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How To Fill Out Form 1040x

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How To Fill Out Form 1040x

How to fill out form 1040x 8. How to fill out form 1040x   Gains and Losses Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Sales and ExchangesDetermining Gain or Loss Like-Kind Exchanges Transfer to Spouse Ordinary or Capital Gain or LossCapital Assets Noncapital Assets Hedging (Commodity Futures) Livestock Converted Wetland and Highly Erodible Cropland Timber Sale of a Farm Foreclosure or Repossession Abandonment Introduction This chapter explains how to figure, and report on your tax return, your gain or loss on the disposition of your property or debt and whether such gain or loss is ordinary or capital. How to fill out form 1040x Ordinary gain is taxed at the same rates as wages and interest income while capital gain is generally taxed at lower rates. How to fill out form 1040x Dispositions discussed in this chapter include sales, exchanges, foreclosures, repossessions, canceled debts, hedging transactions, and elections to treat cutting of timber as a sale or exchange. How to fill out form 1040x Topics - This chapter discusses: Sales and exchanges Ordinary or capital gain or loss Useful Items - You may want to see: Publication 334 Tax Guide for Small Business 523 Selling Your Home 544 Sales and Other Dispositions of Assets 550 Investment Income and Expenses 908 Bankruptcy Tax Guide Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Sch D (Form 1040) Capital Gains and Losses Sch F (Form 1040) Profit or Loss From Farming 1099-A Acquisition or Abandonment of Secured Property 1099-C Cancellation of Debt 4797 Sales of Business Property 8949 Sales and Other Dispositions of Capital Assets See chapter 16 for information about getting publications and forms. How to fill out form 1040x Sales and Exchanges If you sell, exchange, or otherwise dispose of your property, you usually have a gain or a loss. How to fill out form 1040x This section explains certain rules for determining whether any gain you have is taxable, and whether any loss you have is deductible. How to fill out form 1040x A sale is a transfer of property for money or a mortgage, note, or other promise to pay money. How to fill out form 1040x An exchange is a transfer of property for other property or services. How to fill out form 1040x Determining Gain or Loss You usually realize a gain or loss when you sell or exchange property. How to fill out form 1040x If the amount you realize from a sale or exchange of property is more than its adjusted basis, you will have a gain. How to fill out form 1040x If the adjusted basis of the property is more than the amount you realize, you will have a loss. How to fill out form 1040x Basis and adjusted basis. How to fill out form 1040x   The basis of property you buy is usually its cost. How to fill out form 1040x The adjusted basis of property is basis plus certain additions and minus certain deductions. How to fill out form 1040x See chapter 6 for more information about basis and adjusted basis. How to fill out form 1040x Amount realized. How to fill out form 1040x   The amount you realize from a sale or exchange is the total of all money you receive plus the fair market value (FMV) (defined in chapter 6) of all property or services you receive. How to fill out form 1040x The amount you realize also includes any of your liabilities assumed by the buyer and any liabilities to which the property you transferred is subject, such as real estate taxes or a mortgage. How to fill out form 1040x   If the liabilities relate to an exchange of multiple properties, see Multiple Property Exchanges in chapter 1 of Publication 544. How to fill out form 1040x Amount recognized. How to fill out form 1040x   Your gain or loss realized from a sale or exchange of certain property is usually a recognized gain or loss for tax purposes. How to fill out form 1040x A recognized gain is a gain you must include in gross income and report on your income tax return. How to fill out form 1040x A recognized loss is a loss you deduct from gross income. How to fill out form 1040x However, your gain or loss realized from the exchange of certain property may not be recognized for tax purposes. How to fill out form 1040x See Like-Kind Exchanges next. How to fill out form 1040x Also, a loss from the disposition of property held for personal use is not deductible. How to fill out form 1040x Like-Kind Exchanges Certain exchanges of property are not taxable. How to fill out form 1040x This means any gain from the exchange is not recognized, and any loss cannot be deducted. How to fill out form 1040x Your gain or loss will not be recognized until you sell or otherwise dispose of the property you receive. How to fill out form 1040x The exchange of property for the same kind of property is the most common type of nontaxable exchange. How to fill out form 1040x To qualify for treatment as a like-kind exchange, the property traded and the property received must be both of the following. How to fill out form 1040x Qualifying property. How to fill out form 1040x Like-kind property. How to fill out form 1040x These two requirements are discussed later. How to fill out form 1040x Multiple-party transactions. How to fill out form 1040x   The like-kind exchange rules also apply to property exchanges that involve three and four-party transactions. How to fill out form 1040x Any part of these multiple-party transactions can qualify as a like-kind exchange if it meets all the requirements described in this section. How to fill out form 1040x Receipt of title from third party. How to fill out form 1040x   If you receive property in a like-kind exchange and the other party who transfers the property to you does not give you the title, but a third party does, you can still treat this transaction as a like-kind exchange if it meets all the requirements. How to fill out form 1040x Basis of property received. How to fill out form 1040x   If you receive property in a like-kind exchange, the basis of the property will be the same as the basis of the property you gave up. How to fill out form 1040x See chapter 6 for more information. How to fill out form 1040x Money paid. How to fill out form 1040x   If, in addition to giving up like-kind property, you pay money in a like-kind exchange, you still have no recognized gain or loss. How to fill out form 1040x The basis of the property received is the basis of the property given up, increased by the money paid. How to fill out form 1040x Example. How to fill out form 1040x You traded an old tractor with an adjusted basis of $15,000 for a new one. How to fill out form 1040x The new tractor costs $300,000. How to fill out form 1040x You were allowed $80,000 for the old tractor and paid $220,000 cash. How to fill out form 1040x You have no recognized gain or loss on the transaction regardless of the adjusted basis of your old tractor and the basis of the new tractor is $235,000, the adjusted basis of the old tractor plus the cash paid ($15,000 + $220,000). How to fill out form 1040x If you had sold the old tractor to a third party for $80,000 and bought a new one, you would have a recognized gain or loss on the sale of your old tractor equal to the difference between the amount realized and the adjusted basis of the old tractor. How to fill out form 1040x In this case, the taxable gain would be $65,000 ($80,000 − $15,000) and the basis of the new tractor would be $300,000. How to fill out form 1040x Reporting the exchange. How to fill out form 1040x   Report the exchange of like-kind property, even though no gain or loss is recognized, on Form 8824, Like-Kind Exchanges. How to fill out form 1040x The Instructions for Form 8824 explain how to report the details of the exchange. How to fill out form 1040x   If you have any recognized gain because you received money or unlike property, report it on Schedule D (Form 1040) or Form 4797, whichever applies. How to fill out form 1040x You may also have to report the recognized gain as ordinary income because of depreciation recapture on Form 4797. How to fill out form 1040x See chapter 9 for more information. How to fill out form 1040x Qualifying property. How to fill out form 1040x   In a like-kind exchange, both the property you give up and the property you receive must be held by you for investment or for productive use in your trade or business. How to fill out form 1040x Machinery, buildings, land, trucks, breeding livestock, rental houses, and certain mutual ditch, reservoir, or irrigation company stock are examples of property that may qualify. How to fill out form 1040x Nonqualifying property. How to fill out form 1040x   The rules for like-kind exchanges do not apply to exchanges of the following property. How to fill out form 1040x Property you use for personal purposes, such as your home and family car. How to fill out form 1040x Stock in trade or other property held primarily for sale, such as crops and produce. How to fill out form 1040x Stocks, bonds, or notes. How to fill out form 1040x However, see Qualifying property above. How to fill out form 1040x Other securities or evidences of indebtedness, such as accounts receivable. How to fill out form 1040x Partnership interests. How to fill out form 1040x However, you may have a nontaxable exchange under other rules. How to fill out form 1040x See Other Nontaxable Exchanges in chapter 1 of Publication 544. How to fill out form 1040x Like-kind property. How to fill out form 1040x   To qualify as a nontaxable exchange, the properties exchanged must be of like kind. How to fill out form 1040x Like-kind properties are properties of the same nature or character, even if they differ in grade or quality. How to fill out form 1040x Generally, real property exchanged for real property qualifies as an exchange of like-kind property. How to fill out form 1040x For example, an exchange of city property for farm property or improved property for unimproved property is a like-kind exchange. How to fill out form 1040x   An exchange of a tractor for a new tractor is an exchange of like-kind property, and so is an exchange of timber land for crop acreage. How to fill out form 1040x An exchange of a tractor for acreage, however, is not an exchange of like-kind property. How to fill out form 1040x The exchange of livestock of one sex for livestock of the other sex is not a like-kind exchange. How to fill out form 1040x For example, the exchange of a bull for a cow is not a like-kind exchange. How to fill out form 1040x An exchange of the assets of a business for the assets of a similar business cannot be treated as an exchange of one property for another property. How to fill out form 1040x    Note. How to fill out form 1040x Whether you engaged in a like-kind exchange depends on an analysis of each asset involved in the exchange. How to fill out form 1040x Personal property. How to fill out form 1040x   Depreciable tangible personal property can be either like kind or like class to qualify for nontaxable exchange treatment. How to fill out form 1040x Like-class properties are depreciable tangible personal properties within the same General Asset Class or Product Class. How to fill out form 1040x Property classified in any General Asset Class may not be classified within a Product Class. How to fill out form 1040x Assets that are not in the same class will qualify as like-kind property if they are of the same nature or character. How to fill out form 1040x General Asset Classes. How to fill out form 1040x   General Asset Classes describe the types of property frequently used in many businesses. How to fill out form 1040x They include, but are not limited to, the following property. How to fill out form 1040x Office furniture, fixtures, and equipment (asset class 00. How to fill out form 1040x 11). How to fill out form 1040x Information systems, such as computers and peripheral equipment (asset class 00. How to fill out form 1040x 12). How to fill out form 1040x Data handling equipment except computers (asset class 00. How to fill out form 1040x 13). How to fill out form 1040x Automobiles and taxis (asset class 00. How to fill out form 1040x 22). How to fill out form 1040x Light general purpose trucks (asset class 00. How to fill out form 1040x 241). How to fill out form 1040x Heavy general purpose trucks (asset class 00. How to fill out form 1040x 242). How to fill out form 1040x Tractor units for use over-the-road (asset class 00. How to fill out form 1040x 26). How to fill out form 1040x Trailers and trailer-mounted containers (asset class 00. How to fill out form 1040x 27). How to fill out form 1040x Industrial steam and electric generation and/or distribution systems (asset class 00. How to fill out form 1040x 4). How to fill out form 1040x Product Classes. How to fill out form 1040x   Product Classes include property listed in a 6-digit product class in sectors 31 through 33 of the North American Industry Classification System (NAICS) of the Executive Office of the President, Office of Management and Budget, United States, (NAICS Manual). How to fill out form 1040x The latest version of the manual can be accessed at www. How to fill out form 1040x census. How to fill out form 1040x gov/eos/www/naics/. How to fill out form 1040x Copies of the printed manual may be purchased from the National Technical Information Service (NTIS) at  www. How to fill out form 1040x ntis. How to fill out form 1040x gov/products/naics. How to fill out form 1040x aspx or by calling 1-800-553-NTIS (1-800-553-6847) or (703) 605-6000. How to fill out form 1040x A CD-ROM version with search and retrieval software is also available from NTIS. How to fill out form 1040x    NAICS class 333111, Farm Machinery and Equipment Manufacturing, includes most machinery and equipment used in a farming business. How to fill out form 1040x Partially nontaxable exchange. How to fill out form 1040x   If, in addition to like-kind property, you receive money or unlike property in an exchange on which you realize gain, you have a partially nontaxable exchange. How to fill out form 1040x You are taxed on the gain you realize, but only to the extent of the money and the FMV of the unlike property you receive. How to fill out form 1040x A loss is not deductible. How to fill out form 1040x Example 1. How to fill out form 1040x You trade farmland that cost $30,000 for $10,000 cash and other land to be used in farming with a FMV of $50,000. How to fill out form 1040x You have a realized gain of $30,000 ($50,000 FMV of new land + $10,000 cash − $30,000 basis of old farmland = $30,000 realized gain). How to fill out form 1040x However, only $10,000, the cash received, is recognized (included in income). How to fill out form 1040x Example 2. How to fill out form 1040x Assume the same facts as in Example 1, except that, instead of money, you received a tractor with a FMV of $10,000. How to fill out form 1040x Your recognized gain is still limited to $10,000, the value of the tractor (the unlike property). How to fill out form 1040x Example 3. How to fill out form 1040x Assume in Example 1 that the FMV of the land you received was only $15,000. How to fill out form 1040x Your $5,000 loss is not recognized. How to fill out form 1040x Unlike property given up. How to fill out form 1040x   If, in addition to like-kind property, you give up unlike property, you must recognize gain or loss on the unlike property you give up. How to fill out form 1040x The gain or loss is the difference between the FMV of the unlike property and the adjusted basis of the unlike property. How to fill out form 1040x Like-kind exchanges between related persons. How to fill out form 1040x   Special rules apply to like-kind exchanges between related persons. How to fill out form 1040x These rules affect both direct and indirect exchanges. How to fill out form 1040x Under these rules, if either person disposes of the property within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. How to fill out form 1040x The gain or loss on the original exchange must be recognized as of the date of the later disposition. How to fill out form 1040x The 2-year holding period begins on the date of the last transfer of property that was part of the like-kind exchange. How to fill out form 1040x Related persons. How to fill out form 1040x   Under these rules, related persons include, for example, you and a member of your family (spouse, brother, sister, parent, child, etc. How to fill out form 1040x ), you and a corporation in which you have more than 50% ownership, you and a partnership in which you directly or indirectly own more than a 50% interest of the capital or profits, and two partnerships in which you directly or indirectly own more than 50% of the capital interests or profits. How to fill out form 1040x   For the complete list of related persons, see Related persons in chapter 2 of Publication 544. How to fill out form 1040x Example. How to fill out form 1040x You used a grey pickup truck in your farming business. How to fill out form 1040x Your sister used a red pickup truck in her landscaping business. How to fill out form 1040x In December 2012, you exchanged your grey pickup truck, plus $200, for your sister's red pickup truck. How to fill out form 1040x At that time, the FMV of the grey pickup truck was $7,000 and its adjusted basis was $6,000. How to fill out form 1040x The FMV of the red pickup truck was $7,200 and its adjusted basis was $1,000. How to fill out form 1040x You realized a gain of $1,000 (the $7,200 FMV of the red pickup truck, minus the grey pickup truck's $6,000 adjusted basis, minus the $200 you paid). How to fill out form 1040x Your sister realized a gain of $6,200 (the $7,000 FMV of the grey pickup truck plus the $200 you paid, minus the $1,000 adjusted basis of the red pickup truck). How to fill out form 1040x However, because this was a like-kind exchange, you recognized no gain. How to fill out form 1040x Your basis in the red pickup truck was $6,200 (the $6,000 adjusted basis of the grey pickup truck plus the $200 you paid). How to fill out form 1040x She recognized gain only to the extent of the money she received, $200. How to fill out form 1040x Her basis in the grey pickup truck was $1,000 (the $1,000 adjusted basis of the red pickup truck minus the $200 received, plus the $200 gain recognized). How to fill out form 1040x In 2013, you sold the red pickup truck to a third party for $7,000. How to fill out form 1040x Because you sold it within 2 years after the exchange, the exchange is disqualified from nonrecognition treatment. How to fill out form 1040x On your tax return for 2013, you must report your $1,000 gain on the 2012 exchange. How to fill out form 1040x You also report a loss on the sale as $200 (the adjusted basis of the red pickup truck, $7,200 (its $6,200 basis plus the $1,000 gain recognized), minus the $7,000 realized from the sale). How to fill out form 1040x In addition, your sister must report on her tax return for 2013 the $6,000 balance of her gain on the 2012 exchange. How to fill out form 1040x Her adjusted basis in the grey pickup truck is increased to $7,000 (its $1,000 basis plus the $6,000 gain recognized). How to fill out form 1040x Exceptions to the rules for related persons. How to fill out form 1040x   The following property dispositions are excluded from these rules. How to fill out form 1040x Dispositions due to the death of either related person. How to fill out form 1040x Involuntary conversions. How to fill out form 1040x Dispositions where it is established to the satisfaction of the IRS that neither the exchange nor the disposition has, as a main purpose, the avoidance of federal income tax. How to fill out form 1040x Multiple property exchanges. How to fill out form 1040x   Under the like-kind exchange rules, you must generally make a property-by-property comparison to figure your recognized gain and the basis of the property you receive in the exchange. How to fill out form 1040x However, for exchanges of multiple properties, you do not make a property-by-property comparison if you do either of the following. How to fill out form 1040x Transfer and receive properties in two or more exchange groups. How to fill out form 1040x Transfer or receive more than one property within a single exchange group. How to fill out form 1040x   For more information, see Multiple Property Exchanges in chapter 1 of Publication 544. How to fill out form 1040x Deferred exchange. How to fill out form 1040x   A deferred exchange for like-kind property may qualify for nonrecognition of gain or loss. How to fill out form 1040x A deferred exchange is an exchange in which you transfer property you use in business or hold for investment and later receive like-kind property you will use in business or hold for investment. How to fill out form 1040x The property you receive is replacement property. How to fill out form 1040x The transaction must be an exchange of property for property rather than a transfer of property for money used to buy replacement property. How to fill out form 1040x In addition, the replacement property will not be treated as like-kind property unless certain identification and receipt requirements are met. How to fill out form 1040x   For more information see Deferred Exchanges in chapter 1 of Publication 544. How to fill out form 1040x Transfer to Spouse No gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or a former spouse if incident to divorce. How to fill out form 1040x This rule does not apply if the recipient is a nonresident alien. How to fill out form 1040x Nor does this rule apply to a transfer in trust to the extent the liabilities assumed and the liabilities on the property are more than the property's adjusted basis. How to fill out form 1040x Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is not considered a sale or exchange. How to fill out form 1040x The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. How to fill out form 1040x This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its FMV at the time of transfer or any consideration paid by the recipient. How to fill out form 1040x This rule applies for determining loss as well as gain. How to fill out form 1040x Any gain recognized on a transfer in trust increases the basis. How to fill out form 1040x For more information on transfers of property incident to divorce, see Property Settlements in Publication 504, Divorced or Separated Individuals. How to fill out form 1040x Ordinary or Capital Gain or Loss Generally, you will have a capital gain or loss if you sell or exchange a capital asset (defined below). How to fill out form 1040x You may also have a capital gain if your section 1231 transactions result in a net gain. How to fill out form 1040x See Section 1231 Gains and Losses in  chapter 9. How to fill out form 1040x To figure your net capital gain or loss, you must classify your gains and losses as either ordinary or capital (and your capital gains or losses as either short-term or long-term). How to fill out form 1040x Your net capital gains may be taxed at a lower tax rate than ordinary income. How to fill out form 1040x See Capital Gains Tax Rates , later. How to fill out form 1040x Your deduction for a net capital loss may be limited. How to fill out form 1040x See Treatment of Capital Losses , later. How to fill out form 1040x Capital Assets Almost everything you own and use for personal purposes or investment is a capital asset. How to fill out form 1040x The following items are examples of capital assets. How to fill out form 1040x A home owned and occupied by you and your family. How to fill out form 1040x Household furnishings. How to fill out form 1040x A car used for pleasure. How to fill out form 1040x If your car is used both for pleasure and for farm business, it is partly a capital asset and partly a noncapital asset, defined later. How to fill out form 1040x Stocks and bonds. How to fill out form 1040x However, there are special rules for gains on qualified small business stock. How to fill out form 1040x For more information on this subject, see Gains on Qualified Small Business Stock and Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. How to fill out form 1040x Personal-use property. How to fill out form 1040x   Gain from a sale or exchange of personal-use property is a capital gain and is taxable. How to fill out form 1040x Loss from the sale or exchange of personal-use property is not deductible. How to fill out form 1040x You can deduct a loss relating to personal-use property only if it results from a casualty or theft. How to fill out form 1040x For information on casualties and thefts, see chapter 11. How to fill out form 1040x Long and Short Term Where you report a capital gain or loss depends on how long you own the asset before you sell or exchange it. How to fill out form 1040x The time you own an asset before disposing of it is the holding period. How to fill out form 1040x If you hold a capital asset 1 year or less, the gain or loss resulting from its disposition is short term. How to fill out form 1040x Report it in Part I of Schedule D (Form 1040). How to fill out form 1040x If you hold a capital asset longer than 1 year, the gain or loss resulting from its disposition is long term. How to fill out form 1040x Report it in Part II of Schedule D (Form 1040). How to fill out form 1040x Holding period. How to fill out form 1040x   To figure if you held property longer than 1 year, start counting on the day after the day you acquired the property. How to fill out form 1040x The day you disposed of the property is part of your holding period. How to fill out form 1040x Example. How to fill out form 1040x If you bought an asset on June 19, 2012, you should start counting on June 20, 2012. How to fill out form 1040x If you sold the asset on June 19, 2013, your holding period is not longer than 1 year, but if you sold it on June 20, 2013, your holding period is longer than 1 year. How to fill out form 1040x Inherited property. How to fill out form 1040x   If you inherit property, you are considered to have held the property longer than 1 year, regardless of how long you actually held it. How to fill out form 1040x This rule does not apply to livestock used in a farm business. How to fill out form 1040x See Holding period under Livestock , later. How to fill out form 1040x Nonbusiness bad debt. How to fill out form 1040x   A nonbusiness bad debt is a short-term capital loss, deductible in the year the debt becomes worthless. How to fill out form 1040x See chapter 4 of Publication 550. How to fill out form 1040x Nontaxable exchange. How to fill out form 1040x   If you acquire an asset in exchange for another asset and your basis for the new asset is figured, in whole or in part, by using your basis in the old property, the holding period of the new property includes the holding period of the old property. How to fill out form 1040x That is, it begins on the same day as your holding period for the old property. How to fill out form 1040x Gift. How to fill out form 1040x   If you receive a gift of property and your basis in it is figured using the donor's basis, your holding period includes the donor's holding period. How to fill out form 1040x Real property. How to fill out form 1040x   To figure how long you held real property, start counting on the day after you received title to it or, if earlier, on the day after you took possession of it and assumed the burdens and privileges of ownership. How to fill out form 1040x   However, taking possession of real property under an option agreement is not enough to start the holding period. How to fill out form 1040x The holding period cannot start until there is an actual contract of sale. How to fill out form 1040x The holding period of the seller cannot end before that time. How to fill out form 1040x Figuring Net Gain or Loss The totals for short-term capital gains and losses and the totals for long-term capital gains and losses must be figured separately. How to fill out form 1040x Net short-term capital gain or loss. How to fill out form 1040x   Combine your short-term capital gains and losses. How to fill out form 1040x Do this by adding all of your short-term capital gains. How to fill out form 1040x Then add all of your short-term capital losses. How to fill out form 1040x Subtract the lesser total from the greater. How to fill out form 1040x The difference is your net short-term capital gain or loss. How to fill out form 1040x Net long-term capital gain or loss. How to fill out form 1040x   Follow the same steps to combine your long-term capital gains and losses. How to fill out form 1040x The result is your net long-term capital gain or loss. How to fill out form 1040x Net gain. How to fill out form 1040x   If the total of your capital gains is more than the total of your capital losses, the difference is taxable. How to fill out form 1040x However, part of your gain (but not more than your net capital gain) may be taxed at a lower rate than the rate of tax on your ordinary income. How to fill out form 1040x See Capital Gains Tax Rates , later. How to fill out form 1040x Net loss. How to fill out form 1040x   If the total of your capital losses is more than the total of your capital gains, the difference is deductible. How to fill out form 1040x But there are limits on how much loss you can deduct and when you can deduct it. How to fill out form 1040x See Treatment of Capital Losses next. How to fill out form 1040x Treatment of Capital Losses If your capital losses are more than your capital gains, you must claim the difference even if you do not have ordinary income to offset it. How to fill out form 1040x For taxpayers other than corporations, the yearly limit on the capital loss you can deduct is $3,000 ($1,500 if you are married and file a separate return). How to fill out form 1040x If your other income is low, you may not be able to use the full $3,000. How to fill out form 1040x The part of the $3,000 you cannot use becomes part of your capital loss carryover (discussed next). How to fill out form 1040x Capital loss carryover. How to fill out form 1040x   Generally, you have a capital loss carryover if either of the following situations applies to you. How to fill out form 1040x Your net loss on Schedule D (Form 1040), is more than the yearly limit. How to fill out form 1040x Your taxable income without your deduction for exemptions is less than zero. How to fill out form 1040x If either of these situations applies to you for 2013, see Capital Losses under Reporting Capital Gains and Losses in chapter 4 of Publication 550 to figure the amount you can carry over to 2014. How to fill out form 1040x    To figure your capital loss carryover from 2013 to 2014, you will need a copy of your 2013 Form 1040 and Schedule D (Form 1040). How to fill out form 1040x Capital Gains Tax Rates The tax rates that apply to a net capital gain are generally lower than the tax rates that apply to other income. How to fill out form 1040x These lower rates are called the maximum capital gains rates. How to fill out form 1040x The term “net capital gain” means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss. How to fill out form 1040x See Schedule D (Form 1040) and the Instructions for Schedule D (Form 1040). How to fill out form 1040x Also see Publication 550. How to fill out form 1040x Noncapital Assets Noncapital assets include property such as inventory and depreciable property used in a trade or business. How to fill out form 1040x A list of properties that are not capital assets is provided in the Instructions for Schedule D (Form 1040). How to fill out form 1040x Property held for sale in the ordinary course of your farm business. How to fill out form 1040x   Property you hold mainly for sale to customers, such as livestock, poultry, livestock products, and crops, is a noncapital asset. How to fill out form 1040x Gain or loss from sales or other dispositions of this property is reported on Schedule F (Form 1040) (not on Schedule D (Form 1040) or Form 4797). How to fill out form 1040x The treatment of this property is discussed in chapter 3. How to fill out form 1040x Land and depreciable properties. How to fill out form 1040x   Land and depreciable property you use in farming are not capital assets. How to fill out form 1040x Noncapital assets also include livestock held for draft, breeding, dairy, or sporting purposes. How to fill out form 1040x However, your gains and losses from sales and exchanges of your farmland and depreciable properties must be considered together with certain other transactions to determine whether the gains and losses are treated as capital or ordinary gains and losses. How to fill out form 1040x The sales of these business assets are reported on Form 4797. How to fill out form 1040x See chapter 9 for more information. How to fill out form 1040x Hedging (Commodity Futures) Hedging transactions are transactions that you enter into in the normal course of business primarily to manage the risk of interest rate or price changes, or currency fluctuations, with respect to borrowings, ordinary property, or ordinary obligations. How to fill out form 1040x Ordinary property or obligations are those that cannot produce capital gain or loss if sold or exchanged. How to fill out form 1040x A commodity futures contract is a standardized, exchange-traded contract for the sale or purchase of a fixed amount of a commodity at a future date for a fixed price. How to fill out form 1040x The holder of an option on a futures contract has the right (but not the obligation) for a specified period of time to enter into a futures contract to buy or sell at a particular price. How to fill out form 1040x A forward contract is generally similar to a futures contract except that the terms are not standardized and the contract is not exchange traded. How to fill out form 1040x Businesses may enter into commodity futures contracts or forward contracts and may acquire options on commodity futures contracts as either of the following. How to fill out form 1040x Hedging transactions. How to fill out form 1040x Transactions that are not hedging transactions. How to fill out form 1040x Futures transactions with exchange-traded commodity futures contracts that are not hedging transactions, generally, result in capital gain or loss and are subject to the mark-to-market rules discussed in Publication 550. How to fill out form 1040x There is a limit on the amount of capital losses you can deduct each year. How to fill out form 1040x Hedging transactions are not subject to the mark-to-market rules. How to fill out form 1040x If, as a farmer-producer, to protect yourself from the risk of unfavorable price fluctuations, you enter into commodity forward contracts, futures contracts, or options on futures contracts and the contracts cover an amount of the commodity within your range of production, the transactions are generally considered hedging transactions. How to fill out form 1040x They can take place at any time you have the commodity under production, have it on hand for sale, or reasonably expect to have it on hand. How to fill out form 1040x The gain or loss on the termination of these hedges is generally ordinary gain or loss. How to fill out form 1040x Farmers who file their income tax returns on the cash method report any profit or loss on the hedging transaction on Schedule F, line 8. How to fill out form 1040x Gains or losses from hedging transactions that hedge supplies of a type regularly used or consumed in the ordinary course of your trade or business may be ordinary gains or losses. How to fill out form 1040x Examples include fuel and feed. How to fill out form 1040x If you have numerous transactions in the commodity futures market during the year, you must be able to show which transactions are hedging transactions. How to fill out form 1040x Clearly identify a hedging transaction on your books and records before the end of the day you entered into the transaction. How to fill out form 1040x It may be helpful to have separate brokerage accounts for your hedging and speculation transactions. How to fill out form 1040x Retain the identification of each hedging transaction with your books and records. How to fill out form 1040x Also, identify the item(s) or aggregate risk that is being hedged in your records. How to fill out form 1040x Although the identification of the hedging transaction must be made before the end of the day it was entered into, you have 35 days after entering into the transaction to identify the hedged item(s) or risk. How to fill out form 1040x For more information on the tax treatment of futures and options contracts, see Commodity Futures and Section 1256 Contracts Marked to Market in Publication 550. How to fill out form 1040x Accounting methods for hedging transactions. How to fill out form 1040x   The accounting method you use for a hedging transaction must clearly reflect income. How to fill out form 1040x This means that your accounting method must reasonably match the timing of income, deduction, gain, or loss from a hedging transaction with the timing of income, deduction, gain, or loss from the item or items being hedged. How to fill out form 1040x There are requirements and limits on the method you can use for certain hedging transactions. How to fill out form 1040x See Regulations section 1. How to fill out form 1040x 446-4(e) for those requirements and limits. How to fill out form 1040x   Hedging transactions must be accounted for under the rules stated above unless the transaction is subject to mark-to-market accounting under section 475 or you use an accounting method other than the following methods. How to fill out form 1040x Cash method. How to fill out form 1040x Farm-price method. How to fill out form 1040x Unit-livestock-price method. How to fill out form 1040x   Once you adopt a method, you must apply it consistently and must have IRS approval before changing it. How to fill out form 1040x   Your books and records must describe the accounting method used for each type of hedging transaction. How to fill out form 1040x They must also contain any additional identification necessary to verify the application of the accounting method you used for the transaction. How to fill out form 1040x You must make the additional identification no more than 35 days after entering into the hedging transaction. How to fill out form 1040x Example of a hedging transaction. How to fill out form 1040x   You file your income tax returns on the cash method. How to fill out form 1040x On July 2 you anticipate a yield of 50,000 bushels of corn this year. How to fill out form 1040x The December futures price is $5. How to fill out form 1040x 75 a bushel, but there are indications that by harvest time the price will drop. How to fill out form 1040x To protect yourself against a drop in the price, you enter into the following hedging transaction. How to fill out form 1040x You sell ten December futures contracts of 5,000 bushels each for a total of 50,000 bushels of corn at $5. How to fill out form 1040x 75 a bushel. How to fill out form 1040x   The price did not drop as anticipated but rose to $6 a bushel. How to fill out form 1040x In November, you sell your crop at a local elevator for $6 a bushel. How to fill out form 1040x You also close out your futures position by buying ten December contracts for $6 a bushel. How to fill out form 1040x You paid a broker's commission of $1,400 ($70 per contract) for the complete in and out position in the futures market. How to fill out form 1040x   The result is that the price of corn rose 25 cents a bushel and the actual selling price is $6 a bushel. How to fill out form 1040x Your loss on the hedge is 25 cents a bushel. How to fill out form 1040x In effect, the net selling price of your corn is $5. How to fill out form 1040x 75 a bushel. How to fill out form 1040x   Report the results of your futures transactions and your sale of corn separately on Schedule F. How to fill out form 1040x See the instructions for the 2013 Schedule F (Form 1040). How to fill out form 1040x   The loss on your futures transactions is $13,900, figured as follows. How to fill out form 1040x July 2 - Sold December corn futures (50,000 bu. How to fill out form 1040x @$5. How to fill out form 1040x 75) $287,500 November 6 - Bought December corn futures (50,000 bu. How to fill out form 1040x @$6 plus $1,400 broker's commission) 301,400 Futures loss ($13,900) This loss is reported as a negative figure on Schedule F, Part I, line 8, as other income. How to fill out form 1040x   The proceeds from your corn sale at the local elevator are $300,000 (50,000 bu. How to fill out form 1040x × $6). How to fill out form 1040x Report it on Schedule F, Part I, line 2, as income from sales of products you raised. How to fill out form 1040x   Assume you were right and the price went down 25 cents a bushel. How to fill out form 1040x In effect, you would still net $5. How to fill out form 1040x 75 a bushel, figured as follows. How to fill out form 1040x Sold cash corn, per bushel $5. How to fill out form 1040x 50 Gain on hedge, per bushel . How to fill out form 1040x 25 Net price, per bushel $5. How to fill out form 1040x 75       The gain on your futures transactions would have been $11,100, figured as follows. How to fill out form 1040x July 2 - Sold December corn futures (50,000 bu. How to fill out form 1040x @$5. How to fill out form 1040x 75) $287,500 November 6 - Bought December corn futures (50,000 bu. How to fill out form 1040x @$5. How to fill out form 1040x 50 plus $1,400 broker's commission) 276,400 Futures gain $11,100 The $11,100 is reported on Schedule F, Part I, line 8, as other income. How to fill out form 1040x   The proceeds from the sale of your corn at the local elevator, $275,000, are reported on Schedule F, Part I, line 2, as income from sales of products you raised. How to fill out form 1040x Livestock This part discusses the sale or exchange of livestock used in your farm business. How to fill out form 1040x Gain or loss from the sale or exchange of this livestock may qualify as a section 1231 gain or loss. How to fill out form 1040x However, any part of the gain that is ordinary income from the recapture of depreciation is not included as section 1231 gain. How to fill out form 1040x See chapter 9 for more information on section 1231 gains and losses and the recapture of depreciation under section 1245. How to fill out form 1040x The rules discussed here do not apply to the sale of livestock held primarily for sale to customers. How to fill out form 1040x The sale of this livestock is reported on Schedule F. How to fill out form 1040x See chapter 3. How to fill out form 1040x Also, special rules apply to sales or exchanges caused by weather-related conditions. How to fill out form 1040x See chapter 3. How to fill out form 1040x Holding period. How to fill out form 1040x   The sale or exchange of livestock used in your farm business (defined below) qualifies as a section 1231 transaction if you held the livestock for 12 months or more (24 months or more for horses and cattle). How to fill out form 1040x Livestock. How to fill out form 1040x   For section 1231 transactions, livestock includes cattle, hogs, horses, mules, donkeys, sheep, goats, fur-bearing animals, and other mammals. How to fill out form 1040x Also, for section 1231 transactions, livestock does not include chickens, turkeys, pigeons, geese, emus, ostriches, rheas, or other birds, fish, frogs, reptiles, etc. How to fill out form 1040x Livestock used in farm business. How to fill out form 1040x   If livestock is held primarily for draft, breeding, dairy, or sporting purposes, it is used in your farm business. How to fill out form 1040x The purpose for which an animal is held ordinarily is determined by a farmer's actual use of the animal. How to fill out form 1040x An animal is not held for draft, breeding, dairy, or sporting purposes merely because it is suitable for that purpose, or because it is held for sale to other persons for use by them for that purpose. How to fill out form 1040x However, a draft, breeding, or sporting purpose may be present if an animal is disposed of within a reasonable time after it is prevented from its intended use or made undesirable as a result of an accident, disease, drought, or unfitness of the animal. How to fill out form 1040x Example 1. How to fill out form 1040x You discover an animal that you intend to use for breeding purposes is sterile. How to fill out form 1040x You dispose of it within a reasonable time. How to fill out form 1040x This animal was held for breeding purposes. How to fill out form 1040x Example 2. How to fill out form 1040x You retire and sell your entire herd, including young animals that you would have used for breeding or dairy purposes had you remained in business. How to fill out form 1040x These young animals were held for breeding or dairy purposes. How to fill out form 1040x Also, if you sell young animals to reduce your breeding or dairy herd because of drought, these animals are treated as having been held for breeding or dairy purposes. How to fill out form 1040x See Sales Caused by Weather-Related Conditions in chapter 3. How to fill out form 1040x Example 3. How to fill out form 1040x You are in the business of raising hogs for slaughter. How to fill out form 1040x Customarily, before selling your sows, you obtain a single litter of pigs that you will raise for sale. How to fill out form 1040x You sell the brood sows after obtaining the litter. How to fill out form 1040x Even though you hold these brood sows for ultimate sale to customers in the ordinary course of your business, they are considered to be held for breeding purposes. How to fill out form 1040x Example 4. How to fill out form 1040x You are in the business of raising registered cattle for sale to others for use as breeding cattle. How to fill out form 1040x The business practice is to breed the cattle before sale to establish their fitness as registered breeding cattle. How to fill out form 1040x Your use of the young cattle for breeding purposes is ordinary and necessary for selling them as registered breeding cattle. How to fill out form 1040x Such use does not demonstrate that you are holding the cattle for breeding purposes. How to fill out form 1040x However, those cattle you held as additions or replacements to your own breeding herd to produce calves are considered to be held for breeding purposes, even though they may not actually have produced calves. How to fill out form 1040x The same applies to hog and sheep breeders. How to fill out form 1040x Example 5. How to fill out form 1040x You breed, raise, and train horses for racing purposes. How to fill out form 1040x Every year you cull horses from your racing stable. How to fill out form 1040x In 2013, you decided that to prevent your racing stable from getting too large to be effectively operated, you must cull six horses that had been raced at public tracks in 2012. How to fill out form 1040x These horses are all considered held for sporting purposes. How to fill out form 1040x Figuring gain or loss on the cash method. How to fill out form 1040x   Farmers or ranchers who use the cash method of accounting figure their gain or loss on the sale of livestock used in their farming business as follows. How to fill out form 1040x Raised livestock. How to fill out form 1040x   Gain on the sale of raised livestock is generally the gross sales price reduced by any expenses of the sale. How to fill out form 1040x Expenses of sale include sales commissions, freight or hauling from farm to commission company, and other similar expenses. How to fill out form 1040x The basis of the animal sold is zero if the costs of raising it were deducted during the years the animal was being raised. How to fill out form 1040x However, see Uniform Capitalization Rules in chapter 6. How to fill out form 1040x Purchased livestock. How to fill out form 1040x   The gross sales price minus your adjusted basis and any expenses of sale is the gain or loss. How to fill out form 1040x Example. How to fill out form 1040x A farmer sold a breeding cow on January 8, 2013, for $1,250. How to fill out form 1040x Expenses of the sale were $125. How to fill out form 1040x The cow was bought July 2, 2009, for $1,300. How to fill out form 1040x Depreciation (not less than the amount allowable) was $867. How to fill out form 1040x Gross sales price $1,250 Cost (basis) $1,300   Minus: Depreciation deduction 867   Unrecovered cost (adjusted basis) $ 433   Expense of sale 125 558 Gain realized $ 692 Converted Wetland and Highly Erodible Cropland Special rules apply to dispositions of land converted to farming use after March 1, 1986. How to fill out form 1040x Any gain realized on the disposition of converted wetland or highly erodible cropland is treated as ordinary income. How to fill out form 1040x Any loss on the disposition of such property is treated as a long-term capital loss. How to fill out form 1040x Converted wetland. How to fill out form 1040x   This is generally land that was drained or filled to make the production of agricultural commodities possible. How to fill out form 1040x It includes converted wetland held by the person who originally converted it or held by any other person who used the converted wetland at any time after conversion for farming. How to fill out form 1040x   A wetland (before conversion) is land that meets all the following conditions. How to fill out form 1040x It is mostly soil that, in its undrained condition, is saturated, flooded, or ponded long enough during a growing season to develop an oxygen-deficient state that supports the growth and regeneration of plants growing in water. How to fill out form 1040x It is saturated by surface or groundwater at a frequency and duration sufficient to support mostly plants that are adapted for life in saturated soil. How to fill out form 1040x It supports, under normal circumstances, mostly plants that grow in saturated soil. How to fill out form 1040x Highly erodible cropland. How to fill out form 1040x   This is cropland subject to erosion that you used at any time for farming purposes other than grazing animals. How to fill out form 1040x Generally, highly erodible cropland is land currently classified by the Department of Agriculture as Class IV, VI, VII, or VIII under its classification system. How to fill out form 1040x Highly erodible cropland also includes land that would have an excessive average annual erosion rate in relation to the soil loss tolerance level, as determined by the Department of Agriculture. How to fill out form 1040x Successor. How to fill out form 1040x   Converted wetland or highly erodible cropland is also land held by any person whose basis in the land is figured by reference to the adjusted basis of a person in whose hands the property was converted wetland or highly erodible cropland. How to fill out form 1040x Timber Standing timber you held as investment property is a capital asset. How to fill out form 1040x Gain or loss from its sale is capital gain or loss reported on Form 8949 and Schedule D (Form 1040), as applicable. How to fill out form 1040x If you held the timber primarily for sale to customers, it is not a capital asset. How to fill out form 1040x Gain or loss on its sale is ordinary business income or loss. How to fill out form 1040x It is reported on Schedule F, line 1 (purchased timber) or line 2 (raised timber). How to fill out form 1040x See the Instructions for Schedule F (Form 1040). How to fill out form 1040x Farmers who cut timber on their land and sell it as logs, firewood, or pulpwood usually have no cost or other basis for that timber. How to fill out form 1040x Amounts realized from these sales, and the expenses incurred in cutting, hauling, etc. How to fill out form 1040x , are ordinary farm income and expenses reported on Schedule F. How to fill out form 1040x Different rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange or you enter into a cutting contract, discussed below. How to fill out form 1040x Timber considered cut. How to fill out form 1040x   Timber is considered cut on the date when, in the ordinary course of business, the quantity of felled timber is first definitely determined. How to fill out form 1040x This is true whether the timber is cut under contract or whether you cut it yourself. How to fill out form 1040x Christmas trees. How to fill out form 1040x   Evergreen trees, such as Christmas trees, that are more than 6 years old when severed from their roots and sold for ornamental purposes are included in the term timber. How to fill out form 1040x They qualify for both rules discussed below. How to fill out form 1040x Election to treat cutting as a sale or exchange. How to fill out form 1040x   Under the general rule, the cutting of timber results in no gain or loss. How to fill out form 1040x It is not until a sale or exchange occurs that gain or loss is realized. How to fill out form 1040x But if you owned or had a contractual right to cut timber, you can elect to treat the cutting of timber as a section 1231 transaction in the year it is cut. How to fill out form 1040x Even though the cut timber is not actually sold or exchanged, you report your gain or loss on the cutting for the year the timber is cut. How to fill out form 1040x Any later sale results in ordinary business income or loss. How to fill out form 1040x See the example below. How to fill out form 1040x   To elect this treatment, you must: Own or hold a contractual right to cut the timber for a period of more than 1 year before it is cut, and Cut the timber for sale or use in your trade or business. How to fill out form 1040x Making the election. How to fill out form 1040x   You make the election on your return for the year the cutting takes place by including in income the gain or loss on the cutting and including a computation of your gain or loss. How to fill out form 1040x You do not have to make the election in the first year you cut the timber. How to fill out form 1040x You can make it in any year to which the election would apply. How to fill out form 1040x If the timber is partnership property, the election is made on the partnership return. How to fill out form 1040x This election cannot be made on an amended return. How to fill out form 1040x   Once you have made the election, it remains in effect for all later years unless you revoke it. How to fill out form 1040x Election under section 631(a) may be revoked. How to fill out form 1040x   If you previously elected for any tax year ending before October 23, 2004, to treat the cutting of timber as a sale or exchange under section 631(a), you may revoke this election without the consent of the IRS for any tax year ending after October 22, 2004. How to fill out form 1040x The prior election (and revocation) is disregarded for purposes of making a subsequent election. How to fill out form 1040x See Form T (Timber), Forest Activities Schedule, for more information. How to fill out form 1040x Gain or loss. How to fill out form 1040x   Your gain or loss on the cutting of standing timber is the difference between its adjusted basis for depletion and its FMV on the first day of your tax year in which it is cut. How to fill out form 1040x   Your adjusted basis for depletion of cut timber is based on the number of units (board feet, log scale, or other units) of timber cut during the tax year and considered to be sold or exchanged. How to fill out form 1040x Your adjusted basis for depletion is also based on the depletion unit of timber in the account used for the cut timber, and should be figured in the same manner as shown in section 611 and Regulations section 1. How to fill out form 1040x 611-3. How to fill out form 1040x   Depletion of timber is discussed in chapter 7. How to fill out form 1040x Example. How to fill out form 1040x   In April 2013, you owned 4,000 MBF (1,000 board feet) of standing timber longer than 1 year. How to fill out form 1040x It had an adjusted basis for depletion of $40 per MBF. How to fill out form 1040x You are a calendar year taxpayer. How to fill out form 1040x On January 1, 2013, the timber had a FMV of $350 per MBF. How to fill out form 1040x It was cut in April for sale. How to fill out form 1040x On your 2013 tax return, you elect to treat the cutting of the timber as a sale or exchange. How to fill out form 1040x You report the difference between the FMV and your adjusted basis for depletion as a gain. How to fill out form 1040x This amount is reported on Form 4797 along with your other section 1231 gains and losses to figure whether it is treated as a capital gain or as ordinary gain. How to fill out form 1040x You figure your gain as follows. How to fill out form 1040x FMV of timber January 1, 2013 $1,400,000 Minus: Adjusted basis for depletion 160,000 Section 1231 gain $1,240,000   The FMV becomes your basis in the cut timber, and a later sale of the cut timber, including any by-product or tree tops, will result in ordinary business income or loss. How to fill out form 1040x Outright sales of timber. How to fill out form 1040x   Outright sales of timber by landowners qualify for capital gains treatment using rules similar to the rules for certain disposal of timber under a contract with retained economic interest (defined later). How to fill out form 1040x However, for outright sales, the date of disposal is not deemed to be the date the timber is cut because the landowner can elect to treat the payment date as the date of disposal (see Date of disposal below). How to fill out form 1040x Cutting contract. How to fill out form 1040x   You must treat the disposal of standing timber under a cutting contract as a section 1231 transaction if all the following apply to you. How to fill out form 1040x You are the owner of the timber. How to fill out form 1040x You held the timber longer than 1 year before its disposal. How to fill out form 1040x You kept an economic interest in the timber. How to fill out form 1040x   You have kept an economic interest in standing timber if, under the cutting contract, the expected return on your investment is conditioned on the cutting of the timber. How to fill out form 1040x   The difference between the amount realized from the disposal of the timber and its adjusted basis for depletion is treated as gain or loss on its sale. How to fill out form 1040x Include this amount on Form 4797 along with your other section 1231 gains or losses. How to fill out form 1040x Date of disposal. How to fill out form 1040x   The date of disposal is the date the timber is cut. How to fill out form 1040x However, for outright sales by landowners or if you receive payment under the contract before the timber is cut, you can elect to treat the date of payment as the date of disposal. How to fill out form 1040x   This election applies only to figure the holding period of the timber. How to fill out form 1040x It has no effect on the time for reporting gain or loss (generally when the timber is sold or exchanged). How to fill out form 1040x   To make this election, attach a statement to the tax return filed by the due date (including extensions) for the year payment is received. How to fill out form 1040x The statement must identify the advance payments subject to the election and the contract under which they were made. How to fill out form 1040x   If you timely filed your return for the year you received payment without making the election, you can still make the election by filing an amended return within 6 months after the due date for that year's return (excluding extensions). How to fill out form 1040x Attach the statement to the amended return and write “Filed pursuant to section 301. How to fill out form 1040x 9100-2” at the top of the statement. How to fill out form 1040x File the amended return at the same address the original return was filed. How to fill out form 1040x Owner. How to fill out form 1040x   An owner is any person who owns an interest in the timber, including a sublessor and the holder of a contract to cut the timber. How to fill out form 1040x You own an interest in timber if you have the right to cut it for sale on your own account or for use in your business. How to fill out form 1040x Tree stumps. How to fill out form 1040x   Tree stumps are a capital asset if they are on land held by an investor who is not in the timber or stump business as a buyer, seller, or processor. How to fill out form 1040x Gain from the sale of stumps sold in one lot by such a holder is taxed as a capital gain. How to fill out form 1040x However, tree stumps held by timber operators after the saleable standing timber was cut and removed from the land are considered by-products. How to fill out form 1040x Gain from the sale of stumps in lots or tonnage by such operators is taxed as ordinary income. How to fill out form 1040x   See Form T (Timber) and its separate instructions for more information about dispositions of timber. How to fill out form 1040x Sale of a Farm The sale of your farm will usually involve the sale of both nonbusiness property (your home) and business property (the land and buildings used in the farm operation and perhaps machinery and livestock). How to fill out form 1040x If you have a gain from the sale, you may be allowed to exclude the gain on your home. How to fill out form 1040x For more information, see Publication 523, Selling Your Home. How to fill out form 1040x The gain on the sale of your business property is taxable. How to fill out form 1040x A loss on the sale of your business property to an unrelated person is deducted as an ordinary loss. How to fill out form 1040x Your taxable gain or loss on the sale of property used in your farm business is taxed under the rules for section 1231 transactions. How to fill out form 1040x See chapter 9. How to fill out form 1040x Losses from personal-use property, other than casualty or theft losses, are not deductible. How to fill out form 1040x If you receive payments for your farm in installments, your gain is taxed over the period of years the payments are received, unless you elect not to use the installment method of reporting the gain. How to fill out form 1040x See chapter 10 for information about installment sales. How to fill out form 1040x When you sell your farm, the gain or loss on each asset is figured separately. How to fill out form 1040x The tax treatment of gain or loss on the sale of each asset is determined by the classification of the asset. How to fill out form 1040x Each of the assets sold must be classified as one of the following. How to fill out form 1040x Capital asset held 1 year or less. How to fill out form 1040x Capital asset held longer than 1 year. How to fill out form 1040x Property (including real estate) used in your business and held 1 year or less (including draft, breeding, dairy, and sporting animals held less than the holding periods discussed earlier under Livestock ). How to fill out form 1040x Property (including real estate) used in your business and held longer than 1 year (including only draft, breeding, dairy, and sporting animals held for the holding periods discussed earlier). How to fill out form 1040x Property held primarily for sale or which is of the kind that would be included in inventory if on hand at the end of your tax year. How to fill out form 1040x Allocation of consideration paid for a farm. How to fill out form 1040x   The sale of a farm for a lump sum is considered a sale of each individual asset rather than a single asset. How to fill out form 1040x The residual method is required only if the group of assets sold constitutes a trade or business. How to fill out form 1040x This method determines gain or loss from the transfer of each asset. How to fill out form 1040x It also determines the buyer's basis in the business assets. How to fill out form 1040x For more information, see Sale of a Business in chapter 2 of Publication 544. How to fill out form 1040x Property used in farm operation. How to fill out form 1040x   The rules for excluding the gain on the sale of your home, described later under Sale of your home , do not apply to the property used for your farming business. How to fill out form 1040x Recognized gains and losses on business property must be reported on your return for the year of the sale. How to fill out form 1040x If the property was held longer than 1 year, it may qualify for section 1231 treatment (see chapter 9). How to fill out form 1040x Example. How to fill out form 1040x You sell your farm, including your main home, which you have owned since December 2001. How to fill out form 1040x You realize gain on the sale as follows. How to fill out form 1040x   Farm   Farm   With Home Without   Home Only Home Selling price $382,000 $158,000 $224,000 Cost (or other basis) 240,000 110,000 130,000 Gain $142,000 $48,000 $94,000 You must report the $94,000 gain from the sale of the property used in your farm business. How to fill out form 1040x All or a part of that gain may have to be reported as ordinary income from the recapture of depreciation or soil and water conservation expenses. How to fill out form 1040x Treat the balance as section 1231 gain. How to fill out form 1040x The $48,000 gain from the sale of your home is not taxable as long as you meet the requirements explained later under Sale of your home . How to fill out form 1040x Partial sale. How to fill out form 1040x   If you sell only part of your farm, you must report any recognized gain or loss on the sale of that part on your tax return for the year of the sale. How to fill out form 1040x You cannot wait until you have sold enough of the farm to recover its entire cost before reporting gain or loss. How to fill out form 1040x For a detailed discussion on installment sales, see Publication 544. How to fill out form 1040x Adjusted basis of the part sold. How to fill out form 1040x   This is the properly allocated part of your original cost or other basis of the entire farm plus or minus necessary adjustments for improvements, depreciation, etc. How to fill out form 1040x , on the part sold. How to fill out form 1040x If your home is on the farm, you must properly adjust the basis to exclude those costs from your farm asset costs, as discussed below under Sale of your home . How to fill out form 1040x Example. How to fill out form 1040x You bought a 600-acre farm for $700,000. How to fill out form 1040x The farm included land and buildings. How to fill out form 1040x The purchase contract designated $600,000 of the purchase price to the land. How to fill out form 1040x You later sold 60 acres of land on which you had installed a fence. How to fill out form 1040x Your adjusted basis for the part of your farm sold is $60,000 (1/10 of $600,000), plus any unrecovered cost (cost not depreciated) of the fence on the 60 acres at the time of sale. How to fill out form 1040x Use this amount to determine your gain or loss on the sale of the 60 acres. How to fill out form 1040x Assessed values for local property taxes. How to fill out form 1040x   If you paid a flat sum for the entire farm and no other facts are available for properly allocating your original cost or other basis between the land and the buildings, you can use the assessed values for local property taxes for the year of purchase to allocate the costs. How to fill out form 1040x Example. How to fill out form 1040x Assume that in the preceding example there was no breakdown of the $700,000 purchase price between land and buildings. How to fill out form 1040x However, in the year of purchase, local taxes on the entire property were based on assessed valuations of $420,000 for land and $140,000 for improvements, or a total of $560,000. How to fill out form 1040x The assessed valuation of the land is 3/4 (75%) of the total assessed valuation. How to fill out form 1040x Multiply the $700,000 total purchase price by 75% to figure basis of $525,000 for the 600 acres of land. How to fill out form 1040x The unadjusted basis of the 60 acres you sold would then be $52,500 (1/10 of $525,000). How to fill out form 1040x Sale of your home. How to fill out form 1040x   Your home is a capital asset and not property used in the trade or business of farming. How to fill out form 1040x If you sell a farm that includes a house you and your family occupy, you must determine the part of the selling price and the part of the cost or other basis allocable to your home. How to fill out form 1040x Your home includes the immediate surroundings and outbuildings relating to it that are not used for business purposes. How to fill out form 1040x   If you use part of your home for business, you must make an appropriate adjustment to the basis for depreciation allowed or allowable. How to fill out form 1040x For more information on basis, see chapter 6. How to fill out form 1040x More information. How to fill out form 1040x   For more information on selling your home, see Publication 523. How to fill out form 1040x Gain from condemnation. How to fill out form 1040x   If you have a gain from a condemnation or sale under threat of condemnation, you may use the preceding rules for excluding the gain, rather than the rules discussed under Postponing Gain in chapter 11. How to fill out form 1040x However, any gain that cannot be excluded (because it is more than the limit) may be postponed under the rules discussed under Postponing Gain in chapter 11. How to fill out form 1040x Foreclosure or Repossession If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. How to fill out form 1040x The foreclosure or repossession is treated as a sale or exchange from which you may realize gain or loss. How to fill out form 1040x This is true even if you voluntarily return the property to the lender. How to fill out form 1040x You may also realize ordinary income from cancellation of debt if the loan balance is more than the FMV of the property. How to fill out form 1040x Buyer's (borrower's) gain or loss. How to fill out form 1040x   You figure and report gain or loss from a foreclosure or repossession in the same way as gain or loss from a sale or exchange. How to fill out form 1040x The gain or loss is the difference between your adjusted basis in the transferred property and the amount realized. How to fill out form 1040x See Determining Gain or Loss , earlier. How to fill out form 1040x Worksheet 8-1. How to fill out form 1040x Worksheet for Foreclosures andRepossessions Part 1. How to fill out form 1040x Use Part 1 to figure your ordinary income from the cancellation of debt upon foreclosure or repossession. How to fill out form 1040x Complete this part only if you were personally liable for the debt. How to fill out form 1040x Otherwise, go to Part 2. How to fill out form 1040x   1. How to fill out form 1040x Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable after the transfer of property   2. How to fill out form 1040x Enter the Fair Market Value of the transferred property   3. How to fill out form 1040x Ordinary income from cancellation of debt upon foreclosure or repossession. How to fill out form 1040x * Subtract line 2 from line 1. How to fill out form 1040x If zero or less, enter -0-   Part 2. How to fill out form 1040x Figure your gain or loss from foreclosure or repossession. How to fill out form 1040x   4. How to fill out form 1040x If you completed Part 1, enter the smaller of line 1 or line 2. How to fill out form 1040x If you did not complete Part 1, enter the outstanding debt immediately before the transfer of property   5. How to fill out form 1040x Enter any proceeds you received from the foreclosure sale   6. How to fill out form 1040x Add lines 4 and 5   7. How to fill out form 1040x Enter the adjusted basis of the transferred property   8. How to fill out form 1040x Gain or loss from foreclosure or repossession. How to fill out form 1040x Subtract line 7  from line 6   * The income may not be taxable. How to fill out form 1040x See Cancellation of debt . How to fill out form 1040x    You can use Worksheet 8-1 to figure your gain or loss from a foreclosure or repossession. How to fill out form 1040x Amount realized on a nonrecourse debt. How to fill out form 1040x   If you are not personally liable for repaying the debt (nonrecourse debt) secured by the transferred property, the amount you realize includes the full amount of the debt canceled by the transfer. How to fill out form 1040x The full canceled debt is included in the amount realized even if the fair market value of the property is less than the canceled debt. How to fill out form 1040x Example 1. How to fill out form 1040x Ann paid $200,000 for land used in her farming business. How to fill out form 1040x She paid $15,000 down and borrowed the remaining $185,000 from a bank. How to fill out form 1040x Ann is not personally liable for the loan (nonrecourse debt), but pledges the land as security. How to fill out form 1040x The bank foreclosed on the loan 2 years after Ann stopped making payments. How to fill out form 1040x When the bank foreclosed, the balance due on the loan was $180,000 and the FMV of the land was $170,000. How to fill out form 1040x The amount Ann realized on the foreclosure was $180,000, the debt canceled by the foreclosure. How to fill out form 1040x She figures her gain or loss on Form 4797, Part I, by comparing the amount realized ($180,000) with her adjusted basis ($200,000). How to fill out form 1040x She has a $20,000 deductible loss. How to fill out form 1040x Example 2. How to fill out form 1040x Assume the same facts as in Example 1 except the FMV of the land was $210,000. How to fill out form 1040x The result is the same. How to fill out form 1040x The amount Ann realized on the foreclosure is $180,000, the debt canceled by the foreclosure. How to fill out form 1040x Because her adjusted basis is $200,000, she has a deductible loss of $20,000, which she reports on Form 4797, Part I. How to fill out form 1040x Amount realized on a recourse debt. How to fill out form 1040x   If you are personally liable for the debt (recourse debt), the amount realized on the foreclosure or repossession includes the lesser of: The outstanding debt immediately before the transfer reduced by any amount for which you remain personally liable immediately after the transfer, or The fair market value of the transferred property. How to fill out form 1040x   You are treated as receiving ordinary income from the canceled debt for the part of the debt that is more than the fair market value. How to fill out form 1040x The amount realized does not include the canceled debt that is your income from cancellation of debt. How to fill out form 1040x See Cancellation of debt , later. How to fill out form 1040x Example 3. How to fill out form 1040x Assume the same facts as in Example 1 above except Ann is personally liable for the loan (recourse debt). How to fill out form 1040x In this case, the amount she realizes is $170,000. How to fill out form 1040x This is the canceled debt ($180,000) up to the FMV of the land ($170,000). How to fill out form 1040x Ann figures her gain or loss on the foreclosure by comparing the amount realized ($170,000) with her adjusted basis ($200,000). How to fill out form 1040x She has a $30,000 deductible loss, which she figures on Form 4797, Part I. How to fill out form 1040x She is also treated as receiving ordinary income from cancellation of debt. How to fill out form 1040x That income is $10,000 ($180,000 − $170,000). How to fill out form 1040x This is the part of the canceled debt not included in the amount realized. How to fill out form 1040x She reports this as other income on Schedule F, line 8. How to fill out form 1040x Seller's (lender's) gain or loss on repossession. How to fill out form 1040x   If you finance a buyer's purchase of property and later acquire an interest in it through foreclosure or repossession, you may have a gain or loss on the acquisition. How to fill out form 1040x For more information, see Repossession in Publication 537, Installment Sales. How to fill out form 1040x Cancellation of debt. How to fill out form 1040x   If property that is repossessed or foreclosed upon secures a debt for which you are personally liable (recourse debt), you generally must report as ordinary income the amount by which the canceled debt is more than the FMV of the property. How to fill out form 1040x This income is separate from any gain or loss realized from the foreclosure or repossession. How to fill out form 1040x Report the income from cancellation of a business debt on Schedule F, line 8. How to fill out form 1040x Report the income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. How to fill out form 1040x    You can use Worksheet 8-1 to figure your income from cancellation of debt. How to fill out form 1040x   However, income from cancellation of debt is not taxed if any of the following apply. How to fill out form 1040x The cancellation is intended as a gift. How to fill out form 1040x The debt is qualified farm debt (see chapter 3). How to fill out form 1040x The debt is qualified real property business debt (see chapter 5 of Publication 334). How to fill out form 1040x You are insolvent or bankrupt (see  chapter 3). How to fill out form 1040x The debt is qualified principal residence indebtedness (see chapter 3). How to fill out form 1040x   Use Form 982 to report the income exclusion. How to fill out form 1040x Abandonment The abandonment of property is a disposition of property. How to fill out form 1040x You abandon property when you voluntarily and permanently give up possession and use of the property with the intention of ending your ownership, but without passing it on to anyone else. How to fill out form 1040x Business or investment property. How to fill out form 1040x   Loss from abandonment of business or investment property is deductible as a loss. How to fill out form 1040x Loss from abandonment of business or investment property that is not treated as a sale or exchange generally is an ordinary loss. How to fill out form 1040x If your adjusted basis is more than the amount you realize (if any), then you have a loss. How to fill out form 1040x If the amount you realize (if any) is more than your adjusted basis, then you have a gain. How to fill out form 1040x This rule also applies to leasehold improvements the lessor made for the lessee. How to fill out form 1040x However, if the property is foreclosed on or repossessed in lieu of abandonment, gain or loss is figured as discussed earlier under Foreclosure or Repossession . How to fill out form 1040x   If the abandoned property is secured by debt, special rules apply. How to fill out form 1040x The tax consequences of abandonment of property that secures a debt depend on whether you are personally liable for the debt (recourse debt) or were not personally liable for the debt (nonrecourse debt). How to fill out form 1040x For more information, see chapter 3 of Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments (for Individuals). How to fill out form 1040x The abandonment loss is deducted in the tax year in which the loss is sustained. How to fill out form 1040x Report the loss on Form 4797, Part II, line 10. How to fill out form 1040x Personal-use property. How to fill out form 1040x   You cannot deduct any loss from abandonment of your home or other property held for personal use. How to fill out form 1040x Canceled debt. How to fill out form 1040x   If the abandoned property secures a debt for which you are personally liable and the debt is canceled, you will realize ordinary income equal to the canceled debt. How to fill out form 1040x This income is separate from any loss realized from abandonment of the property. How to fill out form 1040x Report income from cancellation of a debt related to a business or rental activity as business or rental income. How to fill out form 1040x Report income from cancellation of a nonbusiness debt as miscellaneous income on Form 1040. How to fill out form 1040x   However, income from cancellation of debt is not taxed in certain circumstances. How to fill out form 1040x See Cancellation of debt earlier under Foreclosure or Repossession . How to fill out form 1040x Forms 1099-A and 1099-C. How to fill out form 1040x   A lender who acquires an interest in your property in a foreclosure, repossession, or abandonment should send you Form 1099-A showing the information you need to figure your loss from the foreclosure, repossession, or abandonment. How to fill out form 1040x However, if the lender cancels part of your debt and the lender must file Form 1099-C, the lender may include the information about the foreclosure, repossession, or abandonment on that form instead of Form 1099-A. How to fill out form 1040x The lender must file Form 1099-C and send you a copy if the canceled debt is $600 or more and the lender is a financial institution, credit union, federal government agency, or any organization that has a significant trade or business of lending money. How to fill out form 1040x For foreclosures, repossessions, abandonments of property, and debt cancellations occurring in 2013, these forms should be sent to you by January 31, 2014. How to fill out form 1040x Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

Arizona Office of the Attorney General- Tucson

Website: Arizona Office of the Attorney General- Tucson

Address: Arizona Office of the Attorney General- Tucson
Consumer Information and Complaints
400 W. Congress St.
South Bldg., Suite 315
Tucson, AZ 85701-1367

Phone Number: 520-628-6504

Toll-free: 1-800-352-8431 (AZ, except in Maricopa and Pima Counties)

Arizona Office of the Attorney General-Phoenix

Website: Arizona Office of the Attorney General-Phoenix

Address: Arizona Office of the Attorney General-Phoenix
Consumer Information and Complaints
1275 W. Washington St.
Phoenix, AZ 85007

Phone Number: 602-542-5763

Toll-free: 1-800-352-8431 (AZ, except Phoenix)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Financial Institutions

Website: Department of Financial Institutions

Address: Department of Financial Institutions
2910 N. 44th St., Suite 310
Phoenix, AZ 85018

Phone Number: 602-771-2800

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
Consumer Affairs Division
2910 N. 44th St., Suite 210
Phoenix, AZ 85018-7269

Phone Number: 602-364-2499 602-364-2977 (in Spanish)

Toll-free: 1-800-325-2548 (AZ)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Arizona Corporation Commission

Website: Arizona Corporation Commission

Address: Arizona Corporation Commission
Securities Division
1300 W. Washington St., 3rd Floor
Phoenix, AZ 85007

Phone Number: 602-542-4242

Toll-free: 1-866-837-4399 (AZ)

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Corporation Commission

Website: Corporation Commission

Address: Corporation Commission
Utilities Division
Consumer Services

1200 W. Washington St.
Phoenix, AZ 85007-2996

Phone Number: 602-542-4251

Toll-free: 1-800-222-7000 (AZ)

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The How To Fill Out Form 1040x

How to fill out form 1040x 37. How to fill out form 1040x   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. How to fill out form 1040x  The maximum adoption credit is $12,970 for 2013. How to fill out form 1040x See Adoption Credit . How to fill out form 1040x Plug-in electric vehicle credit. How to fill out form 1040x  This credit has expired. How to fill out form 1040x Credit for prior year minimum tax. How to fill out form 1040x  The refundable portion of the credit for prior year minimum tax has expired. How to fill out form 1040x Excess withholding of social security and railroad retirement tax. How to fill out form 1040x  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. How to fill out form 1040x 2% of wages up to $113,700. How to fill out form 1040x If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. How to fill out form 1040x See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . How to fill out form 1040x Introduction This chapter discusses the following nonrefundable credits. How to fill out form 1040x Adoption credit. How to fill out form 1040x Alternative motor vehicle credit. How to fill out form 1040x Alternative fuel vehicle refueling property credit. How to fill out form 1040x Credit to holders of tax credit bonds. How to fill out form 1040x Foreign tax credit. How to fill out form 1040x Mortgage interest credit. How to fill out form 1040x Nonrefundable credit for prior year minimum tax. How to fill out form 1040x Plug-in electric drive motor vehicle credit. How to fill out form 1040x Residential energy credits. How to fill out form 1040x Retirement savings contributions credit. How to fill out form 1040x This chapter also discusses the following refundable credits. How to fill out form 1040x Credit for tax on undistributed capital gain. How to fill out form 1040x Health coverage tax credit. How to fill out form 1040x Credit for excess social security tax or railroad retirement tax withheld. How to fill out form 1040x Several other credits are discussed in other chapters in this publication. How to fill out form 1040x Child and dependent care credit (chapter 32). How to fill out form 1040x Credit for the elderly or the disabled (chapter 33). How to fill out form 1040x Child tax credit (chapter 34). How to fill out form 1040x Education credits (chapter 35). How to fill out form 1040x Earned income credit (chapter 36). How to fill out form 1040x Nonrefundable credits. How to fill out form 1040x   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. How to fill out form 1040x These credits may reduce your tax to zero. How to fill out form 1040x If these credits are more than your tax, the excess is not refunded to you. How to fill out form 1040x Refundable credits. How to fill out form 1040x   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. How to fill out form 1040x These credits are added to the federal income tax withheld and any estimated tax payments you made. How to fill out form 1040x If this total is more than your total tax, the excess will be refunded to you. How to fill out form 1040x Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. How to fill out form 1040x However, if the total of these credits is more than your tax, the excess is not refunded to you. How to fill out form 1040x Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. How to fill out form 1040x The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. How to fill out form 1040x If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. How to fill out form 1040x If your modified AGI is $234,580 or more, you cannot take the credit. How to fill out form 1040x Qualified adoption expenses. How to fill out form 1040x   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. How to fill out form 1040x These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. How to fill out form 1040x Nonqualified expenses. How to fill out form 1040x   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. How to fill out form 1040x Eligible child. How to fill out form 1040x   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. How to fill out form 1040x Child with special needs. How to fill out form 1040x   An eligible child is a child with special needs if all three of the following apply. How to fill out form 1040x The child was a citizen or resident of the United States (including U. How to fill out form 1040x S. How to fill out form 1040x possessions) at the time the adoption process began. How to fill out form 1040x A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. How to fill out form 1040x The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. How to fill out form 1040x Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. How to fill out form 1040x When to take the credit. How to fill out form 1040x   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. How to fill out form 1040x If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. How to fill out form 1040x See the Instructions for Form 8839 for more specific information on when to take the credit. How to fill out form 1040x Foreign child. How to fill out form 1040x   If the child is not a U. How to fill out form 1040x S. How to fill out form 1040x citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. How to fill out form 1040x You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. How to fill out form 1040x How to take the credit. How to fill out form 1040x   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. How to fill out form 1040x Include the credit in your total for Form 1040, line 53. How to fill out form 1040x Check box c and enter “8839” on the line next to that box. How to fill out form 1040x More information. How to fill out form 1040x   For more information, see the Instructions for Form 8839. How to fill out form 1040x Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. How to fill out form 1040x Amount of credit. How to fill out form 1040x   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. How to fill out form 1040x In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. How to fill out form 1040x   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. How to fill out form 1040x How to take the credit. How to fill out form 1040x   To take the credit, you must complete Form 8910 and attach it to your Form 1040. How to fill out form 1040x Include the credit in your total for Form 1040, line 53. How to fill out form 1040x Check box c and enter “8910” on the line next to that box. How to fill out form 1040x More information. How to fill out form 1040x   For more information on the credit, see the Instructions for Form 8910. How to fill out form 1040x Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. How to fill out form 1040x Qualified alternative fuel vehicle refueling property. How to fill out form 1040x   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. How to fill out form 1040x To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. How to fill out form 1040x To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. How to fill out form 1040x   The following are alternative fuels. How to fill out form 1040x Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. How to fill out form 1040x Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. How to fill out form 1040x Electricity. How to fill out form 1040x Amount of the credit. How to fill out form 1040x   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. How to fill out form 1040x For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. How to fill out form 1040x How to take the credit. How to fill out form 1040x   To take the credit, you must complete Form 8911 and attach it to your Form 1040. How to fill out form 1040x Include the credit in your total for Form 1040, line 53. How to fill out form 1040x Check box c and enter “8911” on the line next to that box. How to fill out form 1040x More information. How to fill out form 1040x   For more information on the credit, see the Form 8911 instructions. How to fill out form 1040x Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. How to fill out form 1040x You may be able to take a credit if you are a holder of one of the following bonds. How to fill out form 1040x Clean renewable energy bonds (issued before 2010). How to fill out form 1040x New clean renewable energy bonds. How to fill out form 1040x Qualified energy conservation bonds. How to fill out form 1040x Qualified school construction bonds. How to fill out form 1040x Qualified zone academy bonds. How to fill out form 1040x Build America bonds. How to fill out form 1040x In some instances, an issuer may elect to receive a credit for interest paid on the bond. How to fill out form 1040x If the issuer makes this election, you cannot also claim a credit. How to fill out form 1040x Interest income. How to fill out form 1040x   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. How to fill out form 1040x How to take the credit. How to fill out form 1040x   Complete Form 8912 and attach it to your Form 1040. How to fill out form 1040x Include the credit in your total for Form 1040, line 53. How to fill out form 1040x Check box c and enter “8912” on the line next to that box. How to fill out form 1040x More information. How to fill out form 1040x   For more information, see the Instructions for Form 8912. How to fill out form 1040x Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. How to fill out form 1040x S. How to fill out form 1040x possession as a credit against your U. How to fill out form 1040x S. How to fill out form 1040x income tax. How to fill out form 1040x Or, you can deduct them as an itemized deduction (see chapter 22). How to fill out form 1040x You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. How to fill out form 1040x S. How to fill out form 1040x tax under any of the following. How to fill out form 1040x Foreign earned income exclusion. How to fill out form 1040x Foreign housing exclusion. How to fill out form 1040x Income from Puerto Rico exempt from U. How to fill out form 1040x S. How to fill out form 1040x tax. How to fill out form 1040x Possession exclusion. How to fill out form 1040x Limit on the credit. How to fill out form 1040x   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. How to fill out form 1040x S. How to fill out form 1040x tax liability (Form 1040, line 44), multiplied by a fraction. How to fill out form 1040x The numerator of the fraction is your taxable income from sources outside the United States. How to fill out form 1040x The denominator is your total taxable income from U. How to fill out form 1040x S. How to fill out form 1040x and foreign sources. How to fill out form 1040x See Publication 514 for more information. How to fill out form 1040x How to take the credit. How to fill out form 1040x   Complete Form 1116 and attach it to your Form 1040. How to fill out form 1040x Enter the credit on Form 1040, line 47. How to fill out form 1040x Exception. How to fill out form 1040x   You do not have to complete Form 1116 to take the credit if all of the following apply. How to fill out form 1040x All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). How to fill out form 1040x If you had dividend income from shares of stock, you held those shares for at least 16 days. How to fill out form 1040x You are not filing Form 4563 or excluding income from sources within Puerto Rico. How to fill out form 1040x The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). How to fill out form 1040x All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. How to fill out form 1040x More information. How to fill out form 1040x   For more information on the credit and these requirements, see the Instructions for Form 1116. How to fill out form 1040x Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. How to fill out form 1040x If you qualify, you can take the credit each year for part of the home mortgage interest you pay. How to fill out form 1040x Who qualifies. How to fill out form 1040x   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. How to fill out form 1040x Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. How to fill out form 1040x Amount of credit. How to fill out form 1040x   Figure your credit on Form 8396. How to fill out form 1040x If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. How to fill out form 1040x   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. How to fill out form 1040x To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. How to fill out form 1040x      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. How to fill out form 1040x   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. How to fill out form 1040x If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. How to fill out form 1040x See Publication 530 for more information. How to fill out form 1040x Carryforward. How to fill out form 1040x   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. How to fill out form 1040x If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. How to fill out form 1040x   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). How to fill out form 1040x How to take the credit. How to fill out form 1040x    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. How to fill out form 1040x Be sure to include any credit carryforward from 2010, 2011, and 2012. How to fill out form 1040x   Include the credit in your total for Form 1040, line 53. How to fill out form 1040x Check box c and enter “8396” on the line next to that box. How to fill out form 1040x Reduced home mortgage interest deduction. How to fill out form 1040x   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. How to fill out form 1040x You must do this even if part of that amount is to be carried forward to 2014. How to fill out form 1040x For more information about the home mortgage interest deduction, see chapter 23. How to fill out form 1040x Recapture of federal mortgage subsidy. How to fill out form 1040x   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. How to fill out form 1040x The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. How to fill out form 1040x See the Instructions for Form 8828 and chapter 15 for more information. How to fill out form 1040x More information. How to fill out form 1040x   For more information on the credit, see the Form 8396 instructions. How to fill out form 1040x Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. How to fill out form 1040x If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. How to fill out form 1040x This is called the alternative minimum tax. How to fill out form 1040x The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. How to fill out form 1040x If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. How to fill out form 1040x You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. How to fill out form 1040x How to take the credit. How to fill out form 1040x    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. How to fill out form 1040x Include the credit in your total for Form 1040, line 53, and check box b. How to fill out form 1040x You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. How to fill out form 1040x More information. How to fill out form 1040x   For more information on the credit, see the Instructions for Form 8801. How to fill out form 1040x Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. How to fill out form 1040x Qualified plug-in electric drive motor vehicle. How to fill out form 1040x   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. How to fill out form 1040x Qualified two- or three-wheeled plug-in electric vehicle. How to fill out form 1040x   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. How to fill out form 1040x 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. How to fill out form 1040x Certification and other requirements. How to fill out form 1040x   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. How to fill out form 1040x However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. How to fill out form 1040x   The following requirements must also be met to qualify for the credit. How to fill out form 1040x You are the owner of the vehicle. How to fill out form 1040x If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. How to fill out form 1040x You placed the vehicle in service during 2013. How to fill out form 1040x The vehicle is manufactured primarily for use on public streets, roads, and highways. How to fill out form 1040x The original use of the vehicle began with you. How to fill out form 1040x You acquired the vehicle for your use or to lease to others, and not for resale. How to fill out form 1040x In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. How to fill out form 1040x You use the vehicle primarily in the United States. How to fill out form 1040x How to take the credit. How to fill out form 1040x   To take the credit, you must complete Form 8936 and attach it to your Form 1040. How to fill out form 1040x Include the credit in your total for Form 1040, line 53. How to fill out form 1040x Check box c and enter “8936” on the line next to that box. How to fill out form 1040x More information. How to fill out form 1040x   For more information on the credit, see the Form 8936 instructions. How to fill out form 1040x Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. How to fill out form 1040x Nonbusiness energy property credit. How to fill out form 1040x Residential energy efficient property credit. How to fill out form 1040x If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. How to fill out form 1040x Nonbusiness energy property credit. How to fill out form 1040x   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. How to fill out form 1040x   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. How to fill out form 1040x    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. How to fill out form 1040x   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. How to fill out form 1040x Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. How to fill out form 1040x Exterior window (including skylights). How to fill out form 1040x Exterior doors. How to fill out form 1040x Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. How to fill out form 1040x   Residential energy property is any of the following. How to fill out form 1040x Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. How to fill out form 1040x Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. How to fill out form 1040x Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. How to fill out form 1040x Residential energy efficient property credit. How to fill out form 1040x   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. How to fill out form 1040x The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. How to fill out form 1040x Basis reduction. How to fill out form 1040x   You must reduce the basis of your home by the amount of any credit allowed. How to fill out form 1040x How to take the credit. How to fill out form 1040x   Complete Form 5695 and attach it to your Form 1040. How to fill out form 1040x Enter the credit on Form 1040, line 52. How to fill out form 1040x More information. How to fill out form 1040x   For more information on these credits, see the Form 5695 instructions. How to fill out form 1040x Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. How to fill out form 1040x However, you cannot take the credit if either of the following applies. How to fill out form 1040x The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). How to fill out form 1040x The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). How to fill out form 1040x Student. How to fill out form 1040x   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. How to fill out form 1040x School. How to fill out form 1040x   A school includes a technical, trade, or mechanical school. How to fill out form 1040x It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. How to fill out form 1040x How to take the credit. How to fill out form 1040x   Figure the credit on Form 8880. How to fill out form 1040x Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. How to fill out form 1040x More information. How to fill out form 1040x   For more information on the credit, see the Form 8880 instructions. How to fill out form 1040x Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. How to fill out form 1040x If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. How to fill out form 1040x Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. How to fill out form 1040x If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. How to fill out form 1040x The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. How to fill out form 1040x How to take the credit. How to fill out form 1040x   To take the credit, attach Copy B of Form 2439 to your Form 1040. How to fill out form 1040x Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. How to fill out form 1040x More information. How to fill out form 1040x   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. How to fill out form 1040x Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. How to fill out form 1040x You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. How to fill out form 1040x You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. How to fill out form 1040x S. How to fill out form 1040x Treasury–HCTC. How to fill out form 1040x ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. How to fill out form 1040x You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). How to fill out form 1040x You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. How to fill out form 1040x S. How to fill out form 1040x military health system (TRICARE). How to fill out form 1040x You were not imprisoned under federal, state, or local authority. How to fill out form 1040x Your employer did not pay 50% or more of the cost of coverage. How to fill out form 1040x You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. How to fill out form 1040x But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. How to fill out form 1040x If you meet all of these conditions, you may be able to take a credit of up to 72. How to fill out form 1040x 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. How to fill out form 1040x You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. How to fill out form 1040x The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. How to fill out form 1040x You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. How to fill out form 1040x If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. How to fill out form 1040x TAA recipient. How to fill out form 1040x   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). How to fill out form 1040x Example. How to fill out form 1040x You received a trade adjustment allowance for January 2013. How to fill out form 1040x You were an eligible TAA recipient on the first day of January and February. How to fill out form 1040x Alternative TAA recipient. How to fill out form 1040x   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. How to fill out form 1040x Example. How to fill out form 1040x You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. How to fill out form 1040x The program was established by the Department of Labor. How to fill out form 1040x You were an eligible alternative TAA recipient on the first day of October and November. How to fill out form 1040x RTAA recipient. How to fill out form 1040x   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. How to fill out form 1040x PBGC pension recipient. How to fill out form 1040x   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. How to fill out form 1040x You were age 55 or older on the first day of the month. How to fill out form 1040x You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). How to fill out form 1040x If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. How to fill out form 1040x How to take the credit. How to fill out form 1040x   To take the credit, complete Form 8885 and attach it to your Form 1040. How to fill out form 1040x Include your credit in the total for Form 1040, line 71, and check box c. How to fill out form 1040x   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. How to fill out form 1040x For details, see Publication 502 or Form 8885. How to fill out form 1040x More information. How to fill out form 1040x   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. How to fill out form 1040x Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. How to fill out form 1040x If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. How to fill out form 1040x If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. How to fill out form 1040x If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. How to fill out form 1040x 2% rate. How to fill out form 1040x You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. How to fill out form 1040x For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. How to fill out form 1040x 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. How to fill out form 1040x 45%) or the Additional Medicare Tax rate (. How to fill out form 1040x 9%). How to fill out form 1040x The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. How to fill out form 1040x Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. How to fill out form 1040x 40 RRTA tier 2 $84,300 $3,709. How to fill out form 1040x 20 All wages are subject to Medicare tax withholding. How to fill out form 1040x   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. How to fill out form 1040x Be sure to attach a copy of all of your W-2 forms. How to fill out form 1040x Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. How to fill out form 1040x Employer's error. How to fill out form 1040x   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. How to fill out form 1040x The employer should adjust the tax for you. How to fill out form 1040x If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. How to fill out form 1040x Joint return. How to fill out form 1040x   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. How to fill out form 1040x Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. How to fill out form 1040x How to figure the credit if you did not work for a railroad. How to fill out form 1040x   If you did not work for a railroad during 2013, figure the credit as follows: 1. How to fill out form 1040x Add all social security tax withheld (but not more than $7,049. How to fill out form 1040x 40 for each employer). How to fill out form 1040x Enter the total here   2. How to fill out form 1040x Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. How to fill out form 1040x Add lines 1 and 2. How to fill out form 1040x If $7,049. How to fill out form 1040x 40 or less, stop here. How to fill out form 1040x You cannot take  the credit   4. How to fill out form 1040x Social security tax limit 7,049. How to fill out form 1040x 40 5. How to fill out form 1040x Credit. How to fill out form 1040x Subtract line 4 from line 3. How to fill out form 1040x Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. How to fill out form 1040x You are married and file a joint return with your spouse who had no gross income in 2013. How to fill out form 1040x During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. How to fill out form 1040x Social security tax of $3,720 was withheld. How to fill out form 1040x You also worked for another employer in 2013 and earned $55,000 in wages. How to fill out form 1040x $3,410 of social security tax was withheld from these wages. How to fill out form 1040x Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. How to fill out form 1040x 60 for the excess social security tax withheld. How to fill out form 1040x 1. How to fill out form 1040x Add all social security tax withheld (but not more than $7,049. How to fill out form 1040x 40 for each employer). How to fill out form 1040x Enter the total here $7,130. How to fill out form 1040x 00 2. How to fill out form 1040x Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. How to fill out form 1040x Add lines 1 and 2. How to fill out form 1040x If $7,049. How to fill out form 1040x 40 or less, stop here. How to fill out form 1040x You cannot take the credit 7,130. How to fill out form 1040x 00 4. How to fill out form 1040x Social security tax limit 7,049. How to fill out form 1040x 40 5. How to fill out form 1040x Credit. How to fill out form 1040x Subtract line 4 from line 3. How to fill out form 1040x Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. How to fill out form 1040x 60 How to figure the credit if you worked for a railroad. How to fill out form 1040x   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. How to fill out form 1040x Add all social security and tier 1 RRTA tax withheld at the 6. How to fill out form 1040x 2% rate (but not more than $7,049. How to fill out form 1040x 40 for each employer). How to fill out form 1040x Enter the total here   2. How to fill out form 1040x Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. How to fill out form 1040x Add lines 1 and 2. How to fill out form 1040x If $7,049. How to fill out form 1040x 40 or less, stop here. How to fill out form 1040x You cannot take  the credit   4. How to fill out form 1040x Social security and tier 1 RRTA  tax limit 7,049. How to fill out form 1040x 40 5. How to fill out form 1040x Credit. How to fill out form 1040x Subtract line 4 from line 3. How to fill out form 1040x Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. How to fill out form 1040x   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. How to fill out form 1040x More information. How to fill out form 1040x   For more information on the credit, see Publication 505. How to fill out form 1040x Prev  Up  Next   Home   More Online Publications