply your rent payments by the percentage of your home used for business. Help filing an amended tax return   If you own your home, you cannot deduct the fair rental value of your home. Help filing an amended tax return However, see Depreciating Your Home , later. Help filing an amended tax return Repairs. Help filing an amended tax return   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Help filing an amended tax return For example, a furnace repair benefits the entire home. Help filing an amended tax return If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Help filing an amended tax return   Repairs keep your home in good working order over its useful life. Help filing an amended tax return Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Help filing an amended tax return However, repairs are sometimes treated as a permanent improvement and are not deductible. Help filing an amended tax return See Permanent improvements , later, under Depreciating Your Home. Help filing an amended tax return Security system. Help filing an amended tax return   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. Help filing an amended tax return You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. Help filing an amended tax return Utilities and services. Help filing an amended tax return   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Help filing an amended tax return However, if you use part of your home for business, you can deduct the business part of these expenses. Help filing an amended tax return Generally, the business percentage for utilities is the same as the percentage of your home used for business. Help filing an amended tax return Telephone. Help filing an amended tax return   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Help filing an amended tax return e. Help filing an amended tax return , landline) is a nondeductible personal expense. Help filing an amended tax return However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Help filing an amended tax return Do not include these expenses as a cost of using your home for business. Help filing an amended tax return Deduct these charges separately on the appropriate form or schedule. Help filing an amended tax return For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). Help filing an amended tax return Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Help filing an amended tax return Depreciation is an allowance for the wear and tear on the part of your home used for business. Help filing an amended tax return You cannot depreciate the cost or value of the land. Help filing an amended tax return You recover its cost when you sell or otherwise dispose of the property. Help filing an amended tax return Before you figure your depreciation deduction, you need to know the following information. Help filing an amended tax return The month and year you started using your home for business. Help filing an amended tax return The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Help filing an amended tax return The cost of any improvements before and after you began using the property for business. Help filing an amended tax return The percentage of your home used for business. Help filing an amended tax return See Business Percentage , later. Help filing an amended tax return Adjusted basis defined. Help filing an amended tax return   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. Help filing an amended tax return For a discussion of adjusted basis, see Publication 551. Help filing an amended tax return Permanent improvements. Help filing an amended tax return   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Help filing an amended tax return Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Help filing an amended tax return    You must carefully distinguish between repairs and improvements. Help filing an amended tax return See Repairs , earlier, under Actual Expenses. Help filing an amended tax return You also must keep accurate records of these expenses. Help filing an amended tax return These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Help filing an amended tax return However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Help filing an amended tax return Example. Help filing an amended tax return You buy an older home and fix up two rooms as a beauty salon. Help filing an amended tax return You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Help filing an amended tax return Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Help filing an amended tax return However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. Help filing an amended tax return You cannot deduct any portion of it as a repair expense. Help filing an amended tax return Adjusting for depreciation deducted in earlier years. Help filing an amended tax return   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. Help filing an amended tax return If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. Help filing an amended tax return If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Help filing an amended tax return   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. Help filing an amended tax return   If you deducted the incorrect amount of depreciation, see Publication 946. Help filing an amended tax return Fair market value defined. Help filing an amended tax return   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Help filing an amended tax return Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. Help filing an amended tax return Figuring the depreciation deduction for the current year. Help filing an amended tax return   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Help filing an amended tax return   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). Help filing an amended tax return Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Help filing an amended tax return For more information on MACRS and other methods of depreciation, see Publication 946. Help filing an amended tax return   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Help filing an amended tax return The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Help filing an amended tax return The adjusted basis of your home (excluding land) on the date you began using your home for business. Help filing an amended tax return The fair market value of your home (excluding land) on the date you began using your home for business. Help filing an amended tax return Depreciation table. Help filing an amended tax return   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. Help filing an amended tax return Table 2. Help filing an amended tax return MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Help filing an amended tax return 461% 2 2. Help filing an amended tax return 247% 3 2. Help filing an amended tax return 033% 4 1. Help filing an amended tax return 819% 5 1. Help filing an amended tax return 605% 6 1. Help filing an amended tax return 391% 7 1. Help filing an amended tax return 177% 8 0. Help filing an amended tax return 963% 9 0. Help filing an amended tax return 749% 10 0. Help filing an amended tax return 535% 11 0. Help filing an amended tax return 321% 12 0. Help filing an amended tax return 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. Help filing an amended tax return See Publication 946 for the percentages for the remaining tax years of the recovery period. Help filing an amended tax return Example. Help filing an amended tax return In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Help filing an amended tax return This room is 8% of the square footage of his home. Help filing an amended tax return He bought the home in 2003 for $125,000. Help filing an amended tax return He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Help filing an amended tax return In May, the house had a fair market value of $165,000. Help filing an amended tax return He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Help filing an amended tax return The result is $9,200, his depreciable basis for the business part of the house. Help filing an amended tax return George files his return based on the calendar year. Help filing an amended tax return May is the 5th month of his tax year. Help filing an amended tax return He multiplies his depreciable basis of $9,200 by 1. Help filing an amended tax return 605% (. Help filing an amended tax return 01605), the percentage from the table for the 5th month. Help filing an amended tax return His depreciation deduction is $147. Help filing an amended tax return 66. Help filing an amended tax return Depreciating permanent improvements. Help filing an amended tax return   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Help filing an amended tax return Depreciate these costs as part of the cost of your home as explained earlier. Help filing an amended tax return The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. Help filing an amended tax return Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. Help filing an amended tax return For improvements made this year, the recovery period is 39 years. Help filing an amended tax return For the percentage to use for the first year, see Table 2, earlier. Help filing an amended tax return For more information on recovery periods, see Publication 946. Help filing an amended tax return Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Help filing an amended tax return Use the resulting percentage to figure the business part of the expenses for operating your entire home. Help filing an amended tax return You can use any reasonable method to determine the business percentage. Help filing an amended tax return The following are two commonly used methods for figuring the percentage. Help filing an amended tax return Divide the area (length multiplied by the width) used for business by the total area of your home. Help filing an amended tax return If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. Help filing an amended tax return Example 1. Help filing an amended tax return Your office is 240 square feet (12 feet × 20 feet). Help filing an amended tax return Your home is 1,200 square feet. Help filing an amended tax return Your office is 20% (240 ÷ 1,200) of the total area of your home. Help filing an amended tax return Your business percentage is 20%. Help filing an amended tax return Example 2. Help filing an amended tax return You use one room in your home for business. Help filing an amended tax return Your home has 10 rooms, all about equal size. Help filing an amended tax return Your office is 10% (1 ÷ 10) of the total area of your home. Help filing an amended tax return Your business percentage is 10%. Help filing an amended tax return Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. Help filing an amended tax return Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Help filing an amended tax return If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Help filing an amended tax return Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. Help filing an amended tax return The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Help filing an amended tax return These expenses are discussed in detail under Actual Expenses , earlier. Help filing an amended tax return The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Help filing an amended tax return If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Help filing an amended tax return Carryover of unallowed expenses. Help filing an amended tax return   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. Help filing an amended tax return They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Help filing an amended tax return Figuring the deduction limit and carryover. Help filing an amended tax return   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Help filing an amended tax return If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Help filing an amended tax return Example. Help filing an amended tax return You meet the requirements for deducting expenses for the business use of your home. Help filing an amended tax return You use 20% of your home for business. Help filing an amended tax return In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. Help filing an amended tax return    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). Help filing an amended tax return You also can deduct all of your business expenses not related to the use of your home ($2,000). Help filing an amended tax return Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Help filing an amended tax return Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Help filing an amended tax return You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Help filing an amended tax return More than one place of business. Help filing an amended tax return   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. Help filing an amended tax return In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. Help filing an amended tax return If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Help filing an amended tax return For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Help filing an amended tax return Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Help filing an amended tax return In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. Help filing an amended tax return The area you use to figure your deduction is limited to 300 square feet. Help filing an amended tax return See Simplified Amount , later, for information about figuring the amount of the deduction. Help filing an amended tax return For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Help filing an amended tax return R. Help filing an amended tax return B. Help filing an amended tax return 478, available at www. Help filing an amended tax return irs. Help filing an amended tax return gov/irb/2013-06_IRB/ar09. Help filing an amended tax return html. Help filing an amended tax return Actual expenses and depreciation of your home. Help filing an amended tax return   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. Help filing an amended tax return You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. Help filing an amended tax return The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Help filing an amended tax return If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. Help filing an amended tax return More information. Help filing an amended tax return   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Help filing an amended tax return R. Help filing an amended tax return B. Help filing an amended tax return 478, available at www. Help filing an amended tax return irs. Help filing an amended tax return gov/irb/2013-06_IRB/ar09. Help filing an amended tax return html. Help filing an amended tax return See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). Help filing an amended tax return Expenses deductible without regard to business use. Help filing an amended tax return   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. Help filing an amended tax return These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Help filing an amended tax return See Where To Deduct , later. Help filing an amended tax return If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). Help filing an amended tax return No deduction of carryover of actual expenses. Help filing an amended tax return   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. Help filing an amended tax return Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Help filing an amended tax return Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Help filing an amended tax return Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. Help filing an amended tax return An election for a taxable year, once made, is irrevocable. Help filing an amended tax return A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. Help filing an amended tax return Shared use. Help filing an amended tax return   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. Help filing an amended tax return More than one qualified business use. Help filing an amended tax return   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. Help filing an amended tax return More than one home. Help filing an amended tax return   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. Help filing an amended tax return You must figure the deduction for any other home using actual expenses. Help filing an amended tax return Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. Help filing an amended tax return To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. Help filing an amended tax return The allowable area of your home used in conducting the business. Help filing an amended tax return If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. Help filing an amended tax return The gross income from the business use of your home. Help filing an amended tax return The amount of the business expenses that are not related to the use of your home. Help filing an amended tax return If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. Help filing an amended tax return To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Help filing an amended tax return Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). Help filing an amended tax return See Allowable area and Space used regularly for daycare , later. Help filing an amended tax return Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. Help filing an amended tax return If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. Help filing an amended tax return See Gross income limitation , later. Help filing an amended tax return Take the smaller of the amounts from (1) and (2). Help filing an amended tax return This is the amount you can deduct for this qualified business use of your home using the simplified method. Help filing an amended tax return If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. Help filing an amended tax return If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. Help filing an amended tax return Allowable area. Help filing an amended tax return   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. Help filing an amended tax return Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. Help filing an amended tax return You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. Help filing an amended tax return Area used by a qualified joint venture. Help filing an amended tax return   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. Help filing an amended tax return Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Help filing an amended tax return Then, each spouse will figure the allowable area separately. Help filing an amended tax return For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Help filing an amended tax return Shared use. Help filing an amended tax return   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. Help filing an amended tax return You must allocate the shared space between you and the other person in a reasonable manner. Help filing an amended tax return Example. Help filing an amended tax return Kristin and Lindsey are roommates. Help filing an amended tax return Kristin uses 300 square feet of their home for a qualified business use. Help filing an amended tax return Lindsey uses 200 square feet of their home for a separate qualified business use. Help filing an amended tax return The qualified business uses share 100 square feet. Help filing an amended tax return In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. Help filing an amended tax return If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Help filing an amended tax return More than one qualified business use. Help filing an amended tax return   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. Help filing an amended tax return Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Help filing an amended tax return However, do not allocate more square feet to a qualified business use than you actually use for that business. Help filing an amended tax return Rental use. Help filing an amended tax return   The simplified method does not apply to rental use. Help filing an amended tax return A rental use that qualifies for the deduction must be figured using actual expenses. Help filing an amended tax return If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. Help filing an amended tax return You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. Help filing an amended tax return Part-year use or area changes. Help filing an amended tax return   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. Help filing an amended tax return You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. Help filing an amended tax return When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Help filing an amended tax return Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Help filing an amended tax return Example 1. Help filing an amended tax return Andy files his federal income tax return on a calendar year basis. Help filing an amended tax return On July 20, he began using 420 square feet of his home for a qualified business use. Help filing an amended tax return He continued to use the 420 square feet until the end of the year. Help filing an amended tax return His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). Help filing an amended tax return Example 2. Help filing an amended tax return Amy files her federal income tax return on a calendar year basis. Help filing an amended tax return On April 20, she began using 100 square feet of her home for a qualified business use. Help filing an amended tax return On August 5, she expanded the area of her qualified use to 330 square feet. Help filing an amended tax return Amy continued to use the 330 square feet until the end of the year. Help filing an amended tax return Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). Help filing an amended tax return Gross income limitation. Help filing an amended tax return   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. Help filing an amended tax return If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. Help filing an amended tax return Business expenses not related to use of the home. Help filing an amended tax return   These expenses relate to the business activity in the home, but not to the use of the home itself. Help filing an amended tax return You can still deduct business expenses that are unrelated to the use of the home. Help filing an amended tax return See Where To Deduct , later. Help filing an amended tax return Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Help filing an amended tax return Space used regularly for daycare. Help filing an amended tax return   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. Help filing an amended tax return The reduced rate will equal the prescribed rate times a fraction. Help filing an amended tax return The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. Help filing an amended tax return You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Help filing an amended tax return    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. Help filing an amended tax return Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. Help filing an amended tax return To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Help filing an amended tax return You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. Help filing an amended tax return You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. Help filing an amended tax return You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Help filing an amended tax return Figuring the deduction. Help filing an amended tax return   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. Help filing an amended tax return    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. Help filing an amended tax return If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Help filing an amended tax return   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. Help filing an amended tax return A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. Help filing an amended tax return You do not have to keep records to show the specific hours the area was used for business. Help filing an amended tax return You can use the area occasionally for personal reasons. Help filing an amended tax return However, a room you use only occasionally for business does not qualify for the deduction. Help filing an amended tax return To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. Help filing an amended tax return You can compare the hours of business use in a week with the number of hours in a week (168). Help filing an amended tax return Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Help filing an amended tax return If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. Help filing an amended tax return Example 1. Help filing an amended tax return Mary Lake used her basement to operate a daycare business for children. Help filing an amended tax return She figures the business percentage of the basement as follows. Help filing an amended tax return Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. Help filing an amended tax return During the other 12 hours a day, the family could use the basement. Help filing an amended tax return She figures the percentage of time the basement was used for daycare as follows. Help filing an amended tax return Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. Help filing an amended tax return 25%           Mary can deduct 34. Help filing an amended tax return 25% of any direct expenses for the basement. Help filing an amended tax return However, because her indirect expenses are for the entire house, she can deduct only 17. Help filing an amended tax return 13% of the indirect expenses. Help filing an amended tax return She figures the percentage for her indirect expenses as follows. Help filing an amended tax return Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Help filing an amended tax return 25% Percentage for indirect expenses 17. Help filing an amended tax return 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. Help filing an amended tax return In Part II, Mary figures her deductible expenses. Help filing an amended tax return She uses the following information to complete Part II. Help filing an amended tax return Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. Help filing an amended tax return (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Help filing an amended tax return ) The expenses she paid for rent and utilities relate to her entire home. Help filing an amended tax return Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Help filing an amended tax return She shows the total of these expenses on line 22, column (b). Help filing an amended tax return For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Help filing an amended tax return Mary paid $500 to have the basement painted. Help filing an amended tax return The painting is a direct expense. Help filing an amended tax return However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. Help filing an amended tax return 25% – line 6). Help filing an amended tax return She enters $171 (34. Help filing an amended tax return 25% × $500) on line 19, column (a). Help filing an amended tax return She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Help filing an amended tax return This is less than her deduction limit (line 15), so she can deduct the entire amount. Help filing an amended tax return She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Help filing an amended tax return She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Help filing an amended tax return Example 2. Help filing an amended tax return Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. Help filing an amended tax return Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. Help filing an amended tax return Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. Help filing an amended tax return The basement and room are 60% of the total area of her home. Help filing an amended tax return In figuring her expenses, 34. Help filing an amended tax return 25% of any direct expenses for the basement and room are deductible. Help filing an amended tax return In addition, 20. Help filing an amended tax return 55% (34. Help filing an amended tax return 25% × 60%) of her indirect expenses are deductible. Help filing an amended tax return Example 3. Help filing an amended tax return Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Help filing an amended tax return She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. Help filing an amended tax return During the other 12 hours a day, the family could still use the basement. Help filing an amended tax return She figures the percentage of time the basement was used for business as follows. Help filing an amended tax return Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. Help filing an amended tax return 71%           Mary can deduct 35. Help filing an amended tax return 71% of any direct expenses for the basement. Help filing an amended tax return However, because her indirect expenses are for the entire house, she can deduct only 17. Help filing an amended tax return 86% of the indirect expenses. Help filing an amended tax return She figures the percentage for her indirect expenses as follows. Help filing an amended tax return Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Help filing an amended tax return 71% Percentage for indirect expenses 17. Help filing an amended tax return 86% Meals. Help filing an amended tax return   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Help filing an amended tax return Claim it as a separate deduction on your Schedule C (Form 1040). Help filing an amended tax return You can never deduct the cost of food consumed by you or your family. Help filing an amended tax return You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. Help filing an amended tax return However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. Help filing an amended tax return For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. Help filing an amended tax return   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Help filing an amended tax return   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. Help filing an amended tax return If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Help filing an amended tax return If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Help filing an amended tax return Do not include payments or expenses for your own children if they are eligible for the program. Help filing an amended tax return Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Help filing an amended tax return Standard meal and snack rates. Help filing an amended tax return   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. Help filing an amended tax return For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Help filing an amended tax return Family daycare is childcare provided to eligible children in the home of the family daycare provider. Help filing an amended tax return The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Help filing an amended tax return Eligible children are minor children receiving family daycare in the home of the family daycare provider. Help filing an amended tax return Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. Help filing an amended tax return Eligible children do not include children who receive daycare services for personal reasons of the provider. Help filing an amended tax return For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Help filing an amended tax return   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. Help filing an amended tax return You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. Help filing an amended tax return If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. Help filing an amended tax return   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. Help filing an amended tax return If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. Help filing an amended tax return However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. Help filing an amended tax return   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. Help filing an amended tax return The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. Help filing an amended tax return This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Help filing an amended tax return   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. Help filing an amended tax return These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Help filing an amended tax return     Table 3. Help filing an amended tax return Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an
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The Help Filing An Amended Tax Return

Help filing an amended tax return 4. Help filing an amended tax return   Foreign Earned Income and Housing: Exclusion – Deduction Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Qualifies for the Exclusions and the Deduction? RequirementsTax Home in Foreign Country Bona Fide Residence Test Physical Presence Test Waiver of Time Requirements U. Help filing an amended tax return S. Help filing an amended tax return Travel Restrictions Foreign Earned Income Foreign Earned Income ExclusionLimit on Excludable Amount Choosing the Exclusion Foreign Housing Exclusion and DeductionHousing Amount Foreign Housing Exclusion Foreign Housing Deduction Married Couples Form 2555 and Form 2555-EZForm 2555-EZ Form 2555 Topics - This chapter discusses: Who qualifies for the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, The requirements that must be met to claim either exclusion or the deduction, How to figure the foreign earned income exclusion, and How to figure the foreign housing exclusion and the foreign housing deduction. Help filing an amended tax return Useful Items - You may want to see: Publication 519 U. Help filing an amended tax return S. Help filing an amended tax return Tax Guide for Aliens 570 Tax Guide for Individuals With Income from U. Help filing an amended tax return S. Help filing an amended tax return Possessions 596 Earned Income Credit (EIC) Form (and Instructions) 1040X Amended U. Help filing an amended tax return S. Help filing an amended tax return Individual Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion See chapter 7 for information about getting these publications and forms. Help filing an amended tax return Who Qualifies for the Exclusions and the Deduction? If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. Help filing an amended tax return If you are a U. Help filing an amended tax return S. Help filing an amended tax return citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. Help filing an amended tax return However, you may qualify to exclude from income up to $97,600 of your foreign earnings. Help filing an amended tax return In addition, you can exclude or deduct certain foreign housing amounts. Help filing an amended tax return See Foreign Earned Income Exclusion and Foreign Housing Exclusion and Deduction, later. Help filing an amended tax return You also may be entitled to exclude from income the value of meals and lodging provided to you by your employer. Help filing an amended tax return See Exclusion of Meals and Lodging, later. Help filing an amended tax return Requirements To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements. Help filing an amended tax return Your tax home must be in a foreign country. Help filing an amended tax return You must have foreign earned income. Help filing an amended tax return You must be one of the following. Help filing an amended tax return A U. Help filing an amended tax return S. Help filing an amended tax return citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Help filing an amended tax return A U. Help filing an amended tax return S. Help filing an amended tax return resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Help filing an amended tax return A U. Help filing an amended tax return S. Help filing an amended tax return citizen or a U. Help filing an amended tax return S. Help filing an amended tax return resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. Help filing an amended tax return See Publication 519 to find out if you are a U. Help filing an amended tax return S. Help filing an amended tax return resident alien for tax purposes and whether you keep that alien status when you temporarily work abroad. Help filing an amended tax return If you are a nonresident alien married to a U. Help filing an amended tax return S. Help filing an amended tax return citizen or resident alien, and both you and your spouse choose to treat you as a resident alien, you are a resident alien for tax purposes. Help filing an amended tax return For information on making the choice, see the discussion in chapter 1 under Nonresident Alien Spouse Treated as a Resident . Help filing an amended tax return Waiver of minimum time requirements. Help filing an amended tax return   The minimum time requirements for bona fide residence and physical presence can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. Help filing an amended tax return This is fully explained under Waiver of Time Requirements , later. Help filing an amended tax return   See Figure 4-A and information in this chapter to determine if you are eligible to claim either exclusion or the deduction. Help filing an amended tax return Tax Home in Foreign Country To qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, your tax home must be in a foreign country throughout your period of bona fide residence or physical presence abroad. Help filing an amended tax return Bona fide residence and physical presence are explained later. Help filing an amended tax return Tax Home Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Help filing an amended tax return Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Help filing an amended tax return Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. Help filing an amended tax return If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. Help filing an amended tax return If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work. Help filing an amended tax return You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. Help filing an amended tax return However, your abode is not necessarily in the United States while you are temporarily in the United States. Help filing an amended tax return Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. Help filing an amended tax return “Abode” has been variously defined as one's home, habitation, residence, domicile, or place of dwelling. Help filing an amended tax return It does not mean your principal place of business. Help filing an amended tax return “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home. Help filing an amended tax return ” The location of your abode often will depend on where you maintain your economic, family, and personal ties. Help filing an amended tax return Example 1. Help filing an amended tax return You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. Help filing an amended tax return You return to your family residence in the United States during your off periods. Help filing an amended tax return You are considered to have an abode in the United States and do not satisfy the tax home test in the foreign country. Help filing an amended tax return You cannot claim either of the exclusions or the housing deduction. Help filing an amended tax return Example 2. Help filing an amended tax return For several years, you were a marketing executive with a producer of machine tools in Toledo, Ohio. Help filing an amended tax return In November of last year, your employer transferred you to London, England, for a minimum of 18 months to set up a sales operation for Europe. Help filing an amended tax return Before you left, you distributed business cards showing your business and home addresses in London. Help filing an amended tax return You kept ownership of your home in Toledo but rented it to another family. Help filing an amended tax return You placed your car in storage. Help filing an amended tax return In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London. Help filing an amended tax return Shortly after moving, you leased a car and you and your spouse got British driving licenses. Help filing an amended tax return Your entire family got library cards for the local public library. Help filing an amended tax return You and your spouse opened bank accounts with a London bank and secured consumer credit. Help filing an amended tax return You joined a local business league and both you and your spouse became active in the neighborhood civic association and worked with a local charity. Help filing an amended tax return Your abode is in London for the time you live there. Help filing an amended tax return You satisfy the tax home test in the foreign country. Help filing an amended tax return Please click here for the text description of the image. Help filing an amended tax return Figure 4–A Can I Claim the Exclusion or Deduction? Temporary or Indefinite Assignment The location of your tax home often depends on whether your assignment is temporary or indefinite. Help filing an amended tax return If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away-from-home expenses (for travel, meals, and lodging), but you would not qualify for the foreign earned income exclusion. Help filing an amended tax return If your new work assignment is for an indefinite period, your new place of employment becomes your tax home and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. Help filing an amended tax return If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. Help filing an amended tax return If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. Help filing an amended tax return If you expect it to last for more than 1 year, it is indefinite. Help filing an amended tax return If you expect it to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. Help filing an amended tax return Once your expectation changes, it is indefinite. Help filing an amended tax return Foreign Country To meet the bona fide residence test or the physical presence test, you must live in or be present in a foreign country. Help filing an amended tax return A foreign country includes any territory under the sovereignty of a government other than that of the United States. Help filing an amended tax return The term “foreign country” includes the country's airspace and territorial waters, but not international waters and the airspace above them. Help filing an amended tax return It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. Help filing an amended tax return The term “foreign country” does not include Antarctica or U. Help filing an amended tax return S. Help filing an amended tax return possessions such as Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U. Help filing an amended tax return S. Help filing an amended tax return Virgin Islands, and Johnston Island. Help filing an amended tax return For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, the terms “foreign,” “abroad,” and “overseas” refer to areas outside the United States and those areas listed or described in the previous sentence. Help filing an amended tax return American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residence or presence in a U. Help filing an amended tax return S. Help filing an amended tax return possession does not qualify you for the foreign earned income exclusion. Help filing an amended tax return You may, however, qualify for an exclusion of your possession income on your U. Help filing an amended tax return S. Help filing an amended tax return return. Help filing an amended tax return American Samoa. Help filing an amended tax return   There is a possession exclusion available to individuals who are bona fide residents of American Samoa for the entire tax year. Help filing an amended tax return Gross income from sources within American Samoa may be eligible for this exclusion. Help filing an amended tax return Income that is effectively connected with the conduct of a trade or business within American Samoa also may be eligible for this exclusion. Help filing an amended tax return Use Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, to figure the exclusion. Help filing an amended tax return Guam and the Commonwealth of the Northern Mariana Islands. Help filing an amended tax return   An exclusion will be available to residents of Guam and the Commonwealth of the Northern Mariana Islands if, and when, new implementation agreements take effect between the United States and those possessions. Help filing an amended tax return   For more information, see Publication 570. Help filing an amended tax return Puerto Rico and U. Help filing an amended tax return S. Help filing an amended tax return Virgin Islands Residents of Puerto Rico and the U. Help filing an amended tax return S. Help filing an amended tax return Virgin Islands cannot claim the foreign earned income exclusion or the foreign housing exclusion. Help filing an amended tax return Puerto Rico. Help filing an amended tax return   Generally, if you are a U. Help filing an amended tax return S. Help filing an amended tax return citizen who is a bona fide resident of Puerto Rico for the entire tax year, you are not subject to U. Help filing an amended tax return S. Help filing an amended tax return tax on income from Puerto Rican sources. Help filing an amended tax return This does not include amounts paid for services performed as an employee of the United States. Help filing an amended tax return However, you are subject to U. Help filing an amended tax return S. Help filing an amended tax return tax on your income from sources outside Puerto Rico. Help filing an amended tax return In figuring your U. Help filing an amended tax return S. Help filing an amended tax return tax, you cannot deduct expenses allocable to income not subject to tax. Help filing an amended tax return Bona Fide Residence Test You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Help filing an amended tax return You can use the bona fide residence test to qualify for the exclusions and the deduction only if you are either: A U. Help filing an amended tax return S. Help filing an amended tax return citizen, or A U. Help filing an amended tax return S. Help filing an amended tax return resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect. Help filing an amended tax return You do not automatically acquire bona fide resident status merely by living in a foreign country or countries for 1 year. Help filing an amended tax return If you go to a foreign country to work on a particular job for a specified period of time, you ordinarily will not be regarded as a bona fide resident of that country even though you work there for 1 tax year or longer. Help filing an amended tax return The length of your stay and the nature of your job are only two of the factors to be considered in determining whether you meet the bona fide residence test. Help filing an amended tax return Bona fide residence. Help filing an amended tax return   To meet the bona fide residence test, you must have established a bona fide residence in a foreign country. Help filing an amended tax return   Your bona fide residence is not necessarily the same as your domicile. Help filing an amended tax return Your domicile is your permanent home, the place to which you always return or intend to return. Help filing an amended tax return Example. Help filing an amended tax return You could have your domicile in Cleveland, Ohio, and a bona fide residence in Edinburgh, Scotland, if you intend to return eventually to Cleveland. Help filing an amended tax return The fact that you go to Scotland does not automatically make Scotland your bona fide residence. Help filing an amended tax return If you go there as a tourist, or on a short business trip, and return to the United States, you have not established bona fide residence in Scotland. Help filing an amended tax return But if you go to Scotland to work for an indefinite or extended period and you set up permanent quarters there for yourself and your family, you probably have established a bona fide residence in a foreign country, even though you intend to return eventually to the United States. Help filing an amended tax return You are clearly not a resident of Scotland in the first instance. Help filing an amended tax return However, in the second, you are a resident because your stay in Scotland appears to be permanent. Help filing an amended tax return If your residency is not as clearly defined as either of these illustrations, it may be more difficult to decide whether you have established a bona fide residence. Help filing an amended tax return Determination. Help filing an amended tax return   Questions of bona fide residence are determined according to each individual case, taking into account factors such as your intention, the purpose of your trip, and the nature and length of your stay abroad. Help filing an amended tax return   To meet the bona fide residence test, you must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. Help filing an amended tax return The IRS decides whether you are a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555. Help filing an amended tax return IRS cannot make this determination until you file Form 2555. Help filing an amended tax return Statement to foreign authorities. Help filing an amended tax return   You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities: Hold that you are not subject to their income tax laws as a resident, or Have not made a final decision on your status. Help filing an amended tax return Special agreements and treaties. Help filing an amended tax return   An income tax exemption provided in a treaty or other international agreement will not in itself prevent you from being a bona fide resident of a foreign country. Help filing an amended tax return Whether a treaty prevents you from becoming a bona fide resident of a foreign country is determined under all provisions of the treaty, including specific provisions relating to residence or privileges and immunities. Help filing an amended tax return Example 1. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen employed in the United Kingdom by a U. Help filing an amended tax return S. Help filing an amended tax return employer under contract with the U. Help filing an amended tax return S. Help filing an amended tax return Armed Forces. Help filing an amended tax return You are not subject to the North Atlantic Treaty Status of Forces Agreement. Help filing an amended tax return You may be a bona fide resident of the United Kingdom. Help filing an amended tax return Example 2. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen in the United Kingdom who qualifies as an “employee” of an armed service or as a member of a “civilian component” under the North Atlantic Treaty Status of Forces Agreement. Help filing an amended tax return You are not a bona fide resident of the United Kingdom. Help filing an amended tax return Example 3. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen employed in Japan by a U. Help filing an amended tax return S. Help filing an amended tax return employer under contract with the U. Help filing an amended tax return S. Help filing an amended tax return Armed Forces. Help filing an amended tax return You are subject to the agreement of the Treaty of Mutual Cooperation and Security between the United States and Japan. Help filing an amended tax return Being subject to the agreement does not make you a bona fide resident of Japan. Help filing an amended tax return Example 4. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen employed as an “official” by the United Nations in Switzerland. Help filing an amended tax return You are exempt from Swiss taxation on the salary or wages paid to you by the United Nations. Help filing an amended tax return This does not prevent you from being a bona fide resident of Switzerland. Help filing an amended tax return Effect of voting by absentee ballot. Help filing an amended tax return   If you are a U. Help filing an amended tax return S. Help filing an amended tax return citizen living abroad, you can vote by absentee ballot in any election held in the United States without risking your status as a bona fide resident of a foreign country. Help filing an amended tax return   However, if you give information to the local election officials about the nature and length of your stay abroad that does not match the information you give for the bona fide residence test, the information given in connection with absentee voting will be considered in determining your status, but will not necessarily be conclusive. Help filing an amended tax return Uninterrupted period including entire tax year. Help filing an amended tax return   To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. Help filing an amended tax return An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis. Help filing an amended tax return   During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. Help filing an amended tax return To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country. Help filing an amended tax return Example 1. Help filing an amended tax return You arrived with your family in Lisbon, Portugal, on November 1, 2011. Help filing an amended tax return Your assignment is indefinite, and you intend to live there with your family until your company sends you to a new post. Help filing an amended tax return You immediately established residence there. Help filing an amended tax return You spent April of 2012 at a business conference in the United States. Help filing an amended tax return Your family stayed in Lisbon. Help filing an amended tax return Immediately following the conference, you returned to Lisbon and continued living there. Help filing an amended tax return On January 1, 2013, you completed an uninterrupted period of residence for a full tax year (2012), and you meet the bona fide residence test. Help filing an amended tax return Example 2. Help filing an amended tax return Assume the same facts as in Example 1, except that you transferred back to the United States on December 13, 2012. Help filing an amended tax return You would not meet the bona fide residence test because your bona fide residence in the foreign country, although it lasted more than a year, did not include a full tax year. Help filing an amended tax return You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test (discussed later). Help filing an amended tax return Bona fide resident for part of a year. Help filing an amended tax return   Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. Help filing an amended tax return Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years. Help filing an amended tax return Example. Help filing an amended tax return You were a bona fide resident of Singapore from March 1, 2011, through September 14, 2013. Help filing an amended tax return On September 15, 2013, you returned to the United States. Help filing an amended tax return Since you were a bona fide resident of a foreign country for all of 2012, you were also a bona fide resident of a foreign country from March 1, 2011, through the end of 2011 and from January 1, 2013, through September 14, 2013. Help filing an amended tax return Reassignment. Help filing an amended tax return   If you are assigned from one foreign post to another, you may or may not have a break in foreign residence between your assignments, depending on the circumstances. Help filing an amended tax return Example 1. Help filing an amended tax return You were a resident of Pakistan from October 1, 2012, through November 30, 2013. Help filing an amended tax return On December 1, 2013, you and your family returned to the United States to wait for an assignment to another foreign country. Help filing an amended tax return Your household goods also were returned to the United States. Help filing an amended tax return Your foreign residence ended on November 30, 2013, and did not begin again until after you were assigned to another foreign country and physically entered that country. Help filing an amended tax return Since you were not a bona fide resident of a foreign country for the entire tax year of 2012 or 2013 you do not meet the bona fide residence test in either year. Help filing an amended tax return You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test, discussed later. Help filing an amended tax return Example 2. Help filing an amended tax return Assume the same facts as in Example 1, except that upon completion of your assignment in Pakistan you were given a new assignment to Turkey. Help filing an amended tax return On December 1, 2013, you and your family returned to the United States for a month's vacation. Help filing an amended tax return On January 2, 2014, you arrived in Turkey for your new assignment. Help filing an amended tax return Because you did not interrupt your bona fide residence abroad, you meet the bona fide residence test. Help filing an amended tax return Physical Presence Test You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. Help filing an amended tax return The 330 days do not have to be consecutive. Help filing an amended tax return Any U. Help filing an amended tax return S. Help filing an amended tax return citizen or resident alien can use the physical presence test to qualify for the exclusions and the deduction. Help filing an amended tax return The physical presence test is based only on how long you stay in a foreign country or countries. Help filing an amended tax return This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. Help filing an amended tax return 330 full days. Help filing an amended tax return   Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. Help filing an amended tax return You can count days you spent abroad for any reason. Help filing an amended tax return You do not have to be in a foreign country only for employment purposes. Help filing an amended tax return You can be on vacation. Help filing an amended tax return   You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. Help filing an amended tax return Exception. Help filing an amended tax return   You can be physically present in a foreign country or countries for less than 330 full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest. Help filing an amended tax return See Waiver of Time Requirements, later. Help filing an amended tax return Full day. Help filing an amended tax return   A full day is a period of 24 consecutive hours, beginning at midnight. Help filing an amended tax return Travel. Help filing an amended tax return    When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total. Help filing an amended tax return Example. Help filing an amended tax return You leave the United States for France by air on June 10. Help filing an amended tax return You arrive in France at 9:00 a. Help filing an amended tax return m. Help filing an amended tax return on June 11. Help filing an amended tax return Your first full day of physical presence in France is June 12. Help filing an amended tax return Passing over foreign country. Help filing an amended tax return   If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States. Help filing an amended tax return Example. Help filing an amended tax return You leave the United States by air at 9:30 a. Help filing an amended tax return m. Help filing an amended tax return on June 10 to travel to Kenya. Help filing an amended tax return You pass over western Africa at 11:00 p. Help filing an amended tax return m. Help filing an amended tax return on June 10 and arrive in Kenya at 12:30 a. Help filing an amended tax return m. Help filing an amended tax return on June 11. Help filing an amended tax return Your first full day in a foreign country is June 11. Help filing an amended tax return Change of location. Help filing an amended tax return   You can move about from one place to another in a foreign country or to another foreign country without losing full days. Help filing an amended tax return If any part of your travel is not within any foreign country and takes less than 24 hours, you are considered to be in a foreign country during that part of travel. Help filing an amended tax return Example 1. Help filing an amended tax return You leave Ireland by air at 11:00 p. Help filing an amended tax return m. Help filing an amended tax return on July 6 and arrive in Sweden at 5:00 a. Help filing an amended tax return m. Help filing an amended tax return on July 7. Help filing an amended tax return Your trip takes less than 24 hours and you lose no full days. Help filing an amended tax return Example 2. Help filing an amended tax return You leave Norway by ship at 10:00 p. Help filing an amended tax return m. Help filing an amended tax return on July 6 and arrive in Portugal at 6:00 a. Help filing an amended tax return m. Help filing an amended tax return on July 8. Help filing an amended tax return Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. Help filing an amended tax return If you remain in Portugal, your next full day in a foreign country is July 9. Help filing an amended tax return In United States while in transit. Help filing an amended tax return   If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. Help filing an amended tax return You are treated as traveling over areas not within any foreign country. Help filing an amended tax return    Please click here for the text description of the image. Help filing an amended tax return Figure 4-B How to figure the 12-month period. Help filing an amended tax return   There are four rules you should know when figuring the 12-month period. Help filing an amended tax return Your 12-month period can begin with any day of the month. Help filing an amended tax return It ends the day before the same calendar day, 12 months later. Help filing an amended tax return Your 12-month period must be made up of consecutive months. Help filing an amended tax return Any 12-month period can be used if the 330 days in a foreign country fall within that period. Help filing an amended tax return You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. Help filing an amended tax return You can choose the 12-month period that gives you the greatest exclusion. Help filing an amended tax return In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another. Help filing an amended tax return Example 1. Help filing an amended tax return You are a construction worker who works on and off in a foreign country over a 20-month period. Help filing an amended tax return You might pick up the 330 full days in a 12-month period only during the middle months of the time you work in the foreign country because the first few and last few months of the 20-month period are broken up by long visits to the United States. Help filing an amended tax return Example 2. Help filing an amended tax return You work in New Zealand for a 20-month period from January 1, 2012, through August 31, 2013, except that you spend 28 days in February 2012 and 28 days in February 2013 on vacation in the United States. Help filing an amended tax return You are present in New Zealand for at least 330 full days during each of the following two 12-month periods: January 1, 2012 – December 31, 2012 and September 1, 2012 – August 31, 2013. Help filing an amended tax return By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. Help filing an amended tax return See Figure 4-B, on the previous page. Help filing an amended tax return Waiver of Time Requirements Both the bona fide residence test and the physical presence test contain minimum time requirements. Help filing an amended tax return The minimum time requirements can be waived, however, if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. Help filing an amended tax return You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. Help filing an amended tax return To qualify for the waiver, you must actually have your tax home in the foreign country and be a bona fide resident of, or be physically present in, the foreign country on or before the beginning date of the waiver. Help filing an amended tax return Early in 2014, the IRS will publish in the Internal Revenue Bulletin a list of the only countries that qualify for the waiver for 2013 and the effective dates. Help filing an amended tax return If you left one of the countries on or after the date listed for each country, you can meet the bona fide residence test or physical presence test for 2013 without meeting the minimum time requirement. Help filing an amended tax return However, in figuring your exclusion, the number of your qualifying days of bona fide residence or physical presence includes only days of actual residence or presence within the country. Help filing an amended tax return U. Help filing an amended tax return S. Help filing an amended tax return Travel Restrictions If you are present in a foreign country in violation of U. Help filing an amended tax return S. Help filing an amended tax return law, you will not be treated as a bona fide resident of a foreign country or as physically present in a foreign country while you are in violation of the law. Help filing an amended tax return Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income. Help filing an amended tax return Your housing expenses within that country (or outside that country for housing your spouse or dependents) while you are in violation of the law cannot be included in figuring your foreign housing amount. Help filing an amended tax return For 2013, the only country to which travel restrictions applied was Cuba. Help filing an amended tax return The restrictions applied for the entire year. Help filing an amended tax return However, individuals working at the U. Help filing an amended tax return S. Help filing an amended tax return Naval Base at Guantanamo Bay in Cuba are not in violation of U. Help filing an amended tax return S. Help filing an amended tax return law. Help filing an amended tax return Personal service income earned by individuals at the base is eligible for the foreign earned income exclusion provided the other requirements are met. Help filing an amended tax return Foreign Earned Income To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income. Help filing an amended tax return Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements. Help filing an amended tax return Your tax home is in a foreign country. Help filing an amended tax return You meet either the bona fide residence test or the physical presence test. Help filing an amended tax return To determine whether your tax home is in a foreign country, see Tax Home in Foreign Country, earlier. Help filing an amended tax return To determine whether you meet either the bona fide residence test or the physical presence test, see Bona Fide Residence Test and Physical Presence Test, earlier. Help filing an amended tax return Foreign earned income does not include the following amounts. Help filing an amended tax return The value of meals and lodging that you exclude from your income because the meals and lodging were furnished for the convenience of your employer. Help filing an amended tax return Pension or annuity payments you receive, including social security benefits (see Pensions and annuities, later). Help filing an amended tax return Pay you receive as an employee of the U. Help filing an amended tax return S. Help filing an amended tax return Government. Help filing an amended tax return (See U. Help filing an amended tax return S. Help filing an amended tax return Government Employees, later. Help filing an amended tax return ) Amounts you include in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualified annuity contract. Help filing an amended tax return Any unallowable moving expense deduction that you choose to recapture as explained under Moving Expense Attributable to Foreign Earnings in 2 Years in chapter 5. Help filing an amended tax return Payments you receive after the end of the tax year following the tax year in which you performed the services that earned the income. Help filing an amended tax return Earned income. Help filing an amended tax return   This is pay for personal services performed, such as wages, salaries, or professional fees. Help filing an amended tax return The list that follows classifies many types of income into three categories. Help filing an amended tax return The column headed Variable Income lists income that may fall into either the earned income category, the unearned income category, or partly into both. Help filing an amended tax return For more information on earned and unearned income, see Earned and Unearned Income, later. Help filing an amended tax return Earned Income Unearned Income Variable Income Salaries and wages Dividends Business profits Commissions Interest Royalties Bonuses Capital gains Rents Professional fees Gambling winnings Scholarships and fellowships Tips Alimony     Social security benefits     Pensions     Annuities     In addition to the types of earned income listed, certain noncash income and allowances or reimbursements are considered earned income. Help filing an amended tax return Noncash income. Help filing an amended tax return   The fair market value of property or facilities provided to you by your employer in the form of lodging, meals, or use of a car is earned income. Help filing an amended tax return Allowances or reimbursements. Help filing an amended tax return   Earned income includes allowances or reimbursements you receive, such as the following amounts. Help filing an amended tax return    Cost-of-living allowances. Help filing an amended tax return Overseas differential. Help filing an amended tax return Family allowance. Help filing an amended tax return Reimbursement for education or education allowance. Help filing an amended tax return Home leave allowance. Help filing an amended tax return Quarters allowance. Help filing an amended tax return Reimbursement for moving or moving allowance (unless excluded from income as discussed later in Reimbursement of employee expenses under Earned and Unearned Income). Help filing an amended tax return Source of Earned Income The source of your earned income is the place where you perform the services for which you received the income. Help filing an amended tax return Foreign earned income is income you receive for working in a foreign country. Help filing an amended tax return Where or how you are paid has no effect on the source of the income. Help filing an amended tax return For example, income you receive for work done in Austria is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City. Help filing an amended tax return Example. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen, a bona fide resident of Canada, and working as a mining engineer. Help filing an amended tax return Your salary is $76,800 per year. Help filing an amended tax return You also receive a $6,000 cost-of-living allowance, and a $6,000 education allowance. Help filing an amended tax return Your employment contract did not indicate that you were entitled to these allowances only while outside the United States. Help filing an amended tax return Your total income is $88,800. Help filing an amended tax return You work a 5-day week, Monday through Friday. Help filing an amended tax return After subtracting your vacation, you have a total of 240 workdays in the year. Help filing an amended tax return You worked in the United States during the year for 6 weeks (30 workdays). Help filing an amended tax return The following shows how to figure the part of your income that is for work done in Canada during the year. Help filing an amended tax return   Number of days worked in Canada during the year (210) × Total income ($88,800) = $77,700     Number of days of work during the year for which payment was made (240)   Your foreign source earned income is $77,700. Help filing an amended tax return Earned and Unearned Income Earned income was defined earlier as pay for personal services performed. Help filing an amended tax return Some types of income are not easily identified as earned or unearned income. Help filing an amended tax return Some of these types of income are further explained here. Help filing an amended tax return Income from a sole proprietorship or partnership. Help filing an amended tax return   Income from a business in which capital investment is an important part of producing the income may be unearned income. Help filing an amended tax return If you are a sole proprietor or partner and your personal services are also an important part of producing the income, the part of the income that represents the value of your personal services will be treated as earned income. Help filing an amended tax return Capital a factor. Help filing an amended tax return   If capital investment is an important part of producing income, no more than 30% of your share of the net profits of the business is earned income. Help filing an amended tax return   If you have no net profits, the part of your gross profit that represents a reasonable allowance for personal services actually performed is considered earned income. Help filing an amended tax return Because you do not have a net profit, the 30% limit does not apply. Help filing an amended tax return Example 1. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen and meet the bona fide residence test. Help filing an amended tax return You invest in a partnership based in Cameroon that is engaged solely in selling merchandise outside the United States. Help filing an amended tax return You perform no services for the partnership. Help filing an amended tax return At the end of the tax year, your share of the net profits is $80,000. Help filing an amended tax return The entire $80,000 is unearned income. Help filing an amended tax return Example 2. Help filing an amended tax return Assume that in Example 1 you spend time operating the business. Help filing an amended tax return Your share of the net profits is $80,000; 30% of your share of the profits is $24,000. Help filing an amended tax return If the value of your services for the year is $15,000, your earned income is limited to the value of your services, $15,000. Help filing an amended tax return Capital not a factor. Help filing an amended tax return   If capital is not an income-producing factor and personal services produce the business income, the 30% rule does not apply. Help filing an amended tax return The entire amount of business income is earned income. Help filing an amended tax return Example. Help filing an amended tax return You and Lou Green are management consultants and operate as equal partners in performing services outside the United States. Help filing an amended tax return Because capital is not an income- producing factor, all the income from the partnership is considered earned income. Help filing an amended tax return Income from a corporation. Help filing an amended tax return   The salary you receive from a corporation is earned income only if it represents a reasonable allowance as compensation for work you do for the corporation. Help filing an amended tax return Any amount over what is considered a reasonable salary is unearned income. Help filing an amended tax return Example 1. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen and an officer and stockholder of a corporation in Honduras. Help filing an amended tax return You perform no work or service of any kind for the corporation. Help filing an amended tax return During the tax year you receive a $10,000 “salary” from the corporation. Help filing an amended tax return The $10,000 clearly is not for personal services and is unearned income. Help filing an amended tax return Example 2. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen and work full time as secretary-treasurer of your corporation. Help filing an amended tax return During the tax year you receive $100,000 as salary from the corporation. Help filing an amended tax return If $80,000 is a reasonable allowance as pay for the work you did, then $80,000 is earned income. Help filing an amended tax return Stock options. Help filing an amended tax return   You may have earned income if you disposed of stock that you got by exercising a stock option granted to you under an employee stock purchase plan. Help filing an amended tax return   If your gain on the disposition of stock you got by exercising an option is treated as capital gain, your gain is unearned income. Help filing an amended tax return   However, if you disposed of the stock less than 2 years after you were granted the option or less than 1 year after you got the stock, part of the gain on the disposition may be earned income. Help filing an amended tax return It is considered received in the year you disposed of the stock and earned in the year you performed the services for which you were granted the option. Help filing an amended tax return Any part of the earned income that is due to work you did outside the United States is foreign earned income. Help filing an amended tax return   See Publication 525, Taxable and Nontaxable Income, for a discussion of the treatment of stock options. Help filing an amended tax return Pensions and annuities. Help filing an amended tax return    For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, amounts received as pensions or annuities are unearned income. Help filing an amended tax return Royalties. Help filing an amended tax return   Royalties from the leasing of oil and mineral lands and patents generally are a form of rent or dividends and are unearned income. Help filing an amended tax return   Royalties received by a writer are earned income if they are received: For the transfer of property rights of the writer in the writer's product, or Under a contract to write a book or series of articles. Help filing an amended tax return Rental income. Help filing an amended tax return   Generally, rental income is unearned income. Help filing an amended tax return If you perform personal services in connection with the production of rent, up to 30% of your net rental income can be considered earned income. Help filing an amended tax return Example. Help filing an amended tax return Larry Smith, a U. Help filing an amended tax return S. Help filing an amended tax return citizen living in Australia, owns and operates a rooming house in Sydney. Help filing an amended tax return If he is operating the rooming house as a business that requires capital and personal services, he can consider up to 30% of net rental income as earned income. Help filing an amended tax return On the other hand, if he just owns the rooming house and performs no personal services connected with its operation, except perhaps making minor repairs and collecting rents, none of his net income from the house is considered earned income. Help filing an amended tax return It is all unearned income. Help filing an amended tax return Professional fees. Help filing an amended tax return   If you are engaged in a professional occupation (such as a doctor or lawyer), all fees received in the performance of these services are earned income. Help filing an amended tax return Income of an artist. Help filing an amended tax return   Income you receive from the sale of paintings you created is earned income. Help filing an amended tax return Scholarships and fellowships. Help filing an amended tax return   Any portion of a scholarship or fellowship grant that is paid to you for teaching, research or other services is considered earned income if you must include it in your gross income. Help filing an amended tax return If the payer of the grant is required to provide you with a Form W-2, Wage and Tax Statement, these amounts will be listed as wages. Help filing an amended tax return    Certain scholarship and fellowship income may be exempt under other provisions. Help filing an amended tax return See Publication 970, Tax Benefits for Education, chapter 1. Help filing an amended tax return Use of employer's property or facilities. Help filing an amended tax return   If you receive fringe benefits in the form of the right to use your employer's property or facilities, the fair market value of that right is earned income. Help filing an amended tax return Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being required to buy or sell, and both having reasonable knowledge of all the necessary facts. Help filing an amended tax return Example. Help filing an amended tax return You are privately employed and live in Japan all year. Help filing an amended tax return You are paid a salary of $6,000 a month. Help filing an amended tax return You live rent-free in a house provided by your employer that has a fair rental value of $3,000 a month. Help filing an amended tax return The house is not provided for your employer's convenience. Help filing an amended tax return You report on the calendar-year, cash basis. Help filing an amended tax return You received $72,000 salary from foreign sources plus $36,000 fair rental value of the house, or a total of $108,000 of earned income. Help filing an amended tax return Reimbursement of employee expenses. Help filing an amended tax return   If you are reimbursed under an accountable plan (defined below) for expenses you incur on your employer's behalf and you have adequately accounted to your employer for the expenses, do not include the reimbursement for those expenses in your earned income. Help filing an amended tax return   The expenses for which you are reimbursed are not considered allocable (related) to your earned income. Help filing an amended tax return If expenses and reimbursement are equal, there is nothing to allocate to excluded income. Help filing an amended tax return If expenses are more than the reimbursement, the unreimbursed expenses are considered to have been incurred in producing earned income and must be divided between your excluded and included income in determining the amount of unreimbursed expenses you can deduct. Help filing an amended tax return (See chapter 5. Help filing an amended tax return ) If the reimbursement is more than the expenses, no expenses remain to be divided between excluded and included income and the excess reimbursement must be included in earned income. Help filing an amended tax return   These rules do not apply to the following individuals. Help filing an amended tax return Straight-commission salespersons. Help filing an amended tax return Employees who have arrangements with their employers under which taxes are not withheld on a percentage of the commissions because the employers consider that percentage to be attributable to the employees' expenses. Help filing an amended tax return Accountable plan. Help filing an amended tax return   An accountable plan is a reimbursement or allowance arrangement that includes all three of the following rules. Help filing an amended tax return The expenses covered under the plan must have a business connection. Help filing an amended tax return The employee must adequately account to the employer for these expenses within a reasonable period of time. Help filing an amended tax return The employee must return any excess reimbursement or allowance within a reasonable period of time. Help filing an amended tax return Reimbursement of moving expenses. Help filing an amended tax return   Reimbursement of moving expenses may be earned income. Help filing an amended tax return You must include as earned income: Any reimbursements of, or payments for, nondeductible moving expenses, Reimbursements that are more than your deductible expenses and that you do not return to your employer, Any reimbursements made (or treated as made) under a nonaccountable plan (any plan that does not meet the rules listed above for an accountable plan), even if they are for deductible expenses, and Any reimbursement of moving expenses you deducted in an earlier year. Help filing an amended tax return This section discusses reimbursements that must be included in earned income. Help filing an amended tax return Publication 521, Moving Expenses, discusses additional rules that apply to moving expense deductions and reimbursements. Help filing an amended tax return   The rules for determining when the reimbursement is considered earned or where the reimbursement is considered earned may differ somewhat from the general rules previously discussed. Help filing an amended tax return   Although you receive the reimbursement in one tax year, it may be considered earned for services performed, or to be performed, in another tax year. Help filing an amended tax return You must report the reimbursement as income on your return in the year you receive it, even if it is considered earned during a different year. Help filing an amended tax return Move from U. Help filing an amended tax return S. Help filing an amended tax return to foreign country. Help filing an amended tax return   If you move from the United States to a foreign country, your moving expense reimbursement is generally considered pay for future services to be performed at the new location. Help filing an amended tax return The reimbursement is considered earned solely in the year of the move if you qualify for the exclusion for a period that includes at least 120 days during that tax year. Help filing an amended tax return   If you are neither a bona fide resident of nor physically present in a foreign country or countries for a period that includes 120 days during the year of the move, a portion of the reimbursement is considered earned in the year of the move and a portion is considered earned in the year following the year of the move. Help filing an amended tax return To figure the amount earned in the year of the move, multiply the reimbursement by a fraction. Help filing an amended tax return The numerator (top number) is the number of days in your qualifying period that fall within the year of the move, and the denominator (bottom number) is the total number of days in the year of the move. Help filing an amended tax return   The difference between the total reimbursement and the amount considered earned in the year of the move is the amount considered earned in the year following the year of the move. Help filing an amended tax return The part earned in each year is figured as shown in the following example. Help filing an amended tax return Example. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen working in the United States. Help filing an amended tax return You were told in October 2012 that you were being transferred to a foreign country. Help filing an amended tax return You arrived in the foreign country on December 15, 2012, and you are a bona fide resident for the remainder of 2012 and all of 2013. Help filing an amended tax return Your employer reimbursed you $2,000 in January 2013 for the part of the moving expense that you were not allowed to deduct. Help filing an amended tax return Because you did not qualify for the exclusion under the bona fide residence test for at least 120 days in 2012 (the year of the move), the reimbursement is considered pay for services performed in the foreign country for both 2012 and 2013. Help filing an amended tax return You figure the part of the reimbursement for services performed in the foreign country in 2012 by multiplying the total reimbursement by a fraction. Help filing an amended tax return The fraction is the number of days during which you were a bona fide resident in 2012 (the year of the move) divided by 366. Help filing an amended tax return The remaining part of the reimbursement is for services performed in the foreign country in 2013. Help filing an amended tax return This computation is used only to determine when the reimbursement is considered earned. Help filing an amended tax return You would include the amount of the reimbursement in income in 2013, the year you received it. Help filing an amended tax return Move between foreign countries. Help filing an amended tax return   If you move between foreign countries, any moving expense reimbursement that you must include in income will be considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days in the year of the move. Help filing an amended tax return Move to U. Help filing an amended tax return S. Help filing an amended tax return   If you move to the United States, the moving expense reimbursement that you must include in income is generally considered to be U. Help filing an amended tax return S. Help filing an amended tax return source income. Help filing an amended tax return   However, if under either an agreement between you and your employer or a statement of company policy that is reduced to writing before your move to the foreign country, your employer will reimburse you for your move back to the United States regardless of whether you continue to work for the employer, the includible reimbursement is considered compensation for past services performed in the foreign country. Help filing an amended tax return The includible reimbursement is considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days during that year. Help filing an amended tax return Otherwise, you treat the includible reimbursement as received for services performed in the foreign country in the year of the move and the year immediately before the year of the move. Help filing an amended tax return   See the discussion under Move from U. Help filing an amended tax return S. Help filing an amended tax return to foreign country , earlier, to figure the amount of the includible reimbursement considered earned in the year of the move. Help filing an amended tax return The amount earned in the year before the year of the move is the difference between the total includible reimbursement and the amount earned in the year of the move. Help filing an amended tax return Example. Help filing an amended tax return You are a U. Help filing an amended tax return S. Help filing an amended tax return citizen employed in a foreign country. Help filing an amended tax return You retired from employment with your employer on March 31, 2013, and returned to the United States after having been a bona fide resident of the foreign country for several years. Help filing an amended tax return A written agreement with your employer entered into before you went abroad provided that you would be reimbursed for your move back to the United States. Help filing an amended tax return In April 2013, your former employer reimbursed you $4,000 for the part of the cost of your move back to the United States that you were not allowed to deduct. Help filing an amended tax return Because you were not a bona fide resident of a foreign country or countries for a period that included at least 120 days in 2013 (the year of the move), the includible reimbursement is considered pay for services performed in the foreign country for both 2013 and 2012. Help filing an amended tax return You figure the part of the moving expense reimbursement for services performed in the foreign country for 2013 by multiplying the total includible reimbursement by a fraction. Help filing an amended tax return The fraction is the number of days of foreign residence during the year (90) divided by the number of days in the year (365). Help filing an amended tax return The remaining part of the includible reimbursement is for services performed in the foreign country in 2012. Help filing an amended tax return You report the amount of the includible reimbursement in 2013, the year you received it. Help filing an amended tax return    In this example, if you met the physical presence test for a period that included at least 120 days in 2013, the moving expense reimbursement would be considered earned entirely in the year of the move. Help filing an amended tax return Storage expense reimbursements. Help filing an amended tax return   If you are reimbursed for storage expenses, the reimbursement is for services you perform during the period of time for which the storage expenses are incurred. Help filing an amended tax return U. Help filing an amended tax return S. Help filing an amended tax return Government Employees For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. Help filing an amended tax return This includes amounts paid from both appropriated and nonappropriated funds. Help filing an amended tax return The following organizations (and other organizations similarly organized and operated under United States Army, Navy, or Air Force regulations) are integral parts of the Armed Forces, agencies, or instrumentalities of the United States. Help filing an amended tax return United States Armed Forces exchanges. Help filing an amended tax return Commissioned and noncommissioned officers' messes. Help filing an amended tax return Armed Forces motion picture services. Help filing an amended tax return Kindergartens on foreign Armed Forces installations. Help filing an amended tax return Amounts paid by the United States or its agencies to persons who are not their employees may qualify for exclusion or deduction. Help filing an amended tax return If you are a U. Help filing an amended tax return S. Help filing an amended tax return Government employee paid by a U. Help filing an amended tax return S. Help filing an amended tax return agency that assigned you to a foreign government to perform specific services for which the agency is reimbursed by the foreign government, your pay is from the U. Help filing an amended tax return S. Help filing an amended tax return Government and does not qualify for exclusion or deduction. Help filing an amended tax return If you have questions about whether you are an employee or an independent contractor, get Publication 15-A, Employer's Supplemental Tax Guide. Help filing an amended tax return American Institute in Taiwan. Help filing an amended tax return   Amounts paid by the American Institute in Taiwan are not foreign earned income for purposes of the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. Help filing an amended tax return If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. Help filing an amended tax return S. Help filing an amended tax return tax up to the amount that equals tax-exempt allowances received by civilian employees of the U. Help filing an amended tax return S. Help filing an amended tax return Government. Help filing an amended tax return Allowances. Help filing an amended tax return   Cost-of-living and foreign-area allowances paid under certain acts of Congress to U. Help filing an amended tax return S. Help filing an amended tax return civilian officers and employees stationed in Alaska and Hawaii or elsewhere outside the 48 contiguous states and the District of Columbia can be excluded from gross income. Help filing an amended tax return Post differentials are wages that must be included in gross income, regardless of the act of Congress under which they are paid. Help filing an amended tax return More information. Help filing an amended tax return   Publication 516, U. Help filing an amended tax return S. Help filing an amended tax return Government Civilian Employees Stationed Abroad, has more information for U. Help filing an amended tax return S. Help filing an amended tax return Government employees abroad. Help filing an amended tax return Exclusion of Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. Help filing an amended tax return The meals are furnished: On the business premises of your employer, and For the convenience of your employer. Help filing an amended tax return The lodging is furnished: On the business premises of your employer, For the convenience of your employer, and As a condition of your employment. Help filing an amended tax return If these conditions are met, do not include the value of the meals or lodging in your income, even if a law or your employment contract says that they are provided as compensation. Help filing an amended tax return Amounts you do not include in income because of these rules are not foreign earned income. Help filing an amended tax return If you receive a Form W-2, excludable amounts should not be included in the total reported in box 1 as wages. Help filing an amended tax return Family. Help filing an amended tax return   Your family, for this purpose, includes only your spouse and your dependents. Help filing an amended tax return Lodging. Help filing an amended tax return   The value of lodging includes the cost of heat, electricity, gas, water, sewer service, and similar items needed to make the lodging fit to live in. Help filing an amended tax return Business premises of employer. Help filing an amended tax return   Generally, the business premises of your employer is wherever you work. Help filing an amended tax return For example, if you work as a housekeeper, meals and lodging provided in your employer's home are provided on the business premises of your employer. Help filing an amended tax return Similarly, meals provided to cowhands while herding cattle on land leased or owned by their employer are considered provided on the premises of their employer. Help filing an amended tax return Convenience of employer. Help filing an amended tax return   Whether meals or lodging are provided for your employer's convenience must be determined from all the facts and circumstances. Help filing an amended tax return Meals furnished at no charge are considered provided for your employer's convenience if there is a good business reason for providing them, other than to give you more pay. Help filing an amended tax return   On the other hand, if your employer provides meals to you or your family as a means of giving you more pay, and there is no other business reason for providing them, their value is extra income to you because they are not furnished for the convenience of your employer. Help filing an amended tax return Condition of employment. Help filing an amended tax return   Lodging is provided as a condition of employment if you must accept the lodging to properly carry out the duties of your job. Help filing an amended tax return You must accept lodging to properly carry out your duties if, for example, you must be available for duty at all times or you could not perform your duties if the lodging was not furnished. Help filing an amended tax return Foreign camps. Help filing an amended tax return   If the lodging is in a camp located in a foreign country, the camp is considered part of your employer's business premises. Help filing an amended tax return The camp must be: Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance, Located as close as reasonably possible in the area where you work, and Provided in a common area or enclave that is not available to the general public for lodging or accommodations and that normally houses at least ten employees. Help filing an amended tax return Foreign Earned Income Exclusion If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income. Help filing an amended tax return Foreign earned income was defined earlier in this chapter. Help filing an amended tax return You also can choose to exclude from your income a foreign housing amount. Help filing an amended tax return This is explained later under Foreign Housing Exclusion. Help filing an amended tax return If you choose to exclude a foreign housing amount, you must figure the foreign housing exclusion before you figure the foreign earned income exclusion. Help filing an amended tax return Your foreign earned income exclusion is limited to your foreign earned income minus your foreign housing exclusion. Help filing an amended tax return If you choose to exclude foreign earned income, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. Help filing an amended tax return This includes any expenses, losses, and other normally deductible items allocable to the excluded income. Help filing an amended tax return For more information about deductions and credits, see chapter 5 . Help filing an amended tax return Limit on Excludable Amount You may be able to exclude up to $97,600 of your foreign earned income in 2013. Help filing an amended tax return You cannot exclude more than the smaller of: $97,600, or Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later). Help filing an amended tax return If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. Help filing an amended tax return You do not both need to meet the same test. Help filing an amended tax return Together, you and your spouse can exclude as much as $195,200. Help filing an amended tax return Paid in year following work. Help filing an amended tax return   Generally, you are considered to have earned income in the year in which you do the work for which you receive the income, even if you work in one year but are not paid until the following year. Help filing an amended tax return If you report your income on a cash basis, you report the income on your return for the year you receive it. Help filing an amended tax return If you work one year, but are not paid for that work until the next year, the amount you can exclude in the year you are paid is the amount you could have excluded in the year you did the work if you had been paid in that year. Help filing an amended tax return For an exception to this general rule, see Year-end payroll period, later. Help filing an amended tax return Example. Help filing an amended tax return You were a bona fide resident of Brazil for all of 2012 and 2013. Help filing an amended tax return You report your income on the cash basis. Help filing an amended tax return In 2012, you were paid $84,200 for work you did in Brazil during that year. Help filing an amended tax return You excluded all of the $84,200 from your income in 2012. Help filing an amended tax return In 2013, you were paid $117,300 for your work in Brazil. Help filing an amended tax return $18,800 was for work you did in 2012 and $98,500 was for work you did in 2013. Help filing an amended tax return You can exclude $10,900 of the $18,800 from your income in 2013. Help filing an amended tax return This is the $95,100 maximum exclusion in 2012 minus the $84,200 actually excluded that year. Help filing an amended tax return You must include the remaining $7,900 in income in 2013 because you could not have excluded that income in 2012 if you had received it that year. Help filing an amended tax return You can exclude $97,600 of the $98,500 you were paid for work you did in 2013 from your 2013 income. Help filing an amended tax return Your total foreign earned income exclusion for 2013 is $108,500 ($10,900 for work you did in 2012 and $97,600 for work you did in 2013). Help filing an amended tax return You would include in your 2013 income $8,800 ($7,900 for the work you did in 2012 and $900 for the work you did in 2013). Help filing an amended tax return Year-end payroll period. Help filing an amended tax return   There is an exception to the general rule that income is considered earned in the year you do the work for which you receive the income. Help filing an amended tax return If you are a cash-basis taxpayer, any salary or wage payment you receive after the end of the year in which you do the work for which you receive the pay is considered earned entirely in the year you receive it if all four of the following apply. Help filing an amended tax return The period for which the payment is made is a normal payroll period of your employer that regularly applies to you. Help filing an amended tax return The payroll period includes the last day of your tax year (December 31 if you figure your taxes on a calendar-year basis). Help filing an amended tax return The payroll period is not longer than 16 days. Help filing an amended tax return The payday comes at the same time in relation to the payroll period that it would normally come and it comes before the end of the next payroll period. Help filing an amended tax return Example. Help filing an amended tax return You are paid twice a month. Help filing an amended tax return For the normal payroll period that begins on the first of the month and ends on the fifteenth of the month, you are paid on the sixteenth day of the month. Help filing an amended tax return For the normal payroll period that begins on the sixteenth of the month and ends on the last day of the month, you are paid on the first day of the following month. Help filing an amended tax return Because all of the above conditions are met, the pay you received on January 1, 2013, is considered earned in 2013. Help filing an amended tax return Income earned over more than 1 year. Help filing an amended tax return   Regardless of when you actually receive income, you must apply it to the year in which you earned it in figuring your excludable amount for that year. Help filing an amended tax return For example, a bonus may be based on work you did over several years. Help filing an amended tax return You determine the amount of the bonus that is considered earned in a particular year in two steps. Help filing an amended tax return Divide the bonus by the number of calendar months in the period when you did the work that resulted in the bonus. Help filing an amended tax return Multiply the result of (1) by the number of months you did the work during the year. Help filing an amended tax return This is the amount that is subject to the exclusion limit for that tax year. Help filing an amended tax return Income received more than 1 year after it was earned. Help filing an amended tax return   You cannot exclude income you receive after the end of the year following the year you do the work to earn it. Help filing an amended tax return Example. Help filing an amended tax return   You were a bona fide resident of Sweden for 2011, 2012, and 2013. Help filing an amended tax return You report your income on the cash basis. Help filing an amended tax return In 2011, you were paid $69,000 for work you did in Sweden that year and in 2012 you were paid $74,000 for that year's work in Sweden. Help filing an amended tax return You excluded all the income on your 2011 and 2012 returns. Help filing an amended tax return   In 2013, you were paid $92,000; $82,000 for your work in Sweden during 2013, and $10,000 for work you did in Sweden in 2011. Help filing an amended tax return You cannot exclude any of the $10,000 for work done in 2011 because you received it after the end of the year following the year in which you earned it. Help filing an amended tax return You must include the $10,000 in income. Help filing an amended tax return You can exclude all of the $82,000 received for work you did in 2013. Help filing an amended tax return Community income. Help filing an amended tax return   The maximum exclusion applies separately to the earnings of spouses. Help filing an amended tax return Ignore any community property laws when you figure your limit on the foreign earned income exclusion. Help filing an amended tax return Part-year exclusion. Help filing an amended tax return   If the period for which you qualify for the foreign earned income exclusion includes only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. Help filing an amended tax return The number of qualifying days is the number of days in the year within the period on which you both: Have your tax home in a foreign country, and Meet either the bona fide residence test or the physical presence test. Help filing an amended tax return   For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. Help filing an amended tax return To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year. Help filing an amended tax return Example. Help filing an amended tax return You report your income on the calendar-year basis and you qualified for the foreign earned income exclusion under the bona fide residence test for 75 days in 2013. Help filing an amended tax return You can exclude a maximum of 75/365 of $97,600, or $20,055, of your foreign earned income for 2013. Help filing an amended tax return If you qualify under the bona fide residence test for all of 2014, you can exclude your foreign earned income up to the 2014 limit. Help filing an amended tax return Physical presence test. Help filing an amended tax return   Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. Help filing an amended tax return If you qualify for the foreign earned income exclusion under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year. Help filing an amended tax return Example. Help filing an amended tax return You are physically present and have your tax home in a foreign country for a 16-month period from June 1, 2012, through September 30, 2013, except for 16 days in December 2012 when you were on vacation in the United States. Help filing an amended tax return You figure the maximum exclusion for 2012 as follows. Help filing an amended tax return Beginning with June 1, 2012, count forward 330 full days. Help filing an amended tax return Do not count the 16 days you spent in the United States. Help filing an amended tax return The 330th day, May 12, 2013, is the last day of a 12-month period. Help filing an amended tax return Count backward 12 months from May 11, 2013, to find the first day of this 12-month period, May 12, 2012. Help filing an amended tax return This 12-month period runs from May 12, 2012, through May 11, 2013. Help filing an amended tax return Count the total days during 2012 that fall within this 12-month period. Help filing an amended tax return This is 234 days (May 12, 2012 – December 31, 2012). Help filing an amended tax return Multiply $95,100 (the maximum exclusion for 2012) by the fraction 234/366 to find your maximum exclusion for 2012 ($60,802). Help filing an amended tax return You figure the maximum exclusion for 2013 in the opposite manner. Help filing an amended tax return Beginning with your last full day, September 30, 2013, count backward 330 full days. Help filing an amended tax return Do not count the 16 days you spent in the United States. Help filing an amended tax return That day, October 20, 2012, is the first day of a 12-month period. Help filing an amended tax return Count forward 12 months from October 20, 2012, to find the last day of this 12-month period, October 19, 2013. Help filing an amended tax return This 12-month period runs from October 20, 2012, through October 19, 2013. Help filing an amended tax return Count the total days during 2013 that fall within this 12-month period. Help filing an amended tax return This is 292 days (January 1, 2013 – October 19, 2013). Help filing an amended tax return Multiply $97,600, the maximum limit, by the fraction 292/365 to find your maximum exclusion for 2013 ($78,080). Help filing an amended tax return Choosing the Exclusion The foreign earned income exclusion is voluntary. Help filing an amended tax return You can choose the exclusion by completing the appropriate parts of Form 2555. Help filing an amended tax return When You Can Choose the Exclusion Your initial choice of the exclusion on Form 2555 or Form 2555-EZ generally must be made with one of the following returns. Help filing an amended tax return A return filed by the due date (including any extensions). Help filing an amended tax return A return amending a timely-filed return. Help filing an amended tax return Amended returns generally must be filed by the later of 3 years after the filing date of the original return or 2 years after the tax is paid. Help filing an amended tax return A return filed within 1 year from the original due date of the return (determined without regard to any extensions). Help filing an amended tax return Filing after the above periods. Help filing an amended tax return   You can choose the exclusion on a return filed after the periods described above if you owe no federal income tax after taking into account the exclusion. Help filing an amended tax return If you owe federal income tax after taking into account the exclusion, you can choose the exclusion on a return filed after the periods described earlier if you file before the IRS discovers that you failed to choose the exclusion. Help filing an amended tax return Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1. Help filing an amended tax return 911-7(a)(2)(i)(D). Help filing an amended tax return ” If you owe federal income tax after taking into account the foreign earned income exclusion and the IRS discovered that you failed to choose the exclusion, you may still be able to choose the exclusion. Help filing an amended tax return You must request a private letter ruling under Income Tax Regulation 301. Help filing an amended tax return 9100-3 and Revenue Procedure 2013-1, 2013-1 I. Help filing an amended tax return R. Help filing an amended tax return B. Help filing an amended tax return 1, available at www. Help filing an amended tax return irs. Help filing an amended tax return gov/irb/2013-01_IRB/ar06. Help filing an amended tax return html. Help filing an amended tax return Effect of Choosing the Exclusion Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it. Help filing an amended tax return Foreign tax credit or deduction. Help filing an amended tax return