File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

Irsform1040x

I Need To File My State Taxes OnlyFederal Income Tax Forms 1040ezAmend 2011 Tax Return OnlineH&r Block Free Efile1040x Tax Form For 2013Can I Amend My Tax ReturnIrs Ez FileIrs Forms2040 Ez FormFederal And State Income Tax FormsFile State Taxes Free OnlineHow Can I Efile My 2010 TaxesIrs.gov 1040x Form1040 Es1040x Processing Time1040zIrs Tax Forms 2010How Do I File My 2012 Taxes NowH&r BlockTax For Military1040 Ez Form OnlineAmend 2008 Tax Return Free2011 Tax Return SoftwareIrs FormsFree File TaxesHow Do You Ammend A Tax ReturnH&r Block Key Code Free State Filing1040ez Instructions 2014Free State Tax HelpFiling 2010 Taxes OnlineAmend Tax ReturnE File 1040x FreeFile Taxes For 2012Complete 1040x OnlineWhere To Send 2011 Tax ReturnFile 1040ez Online IrsTax Return AmendmentFile Amended Tax Return FreeWww H&r Block1040nr Instructions

Irsform1040x

Irsform1040x 6. Irsform1040x   Insurance Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Deductible PremiumsSelf-Employed Health Insurance Deduction Nondeductible Premiums Capitalized Premiums When To Deduct Premiums What's New Retiree drug subsidy. Irsform1040x  Beginning in 2013, sponsors of certain qualified retiree prescription drug plans must account for the subsidy received by reducing the amount of qualified retiree prescription drug plans expense by the subsidy received (taking into account the taxpayer's accounting method). Irsform1040x For more information, see the retiree drug subsidy frequently asked questions on IRS. Irsform1040x gov. Irsform1040x Introduction You generally can deduct the ordinary and necessary cost of insurance as a business expense if it is for your trade, business, or profession. Irsform1040x However, you may have to capitalize certain insurance costs under the uniform capitalization rules. Irsform1040x For more information, see Capitalized Premiums , later. Irsform1040x Topics - This chapter discusses: Deductible premiums Nondeductible premiums Capitalized premiums When to deduct premiums Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 525 Taxable and Nontaxable Income 538 Accounting Periods and Methods 547 Casualties, Disasters, and Thefts Form (and Instructions) 1040 U. Irsform1040x S. Irsform1040x Individual Income Tax Return See chapter 12 for information about getting publications and forms. Irsform1040x Deductible Premiums You generally can deduct premiums you pay for the following kinds of insurance related to your trade or business. Irsform1040x Insurance that covers fire, storm, theft, accident, or similar losses. Irsform1040x Credit insurance that covers losses from business bad debts. Irsform1040x Group hospitalization and medical insurance for employees, including long-term care insurance. Irsform1040x If a partnership pays accident and health insurance premiums for its partners, it generally can deduct them as guaranteed payments to partners. Irsform1040x If an S corporation pays accident and health insurance premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages subject to federal income tax withholding. Irsform1040x See Publication 15-B. Irsform1040x Liability insurance. Irsform1040x Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. Irsform1040x Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. Irsform1040x If a partnership pays workers' compensation premiums for its partners, it generally can deduct them as guaranteed payments to partners. Irsform1040x If an S corporation pays workers' compensation premiums for its more-than-2% shareholder-employees, it generally can deduct them, but must also include them in the shareholder's wages. Irsform1040x Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. Irsform1040x Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. Irsform1040x Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. Irsform1040x If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. Irsform1040x If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. Irsform1040x Life insurance covering your officers and employees if you are not directly or indirectly a beneficiary under the contract. Irsform1040x Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. Irsform1040x Self-Employed Health Insurance Deduction You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. Irsform1040x The insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. Irsform1040x A child includes your son, daughter, stepchild, adopted child, or foster child. Irsform1040x A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Irsform1040x One of the following statements must be true. Irsform1040x You were self-employed and had a net profit for the year reported on Schedule C (Form 1040), Profit or Loss From Business; Schedule C-EZ (Form 1040), Net Profit From Business; or Schedule F (Form 1040), Profit or Loss From Farming. Irsform1040x You were a partner with net earnings from self-employment for the year reported on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Irsform1040x , box 14, code A. Irsform1040x You used one of the optional methods to figure your net earnings from self-employment on Schedule SE. Irsform1040x You received wages in 2013 from an S corporation in which you were a more-than-2% shareholder. Irsform1040x Health insurance premiums paid or reimbursed by the S corporation are shown as wages on Form W-2, Wage and Tax Statement. Irsform1040x The insurance plan must be established, or considered to be established as discussed in the following bullets, under your business. Irsform1040x For self-employed individuals filing a Schedule C, C-EZ, or F, a policy can be either in the name of the business or in the name of the individual. Irsform1040x For partners, a policy can be either in the name of the partnership or in the name of the partner. Irsform1040x You can either pay the premiums yourself or your partnership can pay them and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Irsform1040x However, if the policy is in your name and you pay the premiums yourself, the partnership must reimburse you and report the premium amounts on Schedule K-1 (Form 1065) as guaranteed payments to be included in your gross income. Irsform1040x Otherwise, the insurance plan will not be considered to be established under your business. Irsform1040x For more-than-2% shareholders, a policy can be either in the name of the S corporation or in the name of the shareholder. Irsform1040x You can either pay the premiums yourself or your S corporation can pay them and report the premium amounts on Form W-2 as wages to be included in your gross income. Irsform1040x However, if the policy is in your name and you pay the premiums yourself, the S corporation must reimburse you and report the premium amounts on Form W-2 as wages to be included in your gross income. Irsform1040x Otherwise, the insurance plan will not be considered to be established under your business. Irsform1040x Medicare premiums you voluntarily pay to obtain insurance in your name that is similar to qualifying private health insurance can be used to figure the deduction. Irsform1040x If you previously filed returns without using Medicare premiums to figure the deduction, you can file timely amended returns to refigure the deduction. Irsform1040x For more information, see Form 1040X, Amended U. Irsform1040x S. Irsform1040x Individual Income Tax Return. Irsform1040x Amounts paid for health insurance coverage from retirement plan distributions that were nontaxable because you are a retired public safety officer cannot be used to figure the deduction. Irsform1040x Take the deduction on Form 1040, line 29. Irsform1040x Qualified long-term care insurance. Irsform1040x   You can include premiums paid on a qualified long-term care insurance contract when figuring your deduction. Irsform1040x But, for each person covered, you can include only the smaller of the following amounts. Irsform1040x The amount paid for that person. Irsform1040x The amount shown below. Irsform1040x Use the person's age at the end of the tax year. Irsform1040x Age 40 or younger–$360 Age 41 to 50–$680 Age 51 to 60–$1,360 Age 61 to 70–$3,640 Age 71 or older–$4,550 Qualified long-term care insurance contract. Irsform1040x   A qualified long-term care insurance contract is an insurance contract that only provides coverage of qualified long-term care services. Irsform1040x The contract must meet all the following requirements. Irsform1040x It must be guaranteed renewable. Irsform1040x It must provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract may be used only to reduce future premiums or increase future benefits. Irsform1040x It must not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed. Irsform1040x It generally must not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer or the contract makes per diem or other periodic payments without regard to expenses. Irsform1040x Qualified long-term care services. Irsform1040x   Qualified long-term care services are: Necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, and rehabilitative services, and Maintenance or personal care services. Irsform1040x The services must be required by a chronically ill individual and prescribed by a licensed health care practitioner. Irsform1040x Worksheet 6-A. Irsform1040x Self-Employed Health Insurance Deduction Worksheet Note. Irsform1040x Use a separate worksheet for each trade or business under which an insurance plan is established. Irsform1040x 1. Irsform1040x Enter the total amount paid in 2013 for health insurance coverage established under your business for 2013 for you, your spouse, and your dependents. Irsform1040x Your insurance can also cover your child who was under age 27 at the end of 2013, even if the child was not your dependent. Irsform1040x But do not include the following. Irsform1040x   Amounts for any month you were eligible to participate in a health plan subsidized by your or your spouse's employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. Irsform1040x Any amounts paid from retirement plan distributions that were nontaxable because you are a retired public safety officer. Irsform1040x Any amounts you included on Form 8885, line 4. Irsform1040x Any qualified health insurance premiums you paid to “U. Irsform1040x S. Irsform1040x Treasury-HCTC. Irsform1040x ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H. Irsform1040x Any payments for qualified long-term care insurance (see line 2) 1. Irsform1040x   2. Irsform1040x For coverage under a qualified long-term care insurance contract, enter for each person covered the smaller of the following amounts. Irsform1040x       a) Total payments made for that person during the year. Irsform1040x       b) The amount shown below. Irsform1040x Use the person's age at the end of the tax year. Irsform1040x         $360— if that person is age 40 or younger          $680— if age 41 to 50         $1,360— if age 51 to 60         $3,640— if age 61 to 70         $4,550— if age 71 or older         Do not include payments for any month you were eligible to participate in a long-term care insurance plan subsidized by your or your spouse’s employer or the employer of either your dependent or your child who was under the age of 27 at the end of 2013. Irsform1040x If more than one person is covered, figure separately the amount to enter for each person. Irsform1040x Then enter the total of those amounts 2. Irsform1040x   3. Irsform1040x Add lines 1 and 2 3. Irsform1040x   4. Irsform1040x Enter your net profit* and any other earned income** from the trade or business under which the insurance plan is established. Irsform1040x Do not include Conservation Reserve Program payments exempt from self-employment tax. Irsform1040x If the business is an S corporation, skip to line 11 4. Irsform1040x   5. Irsform1040x Enter the total of all net profits* from: Schedule C (Form 1040), line 31; Schedule C-EZ (Form 1040), line 3; Schedule F (Form 1040), line 34; or Schedule K-1 (Form 1065), box 14, code A; plus any other income allocable to the profitable businesses. Irsform1040x Do not include Conservation Reserve Program payments exempt from self-employment tax. Irsform1040x See the Instructions for Schedule SE (Form 1040). Irsform1040x Do not include any net losses shown on these schedules. Irsform1040x 5. Irsform1040x   6. Irsform1040x Divide line 4 by line 5 6. Irsform1040x   7. Irsform1040x Multiply Form 1040, line 27, by the percentage on line 6 7. Irsform1040x   8. Irsform1040x Subtract line 7 from line 4 8. Irsform1040x   9. Irsform1040x Enter the amount, if any, from Form 1040, line 28, attributable to the same trade or business in which the insurance plan is established 9. Irsform1040x   10. Irsform1040x Subtract line 9 from line 8 10. Irsform1040x   11. Irsform1040x Enter your Medicare wages (Form W-2, box 5) from an S corporation in which you are a more-than-2% shareholder and in which the insurance plan is established 11. Irsform1040x   12. Irsform1040x Enter any amount from Form 2555, line 45, attributable to the amount entered on line 4 or 11 above, or any amount from Form 2555-EZ, line 18, attributable to the amount entered on line 11 above 12. Irsform1040x   13. Irsform1040x Subtract line 12 from line 10 or 11, whichever applies 13. Irsform1040x   14. Irsform1040x Enter the smaller of line 3 or line 13 here and on Form 1040, line 29. Irsform1040x Do not include this amount when figuring any medical expense deduction on Schedule A (Form 1040). Irsform1040x 14. Irsform1040x   * If you used either optional method to figure your net earnings from self-employment from any business, do not enter your net profit from the business. Irsform1040x Instead, enter the amount attributable to that business from Schedule SE (Form 1040), Section B, line 4b. Irsform1040x * *Earned income includes net earnings and gains from the sale, transfer, or licensing of property you created. Irsform1040x However, it does not include capital gain income. Irsform1040x Chronically ill individual. Irsform1040x   A chronically ill individual is a person who has been certified as one of the following. Irsform1040x An individual who has been unable, due to loss of functional capacity for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual. Irsform1040x Activities of daily living are eating, toileting, transferring (general mobility), bathing, dressing, and continence. Irsform1040x An individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Irsform1040x The certification must have been made by a licensed health care practitioner within the previous 12 months. Irsform1040x Benefits received. Irsform1040x   For information on excluding benefits you receive from a long-term care contract from gross income, see Publication 525. Irsform1040x Other coverage. Irsform1040x   You cannot take the deduction for any month you were eligible to participate in any employer (including your spouse's) subsidized health plan at any time during that month, even if you did not actually participate. Irsform1040x In addition, if you were eligible for any month or part of a month to participate in any subsidized health plan maintained by the employer of either your dependent or your child who was under age 27 at the end of 2013, do not use amounts paid for coverage for that month to figure the deduction. Irsform1040x   These rules are applied separately to plans that provide long-term care insurance and plans that do not provide long-term care insurance. Irsform1040x However, any medical insurance payments not deductible on Form 1040, line 29, can be included as medical expenses on Schedule A (Form 1040), Itemized Deductions, if you itemize deductions. Irsform1040x Effect on itemized deductions. Irsform1040x   Subtract the health insurance deduction from your medical insurance when figuring medical expenses on Schedule A (Form 1040) if you itemize deductions. Irsform1040x Effect on self-employment tax. Irsform1040x   For tax years beginning before or after 2010, you cannot subtract the self-employed health insurance deduction when figuring net earnings for your self-employment tax from the business under which the insurance plan is established, or considered to be established as discussed earlier. Irsform1040x For more information, see Schedule SE (Form 1040). Irsform1040x How to figure the deduction. Irsform1040x   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. Irsform1040x However, if any of the following apply, you must use Worksheet 6-A in this chapter. Irsform1040x You had more than one source of income subject to self-employment tax. Irsform1040x You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Irsform1040x You are using amounts paid for qualified long-term care insurance to figure the deduction. Irsform1040x If you are claiming the health coverage tax credit, complete Form 8885, Health Coverage Tax Credit, before you figure this deduction. Irsform1040x Health coverage tax credit. Irsform1040x   You may be able to take this credit only if you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment trade adjustment assistance (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient. Irsform1040x Use Form 8885 to figure the amount, if any, of this credit. Irsform1040x   When figuring the amount to enter on line 1 of Worksheet 6-A, do not include the following. Irsform1040x Any amounts you included on Form 8885, line 4. Irsform1040x Any qualified health insurance premiums you paid to “U. Irsform1040x S. Irsform1040x Treasury-HCTC. Irsform1040x ” Any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Irsform1040x More than one health plan and business. Irsform1040x   If you have more than one health plan during the year and each plan is established under a different business, you must use separate worksheets (Worksheet 6-A) to figure each plan's net earnings limit. Irsform1040x Include the premium you paid under each plan on line 1 or line 2 of that separate worksheet and your net profit (or wages) from that business on line 4 (or line 11). Irsform1040x For a plan that provides long-term care insurance, the total of the amounts entered for each person on line 2 of all worksheets cannot be more than the appropriate limit shown on line 2 for that person. Irsform1040x Nondeductible Premiums You cannot deduct premiums on the following kinds of insurance. Irsform1040x Self-insurance reserve funds. Irsform1040x You cannot deduct amounts credited to a reserve set up for self-insurance. Irsform1040x This applies even if you cannot get business insurance coverage for certain business risks. Irsform1040x However, your actual losses may be deductible. Irsform1040x See Publication 547. Irsform1040x Loss of earnings. Irsform1040x You cannot deduct premiums for a policy that pays for lost earnings due to sickness or disability. Irsform1040x However, see the discussion on overhead insurance, item (8), under Deductible Premiums , earlier. Irsform1040x Certain life insurance and annuities. Irsform1040x For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. Irsform1040x You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. Irsform1040x A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. Irsform1040x For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. Irsform1040x The disallowance applies without regard to whom the policy covers. Irsform1040x Partners. Irsform1040x If, as a partner in a partnership, you take out an insurance policy on your own life and name your partners as beneficiaries to induce them to retain their investments in the partnership, you are considered a beneficiary. Irsform1040x You cannot deduct the insurance premiums. Irsform1040x Insurance to secure a loan. Irsform1040x If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. Irsform1040x Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. Irsform1040x In the event of death, the proceeds of the policy are generally not taxed as income even if they are used to liquidate the debt. Irsform1040x Capitalized Premiums Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. Irsform1040x Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. Irsform1040x You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. Irsform1040x Indirect costs include premiums for insurance on your plant or facility, machinery, equipment, materials, property produced, or property acquired for resale. Irsform1040x Uniform capitalization rules. Irsform1040x   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. Irsform1040x Produce real property or tangible personal property. Irsform1040x For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. Irsform1040x Acquire property for resale. Irsform1040x However, these rules do not apply to the following property. Irsform1040x Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. Irsform1040x Property you produce if you meet either of the following conditions. Irsform1040x Your indirect costs of producing the property are $200,000 or less. Irsform1040x You use the cash method of accounting and do not account for inventories. Irsform1040x More information. Irsform1040x   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. Irsform1040x When To Deduct Premiums You can usually deduct insurance premiums in the tax year to which they apply. Irsform1040x Cash method. Irsform1040x   If you use the cash method of accounting, you generally deduct insurance premiums in the tax year you actually paid them, even if you incurred them in an earlier year. Irsform1040x However, see Prepayment , later. Irsform1040x Accrual method. Irsform1040x   If you use an accrual method of accounting, you cannot deduct insurance premiums before the tax year in which you incur a liability for them. Irsform1040x In addition, you cannot deduct insurance premiums before the tax year in which you actually pay them (unless the exception for recurring items applies). Irsform1040x For more information about the accrual method of accounting, see chapter 1. Irsform1040x For information about the exception for recurring items, see Publication 538. Irsform1040x Prepayment. Irsform1040x   You cannot deduct expenses in advance, even if you pay them in advance. Irsform1040x This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Irsform1040x   Expenses such as insurance are generally allocable to a period of time. Irsform1040x You can deduct insurance expenses for the year to which they are allocable. Irsform1040x Example. Irsform1040x In 2013, you signed a 3-year insurance contract. Irsform1040x Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. Irsform1040x You can deduct in 2014 and 2015 the premium allocable to those years. Irsform1040x Dividends received. Irsform1040x   If you receive dividends from business insurance and you deducted the premiums in prior years, at least part of the dividends generally are income. Irsform1040x For more information, see Recovery of amount deducted (tax benefit rule) in chapter 1 under How Much Can I Deduct. Irsform1040x Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Access to Privacy Impact Assessments

Privacy Impact Assessments are performed on computer systems and applications in order to evaluate any risks these systems may pose to personally identifiable information. To view a PIA and/or to print one using your browser, go to our Privacy Impact Assessments site. If you prefer to receive a paper copy, you may send a request to: 

Director, Office of Privacy, Information Protection & Data Security
Internal Revenue Service
Room 7050  OS:P
1111 Constitution Ave. NW
Washington, DC 20224

Return to Privacy Policy page
Page Last Reviewed or Updated: 21-Mar-2014

The Irsform1040x

Irsform1040x 31. Irsform1040x   Tax on Unearned Income of Certain Children Table of Contents What's New Introduction Useful Items - You may want to see: Which Parent's Return To UseParents Who Do Not File a Joint Return Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, lines A–C) Step 1. Irsform1040x Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Irsform1040x Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Irsform1040x Figuring the Child's Tax (Form 8615, Part III) What's New Net Investment Income Tax. Irsform1040x . Irsform1040x  For tax years beginning after December 31, 2012, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax (NIIT). Irsform1040x NIIT is a 3. Irsform1040x 8% tax on the lesser of the net investment income or the excess of the child's modified adjusted gross income (MAGI) over the threshold amount. Irsform1040x Use Form 8960, Net Investment Income Tax, to figure this tax. Irsform1040x For more information on NIIT, go to www. Irsform1040x irs. Irsform1040x gov and enter “Net Investment Income Tax” in the search box. Irsform1040x Introduction This chapter discusses the following two rules that may affect the tax on unearned income of certain children. Irsform1040x If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. Irsform1040x (See Parent's Election To Report Child's Interest and Dividends , later. Irsform1040x ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Irsform1040x (See Tax for Certain Children Who Have Unearned Income , later. Irsform1040x ) For these rules, the term “child” includes a legally adopted child and a stepchild. Irsform1040x These rules apply whether or not the child is a dependent. Irsform1040x Useful Items - You may want to see: Publication 929 Tax Rules for Children and Dependents Form (and Instructions) 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. Irsform1040x The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . Irsform1040x Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. Irsform1040x Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Irsform1040x Parents are married. Irsform1040x   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Irsform1040x Parents not living together. Irsform1040x   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. Irsform1040x If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Irsform1040x   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in chapter 2. Irsform1040x Parents are divorced. Irsform1040x   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. Irsform1040x Custodial parent remarried. Irsform1040x   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Irsform1040x Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Irsform1040x Do not use the return of the noncustodial parent. Irsform1040x   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Irsform1040x If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Irsform1040x Parents never married. Irsform1040x   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. Irsform1040x If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Irsform1040x Widowed parent remarried. Irsform1040x   If a widow or widower remarries, the new spouse is treated as the child's other parent. Irsform1040x The rules explained earlier under Custodial parent remarried apply. Irsform1040x Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. Irsform1040x If you do, your child will not have to file a return. Irsform1040x You can make this election only if all the following conditions are met. Irsform1040x Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Irsform1040x Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Irsform1040x The child's gross income was less than $10,000. Irsform1040x The child is required to file a return unless you make this election. Irsform1040x The child does not file a joint return for the year. Irsform1040x No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. Irsform1040x No federal income tax was taken out of your child's income under the backup withholding rules. Irsform1040x You are the parent whose return must be used when applying the special tax rules for children. Irsform1040x (See Which Parent's Return To Use , earlier. Irsform1040x ) These conditions are also shown in Figure 31-A. Irsform1040x Certain January 1 birthdays. Irsform1040x   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Irsform1040x You cannot make this election for such a child unless the child was a full-time student. Irsform1040x   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Irsform1040x You cannot make this election for such a child. Irsform1040x Full-time student. Irsform1040x   A full-time student is a child who during some part of each of any 5 calendar months of the year was 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. Irsform1040x A school includes a technical, trade, or mechanical school. Irsform1040x It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Irsform1040x How to make the election. Irsform1040x   Make the election by attaching Form 8814 to your Form 1040. Irsform1040x (If you make this election, you cannot file Form 1040A or Form 1040EZ. Irsform1040x ) Attach a separate Form 8814 for each child for whom you make the election. Irsform1040x You can make the election for one or more children and not for others. Irsform1040x Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Irsform1040x Rate may be higher. Irsform1040x   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. Irsform1040x This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Irsform1040x However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. Irsform1040x Deductions you cannot take. Irsform1040x   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. Irsform1040x The additional standard deduction if the child is blind. Irsform1040x The deduction for a penalty on an early withdrawal of your child's savings. Irsform1040x Itemized deductions (such as your child's investment expenses or charitable contributions). Irsform1040x Reduced deductions or credits. Irsform1040x   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following. Irsform1040x Deduction for contributions to a traditional individual retirement arrangement (IRA). Irsform1040x Deduction for student loan interest. Irsform1040x Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Irsform1040x Credit for child and dependent care expenses. Irsform1040x Child tax credit. Irsform1040x Education tax credits. Irsform1040x Earned income credit. Irsform1040x Penalty for underpayment of estimated tax. Irsform1040x   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. Irsform1040x If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. Irsform1040x See chapter 4 for more information. Irsform1040x Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Irsform1040x Only the amount over $2,000 is added to your income. Irsform1040x The amount over $2,000 is shown on Form 8814, line 6. Irsform1040x Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Irsform1040x Include the amount from Form 8814, line 12, on Form 1040, line 21. Irsform1040x Enter “Form 8814” on the dotted line next to line 21. Irsform1040x If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040, line 21. Irsform1040x Capital gain distributions and qualified dividends. Irsform1040x   If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Publication 929, Part 2. Irsform1040x If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2. Irsform1040x Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. Irsform1040x This tax is added to the tax figured on your income. Irsform1040x This additional tax is the smaller of: 10% × (your child's gross income − $1,000), or $100. Irsform1040x Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. Irsform1040x Check box a on Form 1040, line 44. Irsform1040x Figure 31-A. Irsform1040x Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Irsform1040x Figure 31–A. Irsform1040x Can You Include Your Child's Income On Your Tax Return? Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Irsform1040x If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. Irsform1040x Attach the completed form to the child's Form 1040 or Form 1040A. Irsform1040x When Form 8615 must be filed. Irsform1040x   Form 8615 must be filed for a child if all of the following statements are true. Irsform1040x The child's investment income was more than $2,000. Irsform1040x The child is required to file a return for 2013. Irsform1040x The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. Irsform1040x At least one of the child's parents was alive at the end of 2013. Irsform1040x The child does not file a joint return for 2013. Irsform1040x These conditions are also shown in  Figure 31-B. Irsform1040x Earned income. Irsform1040x   Earned income includes salaries, wages, tips, and other payments received for personal services performed. Irsform1040x It does not include unearned income as defined later in this chapter. Irsform1040x Support. Irsform1040x   Your child's support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. Irsform1040x To figure your child's support, count support provided by you, your child, and others. Irsform1040x However, a scholarship received by your child is not considered support if your child is a full-time student. Irsform1040x See chapter 3 for details about support. Irsform1040x Certain January 1 birthdays. Irsform1040x   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Irsform1040x Figure 31-B. Irsform1040x Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Irsform1040x Figure 31-B. Irsform1040x Do You Have To Use Form 8615 To Figure Your Child's Tax?    IF a child was born on. Irsform1040x . Irsform1040x . Irsform1040x THEN, at the end of 2013, the child is considered to be. Irsform1040x . Irsform1040x . Irsform1040x January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Irsform1040x The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Irsform1040x  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. Irsform1040x  ***Do not use Form 8615 for this child. Irsform1040x Providing Parental Information (Form 8615, lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Irsform1040x (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Irsform1040x ) On line C, check the box for the parent's filing status. Irsform1040x See Which Parent's Return To Use at the beginning of this chapter for information on which parent's return information must be used on Form 8615. Irsform1040x Parent with different tax year. Irsform1040x   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. Irsform1040x Parent's return information not known timely. Irsform1040x   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. Irsform1040x   You can use any reasonable estimate. Irsform1040x This includes using information from last year's return. Irsform1040x If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Irsform1040x    When you get the correct information, file an amended return on Form 1040X, Amended U. Irsform1040x S. Irsform1040x Individual Income Tax Return. Irsform1040x   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. Irsform1040x S. Irsform1040x Individual Income Tax Return. Irsform1040x Extensions are discussed in chapter 1. Irsform1040x Step 1. Irsform1040x Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. Irsform1040x To do that, use Form 8615, Part I. Irsform1040x Line 1 (unearned income). Irsform1040x   If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Irsform1040x Adjusted gross income is shown on Form 1040, line 38, or Form 1040A, line 22. Irsform1040x Form 1040EZ cannot be used if Form 8615 must be filed. Irsform1040x   If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. Irsform1040x   However, if the child has: excluded any foreign earned income, deducted either a loss from self-employment, or deducted a net operating loss from another year, then use the Alternate Worksheet for Form 8615, Line 1, in Publication 929 to figure the amount to enter on Form 8615, line 1. Irsform1040x Unearned income defined. Irsform1040x   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. Irsform1040x It includes taxable interest, dividends (including capital gain distributions), capital gains, unemployment compensation, the taxable part of social security and pension payments, and certain distributions from trusts. Irsform1040x Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). Irsform1040x Nontaxable income. Irsform1040x   For this purpose, unearned income includes only amounts the child must include in total income. Irsform1040x Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Irsform1040x Income from property received as a gift. Irsform1040x   A child's unearned income includes all income produced by property belonging to the child. Irsform1040x This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. Irsform1040x   A child's unearned income includes income produced by property given as a gift to the child. Irsform1040x This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Irsform1040x Example. Irsform1040x Amanda Black, age 13, received the following income. Irsform1040x Dividends — $800 Wages — $2,100 Taxable interest — $1,200 Tax-exempt interest — $100 Net capital gains — $100 The dividends were qualified dividends on stock given to her by her grandparents. Irsform1040x Amanda's unearned income is $2,100. Irsform1040x This is the total of the dividends ($800), taxable interest ($1,200), and net capital gains ($100). Irsform1040x Her wages are earned (not unearned) income because they are received for work actually done. Irsform1040x Her tax-exempt interest is not included because it is nontaxable. Irsform1040x Trust income. Irsform1040x   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. Irsform1040x   However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income. Irsform1040x Line 2 (deductions). Irsform1040x   If the child does not itemize deductions on Schedule A (Form 1040), enter $2,000 on line 2. Irsform1040x   If the child does itemize deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29, that are directly connected with the production of unearned income entered on line 1, or $2,000. Irsform1040x Directly connected. Irsform1040x   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. Irsform1040x These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Irsform1040x   These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Irsform1040x Only the amount greater than 2% of the child's adjusted gross income can be deducted. Irsform1040x See chapter 28 for more information. Irsform1040x Example 1. Irsform1040x Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2% limit) that are directly connected with his unearned income. Irsform1040x His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Irsform1040x Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly connected itemized deductions of $300. Irsform1040x Example 2. Irsform1040x Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Irsform1040x She has no other income. Irsform1040x She has itemized deductions of $1,050 (net of the 2% limit) that are directly connected with the production of her unearned income. Irsform1040x Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Irsform1040x The amount on line 2 is $2,050. Irsform1040x This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Irsform1040x Line 3. Irsform1040x   Subtract line 2 from line 1 and enter the result on this line. Irsform1040x If zero or less, do not complete the rest of the form. Irsform1040x However, you must still attach Form 8615 to the child's tax return. Irsform1040x Figure the tax on the child's taxable income in the normal manner. Irsform1040x Line 4 (child's taxable income). Irsform1040x   Enter on line 4 the child's taxable income from Form 1040, line 43, or Form 1040A, line 27. Irsform1040x   However, if the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, see the Form 8615 instructions or Pub. Irsform1040x 929. Irsform1040x Line 5 (net unearned income). Irsform1040x   A child's net unearned income cannot be more than his or her taxable income. Irsform1040x Enter on Form 8615, line 5, the smaller of line 3 or line 4. Irsform1040x This is the child's net unearned income. Irsform1040x   If zero or less, do not complete the rest of the form. Irsform1040x However, you must still attach Form 8615 to the child's tax return. Irsform1040x Figure the tax on the child's taxable income in the normal manner. Irsform1040x Step 2. Irsform1040x Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. Irsform1040x The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. Irsform1040x When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. Irsform1040x For example, do not refigure the medical expense deduction. Irsform1040x Figure the tentative tax on Form 8615, lines 6 through 13. Irsform1040x Note. Irsform1040x If the child or parent has any capital gains or losses, get Publication 929 for help in completing Form 8615, Part II. Irsform1040x Line 6 (parent's taxable income). Irsform1040x   Enter on line 6 the parent's taxable income from Form 1040, line 43, Form 1040A, line 27, or Form 1040EZ, line 6. Irsform1040x   If the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) was used to figure the parent's tax, enter the amount from line 3 of that worksheet instead of the parent's taxable income. Irsform1040x Line 7 (net unearned income of other children). Irsform1040x   If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. Irsform1040x Do not include the amount from line 5 of the Form 8615 being completed. Irsform1040x Example. Irsform1040x Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Irsform1040x The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon — $800 Jerry — $600 Mike — $1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. Irsform1040x Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Irsform1040x Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Irsform1040x Other children's information not available. Irsform1040x   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. Irsform1040x See Parent's return information not known timely , earlier. Irsform1040x Line 11 (tentative tax). Irsform1040x   Subtract line 10 from line 9 and enter the result on this line. Irsform1040x This is the tentative tax. Irsform1040x   If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. Irsform1040x Also skip the discussion for lines 12a and 12b that follows. Irsform1040x Lines 12a and 12b (dividing the tentative tax). Irsform1040x   If an amount is entered on line 7, divide the tentative tax shown on line 11 among the children according to each child's share of the total net unearned income. Irsform1040x This is done on lines 12a, 12b, and 13. Irsform1040x Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. Irsform1040x Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b. Irsform1040x Example. Irsform1040x In the earlier example under Line 7 (net unearned income of other children), Sharon's Form 8615 shows $1,600 on line 7. Irsform1040x The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). Irsform1040x The decimal on line 12b is  . Irsform1040x 333, figured as follows and rounded to three places. Irsform1040x   $800 = . Irsform1040x 333     $2,400   Step 3. Irsform1040x Figuring the Child's Tax (Form 8615, Part III) The final step in figuring a child's tax using Form 8615 is to determine the larger of: The total of: The child's share of the tentative tax based on the parent's tax rate, plus The tax on the child's taxable income in excess of net unearned income, figured at the child's tax rate, or The tax on the child's taxable income, figured at the child's tax rate. Irsform1040x This is the child's tax. Irsform1040x It is figured on Form 8615, lines 14 through 18. Irsform1040x Alternative minimum tax. Irsform1040x   A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. Irsform1040x See Alternative Minimum Tax (AMT) in chapter 30. Irsform1040x    For more information on who is liable for AMT and how to figure it, see Form 6251, Alternative Minimum Tax—Individuals. Irsform1040x For information on special limits that apply to a child who files Form 6251, see Certain Children Under Age 24 in the Instructions for Form 6251. Irsform1040x Prev  Up  Next   Home   More Online Publications