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How To File 2011 Tax Return In 2013

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How To File 2011 Tax Return In 2013

How to file 2011 tax return in 2013 5. How to file 2011 tax return in 2013   Wages, Salaries, and Other Earnings Table of Contents Reminder Introduction Useful Items - You may want to see: Employee CompensationBabysitting. How to file 2011 tax return in 2013 Miscellaneous Compensation Fringe Benefits Retirement Plan Contributions Stock Options Restricted Property Special Rules for Certain EmployeesClergy Members of Religious Orders Foreign Employer Military Volunteers Sickness and Injury BenefitsDisability Pensions Long-Term Care Insurance Contracts Workers' Compensation Other Sickness and Injury Benefits Reminder Foreign income. How to file 2011 tax return in 2013   If you are a U. How to file 2011 tax return in 2013 S. How to file 2011 tax return in 2013 citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U. How to file 2011 tax return in 2013 S. How to file 2011 tax return in 2013 law. How to file 2011 tax return in 2013 This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. How to file 2011 tax return in 2013 This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). How to file 2011 tax return in 2013 If you reside outside the United States, you may be able to exclude part or all of your foreign source earned income. How to file 2011 tax return in 2013 For details, see Publication 54, Tax Guide for U. How to file 2011 tax return in 2013 S. How to file 2011 tax return in 2013 Citizens and Resident Aliens Abroad. How to file 2011 tax return in 2013 Introduction This chapter discusses compensation received for services as an employee, such as wages, salaries, and fringe benefits. How to file 2011 tax return in 2013 The following topics are included. How to file 2011 tax return in 2013 Bonuses and awards. How to file 2011 tax return in 2013 Special rules for certain employees. How to file 2011 tax return in 2013 Sickness and injury benefits. How to file 2011 tax return in 2013 The chapter explains what income is included in the employee's gross income and what is not included. How to file 2011 tax return in 2013 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 525 Taxable and Nontaxable Income Employee Compensation This section discusses various types of employee compensation including fringe benefits, retirement plan contributions, stock options, and restricted property. How to file 2011 tax return in 2013 Form W-2. How to file 2011 tax return in 2013    If you are an employee, you should receive Form W-2 from your employer showing the pay you received for your services. How to file 2011 tax return in 2013 Include your pay on line 7 of Form 1040 or Form 1040A, or on line 1 of Form 1040EZ, even if you do not receive a Form W-2. How to file 2011 tax return in 2013   If you performed services, other than as an independent contractor, and your employer did not withhold social security and Medicare taxes from your pay, you must file Form 8919, Uncollected Social Security and Medicare Tax on Wages, with your Form 1040. How to file 2011 tax return in 2013 These wages must be included on line 7 of Form 1040. How to file 2011 tax return in 2013 See Form 8919 for more information. How to file 2011 tax return in 2013 Childcare providers. How to file 2011 tax return in 2013    If you provide childcare, either in the child's home or in your home or other place of business, the pay you receive must be included in your income. How to file 2011 tax return in 2013 If you are not an employee, you are probably self-employed and must include payments for your services on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. How to file 2011 tax return in 2013 You generally are not an employee unless you are subject to the will and control of the person who employs you as to what you are to do and how you are to do it. How to file 2011 tax return in 2013 Babysitting. How to file 2011 tax return in 2013   If you babysit for relatives or neighborhood children, whether on a regular basis or only periodically, the rules for childcare providers apply to you. How to file 2011 tax return in 2013 Miscellaneous Compensation This section discusses different types of employee compensation. How to file 2011 tax return in 2013 Advance commissions and other earnings. How to file 2011 tax return in 2013   If you receive advance commissions or other amounts for services to be performed in the future and you are a cash-method taxpayer, you must include these amounts in your income in the year you receive them. How to file 2011 tax return in 2013    If you repay unearned commissions or other amounts in the same year you receive them, reduce the amount included in your income by the repayment. How to file 2011 tax return in 2013 If you repay them in a later tax year, you can deduct the repayment as an itemized deduction on your Schedule A (Form 1040), or you may be able to take a credit for that year. How to file 2011 tax return in 2013 See Repayments in chapter 12. How to file 2011 tax return in 2013 Allowances and reimbursements. How to file 2011 tax return in 2013    If you receive travel, transportation, or other business expense allowances or reimbursements from your employer, see Publication 463. How to file 2011 tax return in 2013 If you are reimbursed for moving expenses, see Publication 521, Moving Expenses. How to file 2011 tax return in 2013 Back pay awards. How to file 2011 tax return in 2013    Include in income amounts you are awarded in a settlement or judgment for back pay. How to file 2011 tax return in 2013 These include payments made to you for damages, unpaid life insurance premiums, and unpaid health insurance premiums. How to file 2011 tax return in 2013 They should be reported to you by your employer on Form W-2. How to file 2011 tax return in 2013 Bonuses and awards. How to file 2011 tax return in 2013   Bonuses or awards you receive for outstanding work are included in your income and should be shown on your Form W-2. How to file 2011 tax return in 2013 These include prizes such as vacation trips for meeting sales goals. How to file 2011 tax return in 2013 If the prize or award you receive is goods or services, you must include the fair market value of the goods or services in your income. How to file 2011 tax return in 2013 However, if your employer merely promises to pay you a bonus or award at some future time, it is not taxable until you receive it or it is made available to you. How to file 2011 tax return in 2013 Employee achievement award. How to file 2011 tax return in 2013   If you receive tangible personal property (other than cash, a gift certificate, or an equivalent item) as an award for length of service or safety achievement, you generally can exclude its value from your income. How to file 2011 tax return in 2013 However, the amount you can exclude is limited to your employer's cost and cannot be more than $1,600 ($400 for awards that are not qualified plan awards) for all such awards you receive during the year. How to file 2011 tax return in 2013 Your employer can tell you whether your award is a qualified plan award. How to file 2011 tax return in 2013 Your employer must make the award as part of a meaningful presentation, under conditions and circumstances that do not create a significant likelihood of it being disguised pay. How to file 2011 tax return in 2013   However, the exclusion does not apply to the following awards: A length-of-service award if you received it for less than 5 years of service or if you received another length-of-service award during the year or the previous 4 years. How to file 2011 tax return in 2013 A safety achievement award if you are a manager, administrator, clerical employee, or other professional employee or if more than 10% of eligible employees previously received safety achievement awards during the year. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 Ben Green received three employee achievement awards during the year: a nonqualified plan award of a watch valued at $250, and two qualified plan awards of a stereo valued at $1,000 and a set of golf clubs valued at $500. How to file 2011 tax return in 2013 Assuming that the requirements for qualified plan awards are otherwise satisfied, each award by itself would be excluded from income. How to file 2011 tax return in 2013 However, because the $1,750 total value of the awards is more than $1,600, Ben must include $150 ($1,750 – $1,600) in his income. How to file 2011 tax return in 2013 Differential wage payments. How to file 2011 tax return in 2013   This is any payment made to you by an employer for any period during which you are, for a period of more than 30 days, an active duty member of the uniformed services and represents all or a portion of the wages you would have received from the employer during that period. How to file 2011 tax return in 2013 These payments are treated as wages and are subject to income tax withholding, but not FICA or FUTA taxes. How to file 2011 tax return in 2013 The payments are reported as wages on Form W-2. How to file 2011 tax return in 2013 Government cost-of-living allowances. How to file 2011 tax return in 2013   Most payments received by U. How to file 2011 tax return in 2013 S. How to file 2011 tax return in 2013 Government civilian employees for working abroad are taxable. How to file 2011 tax return in 2013 However, certain cost-of-living allowances are tax free. How to file 2011 tax return in 2013 Publication 516, U. How to file 2011 tax return in 2013 S. How to file 2011 tax return in 2013 Government Civilian Employees Stationed Abroad, explains the tax treatment of allowances, differentials, and other special pay you receive for employment abroad. How to file 2011 tax return in 2013 Nonqualified deferred compensation plans. How to file 2011 tax return in 2013   Your employer will report to you the total amount of deferrals for the year under a nonqualified deferred compensation plan. How to file 2011 tax return in 2013 This amount is shown on Form W-2, box 12, using code Y. How to file 2011 tax return in 2013 This amount is not included in your income. How to file 2011 tax return in 2013   However, if at any time during the tax year, the plan fails to meet certain requirements, or is not operated under those requirements, all amounts deferred under the plan for the tax year and all preceding tax years are included in your income for the current year. How to file 2011 tax return in 2013 This amount is included in your wages shown on Form W-2, box 1. How to file 2011 tax return in 2013 It is also shown on Form W-2, box 12, using code Z. How to file 2011 tax return in 2013 Note received for services. How to file 2011 tax return in 2013    If your employer gives you a secured note as payment for your services, you must include the fair market value (usually the discount value) of the note in your income for the year you receive it. How to file 2011 tax return in 2013 When you later receive payments on the note, a proportionate part of each payment is the recovery of the fair market value that you previously included in your income. How to file 2011 tax return in 2013 Do not include that part again in your income. How to file 2011 tax return in 2013 Include the rest of the payment in your income in the year of payment. How to file 2011 tax return in 2013   If your employer gives you a nonnegotiable unsecured note as payment for your services, payments on the note that are credited toward the principal amount of the note are compensation income when you receive them. How to file 2011 tax return in 2013 Severance pay. How to file 2011 tax return in 2013   You must include in income amounts you receive as severance pay and any payment for the cancellation of your employment contract. How to file 2011 tax return in 2013 Accrued leave payment. How to file 2011 tax return in 2013    If you are a federal employee and receive a lump-sum payment for accrued annual leave when you retire or resign, this amount will be included as wages on your Form W-2. How to file 2011 tax return in 2013   If you resign from one agency and are reemployed by another agency, you may have to repay part of your lump-sum annual leave payment to the second agency. How to file 2011 tax return in 2013 You can reduce gross wages by the amount you repaid in the same tax year in which you received it. How to file 2011 tax return in 2013 Attach to your tax return a copy of the receipt or statement given to you by the agency you repaid to explain the difference between the wages on the return and the wages on your Forms W-2. How to file 2011 tax return in 2013 Outplacement services. How to file 2011 tax return in 2013   If you choose to accept a reduced amount of severance pay so that you can receive outplacement services (such as training in résumé writing and interview techniques), you must include the unreduced amount of the severance pay in income. How to file 2011 tax return in 2013    However, you can deduct the value of these outplacement services (up to the difference between the severance pay included in income and the amount actually received) as a miscellaneous deduction (subject to the 2%-of-adjusted-gross-income (AGI) limit) on Schedule A (Form 1040). How to file 2011 tax return in 2013 Sick pay. How to file 2011 tax return in 2013   Pay you receive from your employer while you are sick or injured is part of your salary or wages. How to file 2011 tax return in 2013 In addition, you must include in your income sick pay benefits received from any of the following payers: A welfare fund. How to file 2011 tax return in 2013 A state sickness or disability fund. How to file 2011 tax return in 2013 An association of employers or employees. How to file 2011 tax return in 2013 An insurance company, if your employer paid for the plan. How to file 2011 tax return in 2013 However, if you paid the premiums on an accident or health insurance policy, the benefits you receive under the policy are not taxable. How to file 2011 tax return in 2013 For more information, see Publication 525. How to file 2011 tax return in 2013 Social security and Medicare taxes paid by employer. How to file 2011 tax return in 2013   If you and your employer have an agreement that your employer pays your social security and Medicare taxes without deducting them from your gross wages, you must report the amount of tax paid for you as taxable wages on your tax return. How to file 2011 tax return in 2013 The payment also is treated as wages for figuring your social security and Medicare taxes and your social security and Medicare benefits. How to file 2011 tax return in 2013 However, these payments are not treated as social security and Medicare wages if you are a household worker or a farm worker. How to file 2011 tax return in 2013 Stock appreciation rights. How to file 2011 tax return in 2013   Do not include a stock appreciation right granted by your employer in income until you exercise (use) the right. How to file 2011 tax return in 2013 When you use the right, you are entitled to a cash payment equal to the fair market value of the corporation's stock on the date of use minus the fair market value on the date the right was granted. How to file 2011 tax return in 2013 You include the cash payment in your income in the year you use the right. How to file 2011 tax return in 2013 Fringe Benefits Fringe benefits received in connection with the performance of your services are included in your income as compensation unless you pay fair market value for them or they are specifically excluded by law. How to file 2011 tax return in 2013 Abstaining from the performance of services (for example, under a covenant not to compete) is treated as the performance of services for purposes of these rules. How to file 2011 tax return in 2013 Accounting period. How to file 2011 tax return in 2013   You must use the same accounting period your employer uses to report your taxable noncash fringe benefits. How to file 2011 tax return in 2013 Your employer has the option to report taxable noncash fringe benefits by using either of the following rules. How to file 2011 tax return in 2013 The general rule: benefits are reported for a full calendar year (January 1–December 31). How to file 2011 tax return in 2013 The special accounting period rule: benefits provided during the last 2 months of the calendar year (or any shorter period) are treated as paid during the following calendar year. How to file 2011 tax return in 2013 For example, each year your employer reports the value of benefits provided during the last 2 months of the prior year and the first 10 months of the current year. How to file 2011 tax return in 2013  Your employer does not have to use the same accounting period for each fringe benefit, but must use the same period for all employees who receive a particular benefit. How to file 2011 tax return in 2013   You must use the same accounting period that you use to report the benefit to claim an employee business deduction (for use of a car, for example). How to file 2011 tax return in 2013 Form W-2. How to file 2011 tax return in 2013   Your employer must include all taxable fringe benefits in box 1 of Form W-2 as wages, tips, and other compensation and, if applicable, in boxes 3 and 5 as social security and Medicare wages. How to file 2011 tax return in 2013 Although not required, your employer may include the total value of fringe benefits in box 14 (or on a separate statement). How to file 2011 tax return in 2013 However, if your employer provided you with a vehicle and included 100% of its annual lease value in your income, the employer must separately report this value to you in box 14 (or on a separate statement). How to file 2011 tax return in 2013 Accident or Health Plan In most cases, the value of accident or health plan coverage provided to you by your employer is not included in your income. How to file 2011 tax return in 2013 Benefits you receive from the plan may be taxable, as explained later under Sickness and Injury Benefits . How to file 2011 tax return in 2013 For information on the items covered in this section, other than Long-term care coverage, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. How to file 2011 tax return in 2013 Long-term care coverage. How to file 2011 tax return in 2013    Contributions by your employer to provide coverage for long-term care services generally are not included in your income. How to file 2011 tax return in 2013 However, contributions made through a flexible spending or similar arrangement (such as a cafeteria plan) must be included in your income. How to file 2011 tax return in 2013 This amount will be reported as wages in box 1 of your Form W-2. How to file 2011 tax return in 2013   Contributions you make to the plan are discussed in Publication 502, Medical and Dental Expenses. How to file 2011 tax return in 2013 Archer MSA contributions. How to file 2011 tax return in 2013    Contributions by your employer to your Archer MSA generally are not included in your income. How to file 2011 tax return in 2013 Their total will be reported in box 12 of Form W-2 with code R. How to file 2011 tax return in 2013 You must report this amount on Form 8853, Archer MSAs and Long-Term Care Insurance Contracts. How to file 2011 tax return in 2013 File the form with your return. How to file 2011 tax return in 2013 Health flexible spending arrangement (health FSA). How to file 2011 tax return in 2013   If your employer provides a health FSA that qualifies as an accident or health plan, the amount of your salary reduction, and reimbursements of your medical care expenses, in most cases, are not included in your income. How to file 2011 tax return in 2013 Note. How to file 2011 tax return in 2013 Health FSAs are subject to a $2,500 limit on salary reduction contributions for plan years beginning after 2012. How to file 2011 tax return in 2013 The $2,500 limit is subject to an inflation adjustment for plan years beginning after 2013. How to file 2011 tax return in 2013 For more information, see Notice 2012-40, 2012-26 I. How to file 2011 tax return in 2013 R. How to file 2011 tax return in 2013 B. How to file 2011 tax return in 2013 1046, available at www. How to file 2011 tax return in 2013 irs. How to file 2011 tax return in 2013 gov/irb/2012-26 IRB/ar09. How to file 2011 tax return in 2013 html. How to file 2011 tax return in 2013 Health reimbursement arrangement (HRA). How to file 2011 tax return in 2013   If your employer provides an HRA that qualifies as an accident or health plan, coverage and reimbursements of your medical care expenses generally are not included in your income. How to file 2011 tax return in 2013 Health savings accounts (HSA). How to file 2011 tax return in 2013   If you are an eligible individual, you and any other person, including your employer or a family member, can make contributions to your HSA. How to file 2011 tax return in 2013 Contributions, other than employer contributions, are deductible on your return whether or not you itemize deductions. How to file 2011 tax return in 2013 Contributions made by your employer are not included in your income. How to file 2011 tax return in 2013 Distributions from your HSA that are used to pay qualified medical expenses are not included in your income. How to file 2011 tax return in 2013 Distributions not used for qualified medical expenses are included in your income. How to file 2011 tax return in 2013 See Publication 969 for the requirements of an HSA. How to file 2011 tax return in 2013   Contributions by a partnership to a bona fide partner's HSA are not contributions by an employer. How to file 2011 tax return in 2013 The contributions are treated as a distribution of money and are not included in the partner's gross income. How to file 2011 tax return in 2013 Contributions by a partnership to a partner's HSA for services rendered are treated as guaranteed payments that are includible in the partner's gross income. How to file 2011 tax return in 2013 In both situations, the partner can deduct the contribution made to the partner's HSA. How to file 2011 tax return in 2013   Contributions by an S corporation to a 2% shareholder-employee's HSA for services rendered are treated as guaranteed payments and are includible in the shareholder-employee's gross income. How to file 2011 tax return in 2013 The shareholder-employee can deduct the contribution made to the shareholder-employee's HSA. How to file 2011 tax return in 2013 Qualified HSA funding distribution. How to file 2011 tax return in 2013   You can make a one-time distribution from your individual retirement account (IRA) to an HSA and you generally will not include any of the distribution in your income. How to file 2011 tax return in 2013 See Publication 590 for the requirements for these qualified HSA funding distributions. How to file 2011 tax return in 2013 Failure to maintain eligibility. How to file 2011 tax return in 2013   If your HSA received qualified HSA distributions from a health FSA or HRA (discussed earlier) or a qualified HSA funding distribution, you must be an eligible individual for HSA purposes for the period beginning with the month in which the qualified distribution was made and ending on the last day of the 12th month following that month. How to file 2011 tax return in 2013 If you fail to be an eligible individual during this period, other than because of death or disability, you must include the distribution in your income for the tax year in which you become ineligible. How to file 2011 tax return in 2013 This income is also subject to an additional 10% tax. How to file 2011 tax return in 2013 Adoption Assistance You may be able to exclude from your income amounts paid or expenses incurred by your employer for qualified adoption expenses in connection with your adoption of an eligible child. How to file 2011 tax return in 2013 See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. How to file 2011 tax return in 2013 Adoption benefits are reported by your employer in box 12 of Form W-2 with code T. How to file 2011 tax return in 2013 They also are included as social security and Medicare wages in boxes 3 and 5. How to file 2011 tax return in 2013 However, they are not included as wages in box 1. How to file 2011 tax return in 2013 To determine the taxable and nontaxable amounts, you must complete Part III of Form 8839. How to file 2011 tax return in 2013 File the form with your return. How to file 2011 tax return in 2013 De Minimis (Minimal) Benefits If your employer provides you with a product or service and the cost of it is so small that it would be unreasonable for the employer to account for it, the value is not included in your income. How to file 2011 tax return in 2013 In most cases, the value of benefits such as discounts at company cafeterias, cab fares home when working overtime, and company picnics are not included in your income. How to file 2011 tax return in 2013 Holiday gifts. How to file 2011 tax return in 2013   If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. How to file 2011 tax return in 2013 However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved. How to file 2011 tax return in 2013 Educational Assistance You can exclude from your income up to $5,250 of qualified employer-provided educational assistance. How to file 2011 tax return in 2013 For more information, see Publication 970, Tax Benefits for Education. How to file 2011 tax return in 2013 Group-Term Life Insurance In most cases, the cost of up to $50,000 of group-term life insurance coverage provided to you by your employer (or former employer) is not included in your income. How to file 2011 tax return in 2013 However, you must include in income the cost of employer-provided insurance that is more than the cost of $50,000 of coverage reduced by any amount you pay toward the purchase of the insurance. How to file 2011 tax return in 2013 For exceptions, see Entire cost excluded , and Entire cost taxed , later. How to file 2011 tax return in 2013 If your employer provided more than $50,000 of coverage, the amount included in your income is reported as part of your wages in box 1 of your Form W-2. How to file 2011 tax return in 2013 Also, it is shown separately in box 12 with code C. How to file 2011 tax return in 2013 Group-term life insurance. How to file 2011 tax return in 2013   This insurance is term life insurance protection (insurance for a fixed period of time) that: Provides a general death benefit, Is provided to a group of employees, Is provided under a policy carried by the employer, and Provides an amount of insurance to each employee based on a formula that prevents individual selection. How to file 2011 tax return in 2013 Permanent benefits. How to file 2011 tax return in 2013   If your group-term life insurance policy includes permanent benefits, such as a paid-up or cash surrender value, you must include in your income, as wages, the cost of the permanent benefits minus the amount you pay for them. How to file 2011 tax return in 2013 Your employer should be able to tell you the amount to include in your income. How to file 2011 tax return in 2013 Accidental death benefits. How to file 2011 tax return in 2013   Insurance that provides accidental or other death benefits but does not provide general death benefits (travel insurance, for example) is not group-term life insurance. How to file 2011 tax return in 2013 Former employer. How to file 2011 tax return in 2013   If your former employer provided more than $50,000 of group-term life insurance coverage during the year, the amount included in your income is reported as wages in box 1 of Form W-2. How to file 2011 tax return in 2013 Also, it is shown separately in box 12 with code C. How to file 2011 tax return in 2013 Box 12 also will show the amount of uncollected social security and Medicare taxes on the excess coverage, with codes M and N. How to file 2011 tax return in 2013 You must pay these taxes with your income tax return. How to file 2011 tax return in 2013 Include them on line 60, Form 1040, and follow the instructions for line 60. How to file 2011 tax return in 2013 For more information, see the Instructions for Form 1040. How to file 2011 tax return in 2013 Two or more employers. How to file 2011 tax return in 2013   Your exclusion for employer-provided group-term life insurance coverage cannot exceed the cost of $50,000 of coverage, whether the insurance is provided by a single employer or multiple employers. How to file 2011 tax return in 2013 If two or more employers provide insurance coverage that totals more than $50,000, the amounts reported as wages on your Forms W-2 will not be correct. How to file 2011 tax return in 2013 You must figure how much to include in your income. How to file 2011 tax return in 2013 Reduce the amount you figure by any amount reported with code C in box 12 of your Forms W-2, add the result to the wages reported in box 1, and report the total on your return. How to file 2011 tax return in 2013 Figuring the taxable cost. How to file 2011 tax return in 2013   Use the following worksheet to figure the amount to include in your income. How to file 2011 tax return in 2013     Worksheet 5-1. How to file 2011 tax return in 2013 Figuring the Cost of Group-Term Life Insurance To Include in Income 1. How to file 2011 tax return in 2013 Enter the total amount of your insurance coverage from your employer(s) 1. How to file 2011 tax return in 2013   2. How to file 2011 tax return in 2013 Limit on exclusion for employer-provided group-term life insurance coverage 2. How to file 2011 tax return in 2013 50,000 3. How to file 2011 tax return in 2013 Subtract line 2 from line 1 3. How to file 2011 tax return in 2013   4. How to file 2011 tax return in 2013 Divide line 3 by $1,000. How to file 2011 tax return in 2013 Figure to the nearest tenth 4. How to file 2011 tax return in 2013   5. How to file 2011 tax return in 2013 Go to Table 5-1. How to file 2011 tax return in 2013 Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. How to file 2011 tax return in 2013   6. How to file 2011 tax return in 2013 Multiply line 4 by line 5 6. How to file 2011 tax return in 2013   7. How to file 2011 tax return in 2013 Enter the number of full months of coverage at this cost. How to file 2011 tax return in 2013 7. How to file 2011 tax return in 2013   8. How to file 2011 tax return in 2013 Multiply line 6 by line 7 8. How to file 2011 tax return in 2013   9. How to file 2011 tax return in 2013 Enter the premiums you paid per month 9. How to file 2011 tax return in 2013       10. How to file 2011 tax return in 2013 Enter the number of months you paid the premiums 10. How to file 2011 tax return in 2013       11. How to file 2011 tax return in 2013 Multiply line 9 by line 10. How to file 2011 tax return in 2013 11. How to file 2011 tax return in 2013   12. How to file 2011 tax return in 2013 Subtract line 11 from line 8. How to file 2011 tax return in 2013 Include this amount in your income as wages 12. How to file 2011 tax return in 2013      Table 5-1. How to file 2011 tax return in 2013 Cost of $1,000 of Group-Term Life Insurance for One Month Age Cost Under 25 $. How to file 2011 tax return in 2013 05 25 through 29 . How to file 2011 tax return in 2013 06 30 through 34 . How to file 2011 tax return in 2013 08 35 through 39 . How to file 2011 tax return in 2013 09 40 through 44 . How to file 2011 tax return in 2013 10 45 through 49 . How to file 2011 tax return in 2013 15 50 through 54 . How to file 2011 tax return in 2013 23 55 through 59 . How to file 2011 tax return in 2013 43 60 through 64 . How to file 2011 tax return in 2013 66 65 through 69 1. How to file 2011 tax return in 2013 27 70 and older 2. How to file 2011 tax return in 2013 06 Example. How to file 2011 tax return in 2013 You are 51 years old and work for employers A and B. How to file 2011 tax return in 2013 Both employers provide group-term life insurance coverage for you for the entire year. How to file 2011 tax return in 2013 Your coverage is $35,000 with employer A and $45,000 with employer B. How to file 2011 tax return in 2013 You pay premiums of $4. How to file 2011 tax return in 2013 15 a month under the employer B group plan. How to file 2011 tax return in 2013 You figure the amount to include in your income as shown in Worksheet 5-1. How to file 2011 tax return in 2013 Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated, later. How to file 2011 tax return in 2013 Worksheet 5-1. How to file 2011 tax return in 2013 Figuring the Cost of Group-Term Life Insurance to Include in Income—Illustrated 1. How to file 2011 tax return in 2013 Enter the total amount of your insurance coverage from your employer(s) 1. How to file 2011 tax return in 2013 80,000 2. How to file 2011 tax return in 2013 Limit on exclusion for employer-provided group-term life insurance coverage 2. How to file 2011 tax return in 2013 50,000 3. How to file 2011 tax return in 2013 Subtract line 2 from line 1 3. How to file 2011 tax return in 2013 30,000 4. How to file 2011 tax return in 2013 Divide line 3 by $1,000. How to file 2011 tax return in 2013 Figure to the nearest tenth 4. How to file 2011 tax return in 2013 30. How to file 2011 tax return in 2013 0 5. How to file 2011 tax return in 2013 Go to Table 5-1. How to file 2011 tax return in 2013 Using your age on the last day of the tax year, find your age group in the left column, and enter the cost from the column on the right for your age group 5. How to file 2011 tax return in 2013 . How to file 2011 tax return in 2013 23 6. How to file 2011 tax return in 2013 Multiply line 4 by line 5 6. How to file 2011 tax return in 2013 6. How to file 2011 tax return in 2013 90 7. How to file 2011 tax return in 2013 Enter the number of full months of coverage at this cost. How to file 2011 tax return in 2013 7. How to file 2011 tax return in 2013 12 8. How to file 2011 tax return in 2013 Multiply line 6 by line 7 8. How to file 2011 tax return in 2013 82. How to file 2011 tax return in 2013 80 9. How to file 2011 tax return in 2013 Enter the premiums you paid per month 9. How to file 2011 tax return in 2013 4. How to file 2011 tax return in 2013 15     10. How to file 2011 tax return in 2013 Enter the number of months you paid the premiums 10. How to file 2011 tax return in 2013 12     11. How to file 2011 tax return in 2013 Multiply line 9 by line 10. How to file 2011 tax return in 2013 11. How to file 2011 tax return in 2013 49. How to file 2011 tax return in 2013 80 12. How to file 2011 tax return in 2013 Subtract line 11 from line 8. How to file 2011 tax return in 2013 Include this amount in your income as wages 12. How to file 2011 tax return in 2013 33. How to file 2011 tax return in 2013 00 Entire cost excluded. How to file 2011 tax return in 2013   You are not taxed on the cost of group-term life insurance if any of the following circumstances apply. How to file 2011 tax return in 2013 You are permanently and totally disabled and have ended your employment. How to file 2011 tax return in 2013 Your employer is the beneficiary of the policy for the entire period the insurance is in force during the tax year. How to file 2011 tax return in 2013 A charitable organization (defined in chapter 24) to which contributions are deductible is the only beneficiary of the policy for the entire period the insurance is in force during the tax year. How to file 2011 tax return in 2013 (You are not entitled to a deduction for a charitable contribution for naming a charitable organization as the beneficiary of your policy. How to file 2011 tax return in 2013 ) The plan existed on January 1, 1984, and You retired before January 2, 1984, and were covered by the plan when you retired, or You reached age 55 before January 2, 1984, and were employed by the employer or its predecessor in 1983. How to file 2011 tax return in 2013 Entire cost taxed. How to file 2011 tax return in 2013   You are taxed on the entire cost of group-term life insurance if either of the following circumstances apply: The insurance is provided by your employer through a qualified employees' trust, such as a pension trust or a qualified annuity plan. How to file 2011 tax return in 2013 You are a key employee and your employer's plan discriminates in favor of key employees. How to file 2011 tax return in 2013 Retirement Planning Services If your employer has a qualified retirement plan, qualified retirement planning services provided to you (and your spouse) by your employer are not included in your income. How to file 2011 tax return in 2013 Qualified services include retirement planning advice, information about your employer's retirement plan, and information about how the plan may fit into your overall individual retirement income plan. How to file 2011 tax return in 2013 You cannot exclude the value of any tax preparation, accounting, legal, or brokerage services provided by your employer. How to file 2011 tax return in 2013 Transportation If your employer provides you with a qualified transportation fringe benefit, it can be excluded from your income, up to certain limits. How to file 2011 tax return in 2013 A qualified transportation fringe benefit is: Transportation in a commuter highway vehicle (such as a van) between your home and work place, A transit pass, Qualified parking, or Qualified bicycle commuting reimbursement. How to file 2011 tax return in 2013 Cash reimbursement by your employer for these expenses under a bona fide reimbursement arrangement is also excludable. How to file 2011 tax return in 2013 However, cash reimbursement for a transit pass is excludable only if a voucher or similar item that can be exchanged only for a transit pass is not readily available for direct distribution to you. How to file 2011 tax return in 2013 Exclusion limit. How to file 2011 tax return in 2013   The exclusion for commuter vehicle transportation and transit pass fringe benefits cannot be more than $245 a month. How to file 2011 tax return in 2013   The exclusion for the qualified parking fringe benefit cannot be more than $245 a month. How to file 2011 tax return in 2013   The exclusion for qualified bicycle commuting in a calendar year is $20 multiplied by the number of qualified bicycle commuting months that year. How to file 2011 tax return in 2013   If the benefits have a value that is more than these limits, the excess must be included in your income. How to file 2011 tax return in 2013 You are not entitled to these exclusions if the reimbursements are made under a compensation reduction agreement. How to file 2011 tax return in 2013 Commuter highway vehicle. How to file 2011 tax return in 2013   This is a highway vehicle that seats at least six adults (not including the driver). How to file 2011 tax return in 2013 At least 80% of the vehicle's mileage must reasonably be expected to be: For transporting employees between their homes and work place, and On trips during which employees occupy at least half of the vehicle's adult seating capacity (not including the driver). How to file 2011 tax return in 2013 Transit pass. How to file 2011 tax return in 2013   This is any pass, token, farecard, voucher, or similar item entitling a person to ride mass transit (whether public or private) free or at a reduced rate or to ride in a commuter highway vehicle operated by a person in the business of transporting persons for compensation. How to file 2011 tax return in 2013 Qualified parking. How to file 2011 tax return in 2013   This is parking provided to an employee at or near the employer's place of business. How to file 2011 tax return in 2013 It also includes parking provided on or near a location from which the employee commutes to work by mass transit, in a commuter highway vehicle, or by carpool. How to file 2011 tax return in 2013 It does not include parking at or near the employee's home. How to file 2011 tax return in 2013 Qualified bicycle commuting. How to file 2011 tax return in 2013   This is reimbursement based on the number of qualified bicycle commuting months for the year. How to file 2011 tax return in 2013 A qualified bicycle commuting month is any month you use the bicycle regularly for a substantial portion of the travel between your home and place of employment and you do not receive any of the other qualified transportation fringe benefits. How to file 2011 tax return in 2013 The reimbursement can be for expenses you incurred during the year for the purchase of a bicycle and bicycle improvements, repair, and storage. How to file 2011 tax return in 2013 Retirement Plan Contributions Your employer's contributions to a qualified retirement plan for you are not included in income at the time contributed. How to file 2011 tax return in 2013 (Your employer can tell you whether your retirement plan is qualified. How to file 2011 tax return in 2013 ) However, the cost of life insurance coverage included in the plan may have to be included. How to file 2011 tax return in 2013 See Group-Term Life Insurance , earlier, under Fringe Benefits. How to file 2011 tax return in 2013 If your employer pays into a nonqualified plan for you, you generally must include the contributions in your income as wages for the tax year in which the contributions are made. How to file 2011 tax return in 2013 However, if your interest in the plan is not transferable or is subject to a substantial risk of forfeiture (you have a good chance of losing it) at the time of the contribution, you do not have to include the value of your interest in your income until it is transferable or is no longer subject to a substantial risk of forfeiture. How to file 2011 tax return in 2013 For information on distributions from retirement plans, see Publication 575, Pension and Annuity Income (or Publication 721, Tax Guide to U. How to file 2011 tax return in 2013 S. How to file 2011 tax return in 2013 Civil Service Retirement Benefits, if you are a federal employee or retiree). How to file 2011 tax return in 2013 Elective deferrals. How to file 2011 tax return in 2013   If you are covered by certain kinds of retirement plans, you can choose to have part of your compensation contributed by your employer to a retirement fund, rather than have it paid to you. How to file 2011 tax return in 2013 The amount you set aside (called an elective deferral) is treated as an employer contribution to a qualified plan. How to file 2011 tax return in 2013 An elective deferral, other than a designated Roth contribution (discussed later), is not included in wages subject to income tax at the time contributed. How to file 2011 tax return in 2013 However, it is included in wages subject to social security and Medicare taxes. How to file 2011 tax return in 2013   Elective deferrals include elective contributions to the following retirement plans. How to file 2011 tax return in 2013 Cash or deferred arrangements (section 401(k) plans). How to file 2011 tax return in 2013 The Thrift Savings Plan for federal employees. How to file 2011 tax return in 2013 Salary reduction simplified employee pension plans (SARSEP). How to file 2011 tax return in 2013 Savings incentive match plans for employees (SIMPLE plans). How to file 2011 tax return in 2013 Tax-sheltered annuity plans (403(b) plans). How to file 2011 tax return in 2013 Section 501(c)(18)(D) plans. How to file 2011 tax return in 2013 Section 457 plans. How to file 2011 tax return in 2013 Qualified automatic contribution arrangements. How to file 2011 tax return in 2013   Under a qualified automatic contribution arrangement, your employer can treat you as having elected to have a part of your compensation contributed to a section 401(k) plan. How to file 2011 tax return in 2013 You are to receive written notice of your rights and obligations under the qualified automatic contribution arrangement. How to file 2011 tax return in 2013 The notice must explain: Your rights to elect not to have elective contributions made, or to have contributions made at a different percentage, and How contributions made will be invested in the absence of any investment decision by you. How to file 2011 tax return in 2013   You must be given a reasonable period of time after receipt of the notice and before the first elective contribution is made to make an election with respect to the contributions. How to file 2011 tax return in 2013 Overall limit on deferrals. How to file 2011 tax return in 2013   For 2013, in most cases, you should not have deferred more than a total of $17,500 of contributions to the plans listed in (1) through (3) and (5) above. How to file 2011 tax return in 2013 The limit for SIMPLE plans is $12,000. How to file 2011 tax return in 2013 The limit for section 501(c)(18)(D) plans is the lesser of $7,000 or 25% of your compensation. How to file 2011 tax return in 2013 The limit for section 457 plans is the lesser of your includible compensation or $17,500. How to file 2011 tax return in 2013 Amounts deferred under specific plan limits are part of the overall limit on deferrals. How to file 2011 tax return in 2013 Designated Roth contributions. How to file 2011 tax return in 2013   Employers with section 401(k) and section 403(b) plans can create qualified Roth contribution programs so that you may elect to have part or all of your elective deferrals to the plan designated as after-tax Roth contributions. How to file 2011 tax return in 2013 Designated Roth contributions are treated as elective deferrals, except that they are included in income. How to file 2011 tax return in 2013 Excess deferrals. How to file 2011 tax return in 2013   Your employer or plan administrator should apply the proper annual limit when figuring your plan contributions. How to file 2011 tax return in 2013 However, you are responsible for monitoring the total you defer to ensure that the deferrals are not more than the overall limit. How to file 2011 tax return in 2013   If you set aside more than the limit, the excess generally must be included in your income for that year, unless you have an excess deferral of a designated Roth contribution. How to file 2011 tax return in 2013 See Publication 525 for a discussion of the tax treatment of excess deferrals. How to file 2011 tax return in 2013 Catch-up contributions. How to file 2011 tax return in 2013   You may be allowed catch-up contributions (additional elective deferral) if you are age 50 or older by the end of your tax year. How to file 2011 tax return in 2013 Stock Options If you receive a nonstatutory option to buy or sell stock or other property as payment for your services, you usually will have income when you receive the option, when you exercise the option (use it to buy or sell the stock or other property), or when you sell or otherwise dispose of the option. How to file 2011 tax return in 2013 However, if your option is a statutory stock option, you will not have any income until you sell or exchange your stock. How to file 2011 tax return in 2013 Your employer can tell you which kind of option you hold. How to file 2011 tax return in 2013 For more information, see Publication 525. How to file 2011 tax return in 2013 Restricted Property In most cases, if you receive property for your services, you must include its fair market value in your income in the year you receive the property. How to file 2011 tax return in 2013 However, if you receive stock or other property that has certain restrictions that affect its value, you do not include the value of the property in your income until it has substantially vested. How to file 2011 tax return in 2013 (You can choose to include the value of the property in your income in the year it is transferred to you. How to file 2011 tax return in 2013 ) For more information, see Restricted Property in Publication 525. How to file 2011 tax return in 2013 Dividends received on restricted stock. How to file 2011 tax return in 2013   Dividends you receive on restricted stock are treated as compensation and not as dividend income. How to file 2011 tax return in 2013 Your employer should include these payments on your Form W-2. How to file 2011 tax return in 2013 Stock you chose to include in income. How to file 2011 tax return in 2013   Dividends you receive on restricted stock you chose to include in your income in the year transferred are treated the same as any other dividends. How to file 2011 tax return in 2013 Report them on your return as dividends. How to file 2011 tax return in 2013 For a discussion of dividends, see chapter 8. How to file 2011 tax return in 2013    For information on how to treat dividends reported on both your Form W-2 and Form 1099-DIV, see Dividends received on restricted stock in Publication 525. How to file 2011 tax return in 2013 Special Rules for Certain Employees This section deals with special rules for people in certain types of employment: members of the clergy, members of religious orders, people working for foreign employers, military personnel, and volunteers. How to file 2011 tax return in 2013 Clergy Generally, if you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. How to file 2011 tax return in 2013 , in addition to your salary. How to file 2011 tax return in 2013 If the offering is made to the religious institution, it is not taxable to you. How to file 2011 tax return in 2013 If you are a member of a religious organization and you give your outside earnings to the religious organization, you still must include the earnings in your income. How to file 2011 tax return in 2013 However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. How to file 2011 tax return in 2013 See chapter 24. How to file 2011 tax return in 2013 Pension. How to file 2011 tax return in 2013    A pension or retirement pay for a member of the clergy usually is treated as any other pension or annuity. How to file 2011 tax return in 2013 It must be reported on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. How to file 2011 tax return in 2013 Housing. How to file 2011 tax return in 2013    Special rules for housing apply to members of the clergy. How to file 2011 tax return in 2013 Under these rules, you do not include in your income the rental value of a home (including utilities) or a designated housing allowance provided to you as part of your pay. How to file 2011 tax return in 2013 However, the exclusion cannot be more than the reasonable pay for your service. How to file 2011 tax return in 2013 If you pay for the utilities, you can exclude any allowance designated for utility cost, up to your actual cost. How to file 2011 tax return in 2013 The home or allowance must be provided as compensation for your services as an ordained, licensed, or commissioned minister. How to file 2011 tax return in 2013 However, you must include the rental value of the home or the housing allowance as earnings from self-employment on Schedule SE (Form 1040) if you are subject to the self-employment tax. How to file 2011 tax return in 2013 For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. How to file 2011 tax return in 2013 Members of Religious Orders If you are a member of a religious order who has taken a vow of poverty, how you treat earnings that you renounce and turn over to the order depends on whether your services are performed for the order. How to file 2011 tax return in 2013 Services performed for the order. How to file 2011 tax return in 2013   If you are performing the services as an agent of the order in the exercise of duties required by the order, do not include in your income the amounts turned over to the order. How to file 2011 tax return in 2013   If your order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to be performing the services as an agent of the order. How to file 2011 tax return in 2013 Any wages you earn as an agent of an order that you turn over to the order are not included in your income. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 You are a member of a church order and have taken a vow of poverty. How to file 2011 tax return in 2013 You renounce any claims to your earnings and turn over to the order any salaries or wages you earn. How to file 2011 tax return in 2013 You are a registered nurse, so your order assigns you to work in a hospital that is an associated institution of the church. How to file 2011 tax return in 2013 However, you remain under the general direction and control of the order. How to file 2011 tax return in 2013 You are considered to be an agent of the order and any wages you earn at the hospital that you turn over to your order are not included in your income. How to file 2011 tax return in 2013 Services performed outside the order. How to file 2011 tax return in 2013   If you are directed to work outside the order, your services are not an exercise of duties required by the order unless they meet both of the following requirements: They are the kind of services that are ordinarily the duties of members of the order. How to file 2011 tax return in 2013 They are part of the duties that you must exercise for, or on behalf of, the religious order as its agent. How to file 2011 tax return in 2013 If you are an employee of a third party, the services you perform for the third party will not be considered directed or required of you by the order. How to file 2011 tax return in 2013 Amounts you receive for these services are included in your income, even if you have taken a vow of poverty. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 Mark Brown is a member of a religious order and has taken a vow of poverty. How to file 2011 tax return in 2013 He renounces all claims to his earnings and turns over his earnings to the order. How to file 2011 tax return in 2013 Mark is a schoolteacher. How to file 2011 tax return in 2013 He was instructed by the superiors of the order to get a job with a private tax-exempt school. How to file 2011 tax return in 2013 Mark became an employee of the school, and, at his request, the school made the salary payments directly to the order. How to file 2011 tax return in 2013 Because Mark is an employee of the school, he is performing services for the school rather than as an agent of the order. How to file 2011 tax return in 2013 The wages Mark earns working for the school are included in his income. How to file 2011 tax return in 2013 Foreign Employer Special rules apply if you work for a foreign employer. How to file 2011 tax return in 2013 U. How to file 2011 tax return in 2013 S. How to file 2011 tax return in 2013 citizen. How to file 2011 tax return in 2013   If you are a U. How to file 2011 tax return in 2013 S. How to file 2011 tax return in 2013 citizen who works in the United States for a foreign government, an international organization, a foreign embassy, or any foreign employer, you must include your salary in your income. How to file 2011 tax return in 2013 Social security and Medicare taxes. How to file 2011 tax return in 2013   You are exempt from social security and Medicare employee taxes if you are employed in the United States by an international organization or a foreign government. How to file 2011 tax return in 2013 However, you must pay self-employment tax on your earnings from services performed in the United States, even though you are not self-employed. How to file 2011 tax return in 2013 This rule also applies if you are an employee of a qualifying wholly owned instrumentality of a foreign government. How to file 2011 tax return in 2013 Employees of international organizations or foreign governments. How to file 2011 tax return in 2013   Your compensation for official services to an international organization is exempt from federal income tax if you are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). How to file 2011 tax return in 2013   Your compensation for official services to a foreign government is exempt from federal income tax if all of the following are true. How to file 2011 tax return in 2013 You are not a citizen of the United States or you are a citizen of the Philippines (whether or not you are a citizen of the United States). How to file 2011 tax return in 2013 Your work is like the work done by employees of the United States in foreign countries. How to file 2011 tax return in 2013 The foreign government gives an equal exemption to employees of the United States in its country. How to file 2011 tax return in 2013 Waiver of alien status. How to file 2011 tax return in 2013   If you are an alien who works for a foreign government or international organization and you file a waiver under section 247(b) of the Immigration and Nationality Act to keep your immigrant status, different rules may apply. How to file 2011 tax return in 2013 See Foreign Employer in Publication 525. How to file 2011 tax return in 2013 Employment abroad. How to file 2011 tax return in 2013   For information on the tax treatment of income earned abroad, see Publication 54. How to file 2011 tax return in 2013 Military Payments you receive as a member of a military service generally are taxed as wages except for retirement pay, which is taxed as a pension. How to file 2011 tax return in 2013 Allowances generally are not taxed. How to file 2011 tax return in 2013 For more information on the tax treatment of military allowances and benefits, see Publication 3, Armed Forces' Tax Guide. How to file 2011 tax return in 2013 Differential wage payments. How to file 2011 tax return in 2013   Any payments made to you by an employer during the time you are performing service in the uniformed services are treated as compensation. How to file 2011 tax return in 2013 These wages are subject to income tax withholding and are reported on a Form W-2. How to file 2011 tax return in 2013 See the discussion under Miscellaneous Compensation , earlier. How to file 2011 tax return in 2013 Military retirement pay. How to file 2011 tax return in 2013   If your retirement pay is based on age or length of service, it is taxable and must be included in your income as a pension on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. How to file 2011 tax return in 2013 Do not include in your income the amount of any reduction in retirement or retainer pay to provide a survivor annuity for your spouse or children under the Retired Serviceman's Family Protection Plan or the Survivor Benefit Plan. How to file 2011 tax return in 2013   For more detailed discussion of survivor annuities, see chapter 10. How to file 2011 tax return in 2013 Disability. How to file 2011 tax return in 2013   If you are retired on disability, see Military and Government Disability Pensions under Sickness and Injury Benefits, later. How to file 2011 tax return in 2013 Veterans' benefits. How to file 2011 tax return in 2013   Do not include in your income any veterans' benefits paid under any law, regulation, or administrative practice administered by the Department of Veterans Affairs (VA). How to file 2011 tax return in 2013 The following amounts paid to veterans or their families are not taxable. How to file 2011 tax return in 2013 Education, training, and subsistence allowances. How to file 2011 tax return in 2013 Disability compensation and pension payments for disabilities paid either to veterans or their families. How to file 2011 tax return in 2013 Grants for homes designed for wheelchair living. How to file 2011 tax return in 2013 Grants for motor vehicles for veterans who lost their sight or the use of their limbs. How to file 2011 tax return in 2013 Veterans' insurance proceeds and dividends paid either to veterans or their beneficiaries, including the proceeds of a veteran's endowment policy paid before death. How to file 2011 tax return in 2013 Interest on insurance dividends you leave on deposit with the VA. How to file 2011 tax return in 2013 Benefits under a dependent-care assistance program. How to file 2011 tax return in 2013 The death gratuity paid to a survivor of a member of the Armed Forces who died after September 10, 2001. How to file 2011 tax return in 2013 Payments made under the compensated work therapy program. How to file 2011 tax return in 2013 Any bonus payment by a state or political subdivision because of service in a combat zone. How to file 2011 tax return in 2013 Volunteers The tax treatment of amounts you receive as a volunteer worker for the Peace Corps or similar agency is covered in the following discussions. How to file 2011 tax return in 2013 Peace Corps. How to file 2011 tax return in 2013   Living allowances you receive as a Peace Corps volunteer or volunteer leader for housing, utilities, household supplies, food, and clothing are exempt from tax. How to file 2011 tax return in 2013 Taxable allowances. How to file 2011 tax return in 2013   The following allowances must be included in your income and reported as wages: Allowances paid to your spouse and minor children while you are a volunteer leader training in the United States. How to file 2011 tax return in 2013 Living allowances designated by the Director of the Peace Corps as basic compensation. How to file 2011 tax return in 2013 These are allowances for personal items such as domestic help, laundry and clothing maintenance, entertainment and recreation, transportation, and other miscellaneous expenses. How to file 2011 tax return in 2013 Leave allowances. How to file 2011 tax return in 2013 Readjustment allowances or termination payments. How to file 2011 tax return in 2013 These are considered received by you when credited to your account. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 Gary Carpenter, a Peace Corps volunteer, gets $175 a month as a readjustment allowance during his period of service, to be paid to him in a lump sum at the end of his tour of duty. How to file 2011 tax return in 2013 Although the allowance is not available to him until the end of his service, Gary must include it in his income on a monthly basis as it is credited to his account. How to file 2011 tax return in 2013 Volunteers in Service to America (VISTA). How to file 2011 tax return in 2013   If you are a VISTA volunteer, you must include meal and lodging allowances paid to you in your income as wages. How to file 2011 tax return in 2013 National Senior Services Corps programs. How to file 2011 tax return in 2013   Do not include in your income amounts you receive for supportive services or reimbursements for out-of-pocket expenses from the following programs. How to file 2011 tax return in 2013 Retired Senior Volunteer Program (RSVP). How to file 2011 tax return in 2013 Foster Grandparent Program. How to file 2011 tax return in 2013 Senior Companion Program. How to file 2011 tax return in 2013 Service Corps of Retired Executives (SCORE). How to file 2011 tax return in 2013   If you receive amounts for supportive services or reimbursements for out-of-pocket expenses from SCORE, do not include these amounts in income. How to file 2011 tax return in 2013 Volunteer tax counseling. How to file 2011 tax return in 2013   Do not include in your income any reimbursements you receive for transportation, meals, and other expenses you have in training for, or actually providing, volunteer federal income tax counseling for the elderly (TCE). How to file 2011 tax return in 2013   You can deduct as a charitable contribution your unreimbursed out-of-pocket expenses in taking part in the volunteer income tax assistance (VITA) program. How to file 2011 tax return in 2013 See chapter 24. How to file 2011 tax return in 2013 Sickness and Injury Benefits This section discusses sickness and injury benefits including disability pensions, long-term care insurance contracts, workers' compensation, and other benefits. How to file 2011 tax return in 2013 In most cases, you must report as income any amount you receive for personal injury or sickness through an accident or health plan that is paid for by your employer. How to file 2011 tax return in 2013 If both you and your employer pay for the plan, only the amount you receive that is due to your employer's payments is reported as income. How to file 2011 tax return in 2013 However, certain payments may not be taxable to you. How to file 2011 tax return in 2013 Your employer should be able to give you specific details about your pension plan and tell you the amount you paid for your disability pension. How to file 2011 tax return in 2013 In addition to disability pensions and annuities, you may be receiving other payments for sickness and injury. How to file 2011 tax return in 2013 Do not report as income any amounts paid to reimburse you for medical expenses you incurred after the plan was established. How to file 2011 tax return in 2013 Cost paid by you. How to file 2011 tax return in 2013   If you pay the entire cost of a health or accident insurance plan, do not include any amounts you receive from the plan for personal injury or sickness as income on your tax return. How to file 2011 tax return in 2013 If your plan reimbursed you for medical expenses you deducted in an earlier year, you may have to include some, or all, of the reimbursement in your income. How to file 2011 tax return in 2013 See Reimbursement in a later year in chapter 21. How to file 2011 tax return in 2013 Cafeteria plans. How to file 2011 tax return in 2013   In most cases, if you are covered by an accident or health insurance plan through a cafeteria plan, and the amount of the insurance premiums was not included in your income, you are not considered to have paid the premiums and you must include any benefits you receive in your income. How to file 2011 tax return in 2013 If the amount of the premiums was included in your income, you are considered to have paid the premiums, and any benefits you receive are not taxable. How to file 2011 tax return in 2013 Disability Pensions If you retired on disability, you must include in income any disability pension you receive under a plan that is paid for by your employer. How to file 2011 tax return in 2013 You must report your taxable disability payments as wages on line 7 of Form 1040 or Form 1040A, until you reach minimum retirement age. How to file 2011 tax return in 2013 Minimum retirement age generally is the age at which you can first receive a pension or annuity if you are not disabled. How to file 2011 tax return in 2013 You may be entitled to a tax credit if you were permanently and totally disabled when you retired. How to file 2011 tax return in 2013 For information on this credit and the definition of permanent and total disability, see chapter 33. How to file 2011 tax return in 2013 Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension or annuity. How to file 2011 tax return in 2013 Report the payments on lines 16a and 16b of Form 1040 or on lines 12a and 12b of Form 1040A. How to file 2011 tax return in 2013 The rules for reporting pensions are explained in How To Report in chapter 10. How to file 2011 tax return in 2013 For information on disability payments from a governmental program provided as a substitute for unemployment compensation, see chapter 12. How to file 2011 tax return in 2013 Retirement and profit-sharing plans. How to file 2011 tax return in 2013   If you receive payments from a retirement or profit-sharing plan that does not provide for disability retirement, do not treat the payments as a disability pension. How to file 2011 tax return in 2013 The payments must be reported as a pension or annuity. How to file 2011 tax return in 2013 For more information on pensions, see chapter 10. How to file 2011 tax return in 2013 Accrued leave payment. How to file 2011 tax return in 2013   If you retire on disability, any lump-sum payment you receive for accrued annual leave is a salary payment. How to file 2011 tax return in 2013 The payment is not a disability payment. How to file 2011 tax return in 2013 Include it in your income in the tax year you receive it. How to file 2011 tax return in 2013 Military and Government Disability Pensions Certain military and government disability pensions are not taxable. How to file 2011 tax return in 2013 Service-connected disability. How to file 2011 tax return in 2013   You may be able to exclude from income amounts you receive as a pension, annuity, or similar allowance for personal injury or sickness resulting from active service in one of the following government services. How to file 2011 tax return in 2013 The armed forces of any country. How to file 2011 tax return in 2013 The National Oceanic and Atmospheric Administration. How to file 2011 tax return in 2013 The Public Health Service. How to file 2011 tax return in 2013 The Foreign Service. How to file 2011 tax return in 2013 Conditions for exclusion. How to file 2011 tax return in 2013   Do not include the disability payments in your income if any of the following conditions apply. How to file 2011 tax return in 2013 You were entitled to receive a disability payment before September 25, 1975. How to file 2011 tax return in 2013 You were a member of a listed government service or its reserve component, or were under a binding written commitment to become a member, on September 24, 1975. How to file 2011 tax return in 2013 You receive the disability payments for a combat-related injury. How to file 2011 tax return in 2013 This is a personal injury or sickness that Results directly from armed conflict, Takes place while you are engaged in extra-hazardous service, Takes place under conditions simulating war, including training exercises such as maneuvers, or Is caused by an instrumentality of war. How to file 2011 tax return in 2013 You would be entitled to receive disability compensation from the Department of Veterans Affairs (VA) if you filed an application for it. How to file 2011 tax return in 2013 Your exclusion under this condition is equal to the amount you would be entitled to receive from the VA. How to file 2011 tax return in 2013 Pension based on years of service. How to file 2011 tax return in 2013   If you receive a disability pension based on years of service, in most cases you must include it in your income. How to file 2011 tax return in 2013 However, if the pension qualifies for the exclusion for a service-connected disability (discussed earlier), do not include in income the part of your pension that you would have received if the pension had been based on a percentage of disability. How to file 2011 tax return in 2013 You must include the rest of your pension in your income. How to file 2011 tax return in 2013 Retroactive VA determination. How to file 2011 tax return in 2013   If you retire from the armed services based on years of service and are later given a retroactive service-connected disability rating by the VA, your retirement pay for the retroactive period is excluded from income up to the amount of VA disability benefits you would have been entitled to receive. How to file 2011 tax return in 2013 You can claim a refund of any tax paid on the excludable amount (subject to the statute of limitations) by filing an amended return on Form 1040X for each previous year during the retroactive period. How to file 2011 tax return in 2013 You must include with each Form 1040X a copy of the official VA Determination letter granting the retroactive benefit. How to file 2011 tax return in 2013 The letter must show the amount withheld and the effective date of the benefit. How to file 2011 tax return in 2013   If you receive a lump-sum disability severance payment and are later awarded VA disability benefits, exclude 100% of the severance benefit from your income. How to file 2011 tax return in 2013 However, you must include in your income any lump-sum readjustment or other nondisability severance payment you received on release from active duty, even if you are later given a retroactive disability rating by the VA. How to file 2011 tax return in 2013 Special statute of limitations. How to file 2011 tax return in 2013   In most cases, under the statute of limitations a claim for credit or refund must be filed within 3 years from the time a return was filed. How to file 2011 tax return in 2013 However, if you receive a retroactive service-connected disability rating determination, the statute of limitations is extended by a 1-year period beginning on the date of the determination. How to file 2011 tax return in 2013 This 1-year extended period applies to claims for credit or refund filed after June 17, 2008, and does not apply to any tax year that began more than 5 years before the date of the determination. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 You retired in 2007 and receive a pension based on your years of service. How to file 2011 tax return in 2013 On August 1, 2013, you receive a determination of service-connected disability retroactive to 2007. How to file 2011 tax return in 2013 Generally, you could claim a refund for the taxes paid on your pension for 2010, 2011, and 2012. How to file 2011 tax return in 2013 However, under the special limitation period, you can also file a claim for 2009 as long as you file the claim by August 1, 2014. How to file 2011 tax return in 2013 You cannot file a claim for 2007 and 2008 because those tax years began more than 5 years before the determination. How to file 2011 tax return in 2013 Terrorist attack or military action. How to file 2011 tax return in 2013   Do not include in your income disability payments you receive for injuries resulting directly from a terrorist or military action. How to file 2011 tax return in 2013 Long-Term Care Insurance Contracts Long-term care insurance contracts in most cases are treated as accident and health insurance contracts. How to file 2011 tax return in 2013 Amounts you receive from them (other than policyholder dividends or premium refunds) in most cases are excludable from income as amounts received for personal injury or sickness. How to file 2011 tax return in 2013 To claim an exclusion for payments made on a per diem or other periodic basis under a long-term care insurance contract, you must file Form 8853 with your return. How to file 2011 tax return in 2013 A long-term care insurance contract is an insurance contract that only provides coverage for qualified long-term care services. How to file 2011 tax return in 2013 The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits, and In most cases, not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. How to file 2011 tax return in 2013 Qualified long-term care services. How to file 2011 tax return in 2013   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and maintenance and personal care services, and Required by a chronically ill individual and provided pursuant to a plan of care as prescribed by a licensed health care practitioner. How to file 2011 tax return in 2013 Chronically ill individual. How to file 2011 tax return in 2013   A chronically ill individual is one who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: An individual who, for at least 90 days, is unable to perform at least two activities of daily living without substantial assistance due to loss of functional capacity. How to file 2011 tax return in 2013 Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. How to file 2011 tax return in 2013 An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. How to file 2011 tax return in 2013 Limit on exclusion. How to file 2011 tax return in 2013   You generally can exclude from gross income up to $320 a day for 2013. How to file 2011 tax return in 2013 See Limit on exclusion, under Long-Term Care Insurance Contracts, under Sickness and Injury Benefits in Publication 525 for more information. How to file 2011 tax return in 2013 Workers' Compensation Amounts you receive as workers' compensation for an occupational sickness or injury are fully exempt from tax if they are paid under a workers' compensation act or a statute in the nature of a workers' compensation act. How to file 2011 tax return in 2013 The exemption also applies to your survivors. How to file 2011 tax return in 2013 The exemption, however, does not apply to retirement plan benefits you receive based on your age, length of service, or prior contributions to the plan, even if you retired because of an occupational sickness or injury. How to file 2011 tax return in 2013 If part of your workers' compensation reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. How to file 2011 tax return in 2013 For more information, see Publication 915, Social Security and Equivalent Railroad Retirement Benefits. How to file 2011 tax return in 2013 Return to work. How to file 2011 tax return in 2013    If you return to work after qualifying for workers' compensation, salary payments you receive for performing light duties are taxable as wages. How to file 2011 tax return in 2013 Other Sickness and Injury Benefits In addition to disability pensions and annuities, you may receive other payments for sickness or injury. How to file 2011 tax return in 2013 Railroad sick pay. How to file 2011 tax return in 2013    Payments you receive as sick pay under the Railroad Unemployment Insurance Act are taxable and you must include them in your income. How to file 2011 tax return in 2013 However, do not include them in your income if they are for an on-the-job injury. How to file 2011 tax return in 2013   If you received income because of a disability, see Disability Pensions , earlier. How to file 2011 tax return in 2013 Federal Employees' Compensation Act (FECA). How to file 2011 tax return in 2013   Payments received under this Act for personal injury or sickness, including payments to beneficiaries in case of death, are not taxable. How to file 2011 tax return in 2013 However, you are taxed on amounts you receive under this Act as continuation of pay for up to 45 days while a claim is being decided. How to file 2011 tax return in 2013 Report this income on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040-EZ. How to file 2011 tax return in 2013 Also, pay for sick leave while a claim is being processed is taxable and must be included in your income as wages. How to file 2011 tax return in 2013    If part of the payments you receive under FECA reduces your social security or equivalent railroad retirement benefits received, that part is considered social security (or equivalent railroad retirement) benefits and may be taxable. How to file 2011 tax return in 2013 For a discussion of the taxability of these benefits, see Social security and equivalent railroad retirement benefits under Other Income, in Publication 525. How to file 2011 tax return in 2013    You can deduct the amount you spend to buy back sick leave for an earlier year to be eligible for nontaxable FECA benefits for that period. How to file 2011 tax return in 2013 It is a miscellaneous deduction subject to the 2%-of-AGI limit on Schedule A (Form 1040). How to file 2011 tax return in 2013 If you buy back sick leave in the same year you used it, the amount reduces your taxable sick leave pay. How to file 2011 tax return in 2013 Do not deduct it separately. How to file 2011 tax return in 2013 Other compensation. How to file 2011 tax return in 2013   Many other amounts you receive as compensation for sickness or injury are not taxable. How to file 2011 tax return in 2013 These include the following amounts. How to file 2011 tax return in 2013 Compensatory damages you receive for physical injury or physical sickness, whether paid in a lump sum or in periodic payments. How to file 2011 tax return in 2013 Benefits you receive under an accident or health insurance policy on which either you paid the premiums or your employer paid the premiums but you had to include them in your income. How to file 2011 tax return in 2013 Disability benefits you receive for loss of income or earning capacity as a result of injuries under a no-fault car insurance policy. How to file 2011 tax return in 2013 Compensation you receive for permanent loss or loss of use of a part or function of your body, or for your permanent disfigurement. How to file 2011 tax return in 2013 This compensation must be based only on the injury and not on the period of your absence from work. How to file 2011 tax return in 2013 These benefits are not taxable even if your employer pays for the accident and health plan that provides these benefits. How to file 2011 tax return in 2013 Reimbursement for medical care. How to file 2011 tax return in 2013    A reimbursement for medical care is generally not taxable. How to file 2011 tax return in 2013 However, it may reduce your medical expense deduction. How to file 2011 tax return in 2013 For more information, see chapter 21. How to file 2011 tax return in 2013 Prev  Up  Next   Home   More Online Publications
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The How To File 2011 Tax Return In 2013

How to file 2011 tax return in 2013 4. How to file 2011 tax return in 2013   Special Situations Table of Contents Condominiums CooperativesDepreciation Property Changed to Rental UseBasis of Property Changed to Rental Use Figuring the Depreciation Deduction Renting Part of Property Not Rented for ProfitPostponing decision. How to file 2011 tax return in 2013 Example—Property Changed to Rental Use This chapter discusses some rental real estate activities that are subject to additional rules. How to file 2011 tax return in 2013 Condominiums A condominium is most often a dwelling unit in a multi-unit building, but can also take other forms, such as a townhouse or garden apartment. How to file 2011 tax return in 2013 If you own a condominium, you also own a share of the common elements, such as land, lobbies, elevators, and service areas. How to file 2011 tax return in 2013 You and the other condominium owners may pay dues or assessments to a special corporation that is organized to take care of the common elements. How to file 2011 tax return in 2013 Special rules apply if you rent your condominium to others. How to file 2011 tax return in 2013 You can deduct as rental expenses all the expenses discussed in chapters 1 and 2. How to file 2011 tax return in 2013 In addition, you can deduct any dues or assessments paid for maintenance of the common elements. How to file 2011 tax return in 2013 You cannot deduct special assessments you pay to a condominium management corporation for improvements. How to file 2011 tax return in 2013 However, you may be able to recover your share of the cost of any improvement by taking depreciation. How to file 2011 tax return in 2013 Cooperatives If you live in a cooperative, you do not own your apartment. How to file 2011 tax return in 2013 Instead, a corporation owns the apartments and you are a tenant-stockholder in the cooperative housing corporation. How to file 2011 tax return in 2013 If you rent your apartment to others, you usually can deduct, as a rental expense, all the maintenance fees you pay to the cooperative housing corporation. How to file 2011 tax return in 2013 In addition to the maintenance fees paid to the cooperative housing corporation, you can deduct your direct payments for repairs, upkeep, and other rental expenses, including interest paid on a loan used to buy your stock in the corporation. How to file 2011 tax return in 2013 Depreciation You will be depreciating your stock in the corporation rather than the apartment itself. How to file 2011 tax return in 2013 Figure your depreciation deduction as follows. How to file 2011 tax return in 2013 Figure the depreciation for all the depreciable real property owned by the corporation. How to file 2011 tax return in 2013 (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. How to file 2011 tax return in 2013 ) If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. How to file 2011 tax return in 2013 Multiply your cost per share by the total number of outstanding shares. How to file 2011 tax return in 2013 Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. How to file 2011 tax return in 2013 Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. How to file 2011 tax return in 2013 Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. How to file 2011 tax return in 2013 Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. How to file 2011 tax return in 2013 Multiply the result of (2) by the percentage you figured in (3). How to file 2011 tax return in 2013 This is your depreciation on the stock. How to file 2011 tax return in 2013 Your depreciation deduction for the year cannot be more than the part of your adjusted basis (defined in chapter 2) in the stock of the corporation that is allocable to your rental property. How to file 2011 tax return in 2013 Payments added to capital account. How to file 2011 tax return in 2013   Payments earmarked for a capital asset or improvement, or otherwise charged to the corporation's capital account are added to the basis of your stock in the corporation. How to file 2011 tax return in 2013 For example, you cannot deduct a payment used to pave a community parking lot, install a new roof, or pay the principal of the corporation's mortgage. How to file 2011 tax return in 2013   Treat as a capital cost the amount you were assessed for capital items. How to file 2011 tax return in 2013 This cannot be more than the amount by which your payments to the corporation exceeded your share of the corporation's mortgage interest and real estate taxes. How to file 2011 tax return in 2013   Your share of interest and taxes is the amount the corporation elected to allocate to you, if it reasonably reflects those expenses for your apartment. How to file 2011 tax return in 2013 Otherwise, figure your share in the following manner. How to file 2011 tax return in 2013 Divide the number of your shares of stock by the total number of shares outstanding, including any shares held by the corporation. How to file 2011 tax return in 2013 Multiply the corporation's deductible interest by the number you figured in (1). How to file 2011 tax return in 2013 This is your share of the interest. How to file 2011 tax return in 2013 Multiply the corporation's deductible taxes by the number you figured in (1). How to file 2011 tax return in 2013 This is your share of the taxes. How to file 2011 tax return in 2013 Property Changed to Rental Use If you change your home or other property (or a part of it) to rental use at any time other than the beginning of your tax year, you must divide yearly expenses, such as taxes and insurance, between rental use and personal use. How to file 2011 tax return in 2013 You can deduct as rental expenses only the part of the expense that is for the part of the year the property was used or held for rental purposes. How to file 2011 tax return in 2013 You cannot deduct depreciation or insurance for the part of the year the property was held for personal use. How to file 2011 tax return in 2013 However, you can include the home mortgage interest, qualified mortgage insurance premiums, and real estate tax expenses for the part of the year the property was held for personal use as an itemized deduction on Schedule A (Form 1040). How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 Your tax year is the calendar year. How to file 2011 tax return in 2013 You moved from your home in May and started renting it out on June 1. How to file 2011 tax return in 2013 You can deduct as rental expenses seven-twelfths of your yearly expenses, such as taxes and insurance. How to file 2011 tax return in 2013 Starting with June, you can deduct as rental expenses the amounts you pay for items generally billed monthly, such as utilities. How to file 2011 tax return in 2013 When figuring depreciation, treat the property as placed in service on June 1. How to file 2011 tax return in 2013 Basis of Property Changed to Rental Use When you change property you held for personal use to rental use (for example, you rent your former home), the basis for depreciation will be the lesser of fair market value or adjusted basis on the date of conversion. How to file 2011 tax return in 2013 Fair market value. How to file 2011 tax return in 2013   This is the price at which the property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts. How to file 2011 tax return in 2013 Sales of similar property, on or about the same date, may be helpful in figuring the fair market value of the property. How to file 2011 tax return in 2013 Figuring the basis. How to file 2011 tax return in 2013   The basis for depreciation is the lesser of: The fair market value of the property on the date you changed it to rental use, or Your adjusted basis on the date of the change—that is, your original cost or other basis of the property, plus the cost of permanent additions or improvements since you acquired it, minus deductions for any casualty or theft losses claimed on earlier years' income tax returns and other decreases to basis. How to file 2011 tax return in 2013 For other increases and decreases to basis, see Adjusted Basis in chapter 2. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 Several years ago you built your home for $140,000 on a lot that cost you $14,000. How to file 2011 tax return in 2013 Before changing the property to rental use this year, you added $28,000 of permanent improvements to the house and claimed a $3,500 casualty loss deduction for damage to the house. How to file 2011 tax return in 2013 Part of the improvements qualified for a $500 residential energy credit, which you claimed on your 2010 tax return. How to file 2011 tax return in 2013 Because land is not depreciable, you can only include the cost of the house when figuring the basis for depreciation. How to file 2011 tax return in 2013 The adjusted basis of the house at the time of the change in its use was $164,000 ($140,000 + $28,000 − $3,500 − $500). How to file 2011 tax return in 2013 On the date of the change in use, your property had a fair market value of $168,000, of which $21,000 was for the land and $147,000 was for the house. How to file 2011 tax return in 2013 The basis for depreciation on the house is the fair market value on the date of the change ($147,000), because it is less than your adjusted basis ($164,000). How to file 2011 tax return in 2013 Cooperatives If you change your cooperative apartment to rental use, figure your allowable depreciation as explained earlier. How to file 2011 tax return in 2013 (Depreciation methods are discussed in chapter 2 of this publication and Publication 946. How to file 2011 tax return in 2013 ) The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. How to file 2011 tax return in 2013 The fair market value of the property on the date you change your apartment to rental use. How to file 2011 tax return in 2013 This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. How to file 2011 tax return in 2013 The corporation's adjusted basis in the property on that date. How to file 2011 tax return in 2013 Do not subtract depreciation when figuring the corporation's adjusted basis. How to file 2011 tax return in 2013 If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1) under Depreciation (under Cooperatives, near the beginning of this chapter). How to file 2011 tax return in 2013 The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. How to file 2011 tax return in 2013 Figuring the Depreciation Deduction To figure the deduction, use the depreciation system in effect when you convert your residence to rental use. How to file 2011 tax return in 2013 Generally, that will be MACRS for any conversion after 1986. How to file 2011 tax return in 2013 Treat the property as placed in service on the conversion date. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 Your converted residence (see previous example under Figuring the basis) was available for rent on August 1. How to file 2011 tax return in 2013 Using Table 2-2d (see chapter 2), the percentage for Year 1 beginning in August is 1. How to file 2011 tax return in 2013 364% and the depreciation deduction for Year 1 is $2,005 ($147,000 × . How to file 2011 tax return in 2013 01364). How to file 2011 tax return in 2013 Renting Part of Property If you rent part of your property, you must divide certain expenses between the part of the property used for rental purposes and the part of the property used for personal purposes, as though you actually had two separate pieces of property. How to file 2011 tax return in 2013 You can deduct the expenses related to the part of the property used for rental purposes, such as home mortgage interest, qualified mortgage insurance premiums, and real estate taxes, as rental expenses on Schedule E (Form 1040). How to file 2011 tax return in 2013 You can also deduct as rental expenses a portion of other expenses that normally are nondeductible personal expenses, such as expenses for electricity, or painting the outside of the house. How to file 2011 tax return in 2013 There is no change in the types of expenses deductible for the personal-use part of your property. How to file 2011 tax return in 2013 Generally, these expenses may be deducted only if you itemize your deductions on Schedule A (Form 1040). How to file 2011 tax return in 2013 You cannot deduct any part of the cost of the first phone line even if your tenants have unlimited use of it. How to file 2011 tax return in 2013 You do not have to divide the expenses that belong only to the rental part of your property. How to file 2011 tax return in 2013 For example, if you paint a room that you rent, or if you pay premiums for liability insurance in connection with renting a room in your home, your entire cost is a rental expense. How to file 2011 tax return in 2013 If you install a second phone line strictly for your tenant's use, all of the cost of the second line is deductible as a rental expense. How to file 2011 tax return in 2013 You can deduct depreciation on the part of the house used for rental purposes as well as on the furniture and equipment you use for rental purposes. How to file 2011 tax return in 2013 How to divide expenses. How to file 2011 tax return in 2013   If an expense is for both rental use and personal use, such as mortgage interest or heat for the entire house, you must divide the expense between rental use and personal use. How to file 2011 tax return in 2013 You can use any reasonable method for dividing the expense. How to file 2011 tax return in 2013 It may be reasonable to divide the cost of some items (for example, water) based on the number of people using them. How to file 2011 tax return in 2013 The two most common methods for dividing an expense are (1) the number of rooms in your home, and (2) the square footage of your home. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 You rent a room in your house. How to file 2011 tax return in 2013 The room is 12 × 15 feet, or 180 square feet. How to file 2011 tax return in 2013 Your entire house has 1,800 square feet of floor space. How to file 2011 tax return in 2013 You can deduct as a rental expense 10% of any expense that must be divided between rental use and personal use. How to file 2011 tax return in 2013 If your heating bill for the year for the entire house was $600, $60 ($600 × . How to file 2011 tax return in 2013 10) is a rental expense. How to file 2011 tax return in 2013 The balance, $540, is a personal expense that you cannot deduct. How to file 2011 tax return in 2013 Duplex. How to file 2011 tax return in 2013   A common situation is the duplex where you live in one unit and rent out the other. How to file 2011 tax return in 2013 Certain expenses apply to the entire property, such as mortgage interest and real estate taxes, and must be split to determine rental and personal expenses. How to file 2011 tax return in 2013 Example. How to file 2011 tax return in 2013 You own a duplex and live in one half, renting the other half. How to file 2011 tax return in 2013 Both units are approximately the same size. How to file 2011 tax return in 2013 Last year, you paid a total of $10,000 mortgage interest and $2,000 real estate taxes for the entire property. How to file 2011 tax return in 2013 You can deduct $5,000 mortgage interest and $1,000 real estate taxes on Schedule E (Form 1040), and if you itemize your deductions, you can deduct the other $5,000 mortgage interest and $1,000 real estate taxes on Schedule A (Form 1040). How to file 2011 tax return in 2013 Not Rented for Profit If you do not rent your property to make a profit, you can deduct your rental expenses only up to the amount of your rental income. How to file 2011 tax return in 2013 You cannot deduct a loss or carry forward to the next year any rental expenses that are more than your rental income for the year. How to file 2011 tax return in 2013 Where to report. How to file 2011 tax return in 2013   Report your not-for-profit rental income on Form 1040 or 1040NR, line 21. How to file 2011 tax return in 2013 For example, if you are filing Form 1040, you can include your mortgage interest and any qualified mortgage insurance premiums (if you use the property as your main home or second home), real estate taxes, and casualty losses on the appropriate lines of Schedule A (Form 1040) if you itemize your deductions. How to file 2011 tax return in 2013   If you itemize your deductions, claim your other rental expenses, subject to the rules explained in chapter 1 of Publication 535, as miscellaneous itemized deductions on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. How to file 2011 tax return in 2013 You can deduct these expenses only if they, together with certain other miscellaneous itemized deductions, total more than 2% of your adjusted gross income. How to file 2011 tax return in 2013 Presumption of profit. How to file 2011 tax return in 2013   If your rental income is more than your rental expenses for at least 3 years out of a period of 5 consecutive years, you are presumed to be renting your property to make a profit. How to file 2011 tax return in 2013 Postponing decision. How to file 2011 tax return in 2013   If you are starting your rental activity and do not have 3 years showing a profit, you can elect to have the presumption made after you have the 5 years of experience required by the test. How to file 2011 tax return in 2013 You may choose to postpone the decision of whether the rental is for profit by filing Form 5213. How to file 2011 tax return in 2013 You must file Form 5213 within 3 years after the due date of your return (determined without extensions) for the year in which you first carried on the activity or, if earlier, within 60 days after receiving written notice from the Internal Revenue Service proposing to disallow deductions attributable to the activity. How to file 2011 tax return in 2013 More information. How to file 2011 tax return in 2013   For more information about the rules for an activity not engaged in for profit, see Not-for-Profit Activities in chapter 1 of Publication 535. How to file 2011 tax return in 2013 Example—Property Changed to Rental Use In January, Eileen Johnson bought a condominium apartment to live in. How to file 2011 tax return in 2013 Instead of selling the house she had been living in, she decided to change it to rental property. How to file 2011 tax return in 2013 Eileen selected a tenant and started renting the house on February 1. How to file 2011 tax return in 2013 Eileen charges $750 a month for rent and collects it herself. How to file 2011 tax return in 2013 Eileen also received a $750 security deposit from her tenant. How to file 2011 tax return in 2013 Because she plans to return it to her tenant at the end of the lease, she does not include it in her income. How to file 2011 tax return in 2013 Her rental expenses for the year are as follows. How to file 2011 tax return in 2013   Mortgage interest $1,800     Fire insurance (1-year policy) 100     Miscellaneous repairs (after renting) 297     Real estate taxes imposed and paid 1,200   Eileen must divide the real estate taxes, mortgage interest, and fire insurance between the personal use of the property and the rental use of the property. How to file 2011 tax return in 2013 She can deduct eleven-twelfths of these expenses as rental expenses. How to file 2011 tax return in 2013 She can include the balance of the allowable taxes and mortgage interest on Schedule A (Form 1040) if she itemizes. How to file 2011 tax return in 2013 She cannot deduct the balance of the fire insurance because it is a personal expense. How to file 2011 tax return in 2013 Eileen bought this house in 1984 for $35,000. How to file 2011 tax return in 2013 Her property tax was based on assessed values of $10,000 for the land and $25,000 for the house. How to file 2011 tax return in 2013 Before changing it to rental property, Eileen added several improvements to the house. How to file 2011 tax return in 2013 She figures her adjusted basis as follows:   Improvements Cost     House $25,000     Remodeled kitchen 4,200     Recreation room 5,800     New roof 1,600     Patio and deck 2,400     Adjusted basis $39,000   On February 1, when Eileen changed her house to rental property, the property had a fair market value of $152,000. How to file 2011 tax return in 2013 Of this amount, $35,000 was for the land and $117,000 was for the house. How to file 2011 tax return in 2013 Because Eileen's adjusted basis is less than the fair market value on the date of the change, Eileen uses $39,000 as her basis for depreciation. How to file 2011 tax return in 2013 As specified for residential rental property, Eileen must use the straight line method of depreciation over the GDS or ADS recovery period. How to file 2011 tax return in 2013 She chooses the GDS recovery period of 27. How to file 2011 tax return in 2013 5 years. How to file 2011 tax return in 2013 She uses Table 2-2d to find her depreciation percentage. How to file 2011 tax return in 2013 Since she placed the property in service in February, the percentage is 3. How to file 2011 tax return in 2013 182%. How to file 2011 tax return in 2013 On April 1, Eileen bought a new dishwasher for the rental property at a cost of $425. How to file 2011 tax return in 2013 The dishwasher is personal property used in a rental real estate activity, which has a 5-year recovery period. How to file 2011 tax return in 2013 She uses Table 2-2a to find the percentage for Year 1 under “Half-year convention” (20%) to figure her depreciation deduction. How to file 2011 tax return in 2013 On May 1, Eileen paid $4,000 to have a furnace installed in the house. How to file 2011 tax return in 2013 The furnace is residential rental property. How to file 2011 tax return in 2013 Because she placed the property in service in May, the percentage from Table 2-2d is 2. How to file 2011 tax return in 2013 273%. How to file 2011 tax return in 2013 Eileen figures her net rental income or loss for the house as follows: Total rental income received  ($750 × 11) $8,250 Minus: Expenses     Mortgage interest ($1,800 × 11/12) $1,650   Fire insurance ($100 × 11/12) 92   Miscellaneous repairs 297   Real estate taxes ($1,200 × 11/12) 1,100   Total expenses 3,139 Balance $5,111 Minus: Depreciation     House ($39,000 × . How to file 2011 tax return in 2013 03182) $1,241   Dishwasher ($425 × . How to file 2011 tax return in 2013 20) 85   Furnace ($4,000 × . How to file 2011 tax return in 2013 02273) 91   Total depreciation 1,417 Net rental income for house   $3,694       Eileen uses Schedule E, Part I, to report her rental income and expenses. How to file 2011 tax return in 2013 She enters her income, expenses, and depreciation for the house in the column for Property A. How to file 2011 tax return in 2013 Since all property was placed in service this year, Eileen must use Form 4562 to figure the depreciation. How to file 2011 tax return in 2013 See the Instructions for Form 4562 for more information on preparing the form. How to file 2011 tax return in 2013 Prev  Up  Next   Home   More Online Publications