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Print 1040ez

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Print 1040ez Publication 3 - Main Content Table of Contents Gross IncomeForeign Source Income Military Spouses Residency Relief Act (MSRRA) Community Property Form W-2 Codes Adjustments to IncomeArmed Forces Reservists Individual Retirement Arrangements Moving Expenses Combat Zone ExclusionCombat Zone Serving in a Combat Zone Amount of Exclusion Alien StatusResident Aliens Nonresident Aliens Dual-Status Aliens Sale of HomePeriod of suspension. Print 1040ez Qualified official extended duty. Print 1040ez ForeclosuresLump Sum Portion of Settlement Payment. Print 1040ez Interest Payment on Lump Sum Portion of Settlement Payment. Print 1040ez Lost Equity Portion of Settlement Payment. Print 1040ez The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Print 1040ez Interest Payment on Lost Equity Portion of Settlement Payment. Print 1040ez Itemized DeductionsEmployee Business Expenses Repayments CreditsFirst-Time Homebuyer Credit Child Tax Credit Earned Income Credit Credit for Excess Social Security Tax Withheld Forgiveness of Decedent's Tax LiabilityCombat Zone Related Forgiveness Terrorist or Military Action Related Forgiveness Claims for Tax Forgiveness Filing ReturnsSame-Sex Marriage Where To File When To File Signing Returns Extension of DeadlinesService That Qualifies for an Extension of Deadline Length of Extension Actions for Which Deadlines Are Extended Deferral of Payment Maximum Rate of Interest How To Get Tax HelpLow Income Taxpayer Clinics Gross Income Members of the Armed Forces receive many different types of pay and allowances. Print 1040ez Some are included in gross income while others are excluded from gross income. Print 1040ez Included items (Table 1) are subject to tax and must be reported on your tax return. Print 1040ez Excluded items (Table 2) are not subject to tax, but may have to be shown on your tax return. Print 1040ez For information on the exclusion of pay for service in a combat zone and other tax benefits for combat zone participants, see Combat Zone Exclusion and Extension of Deadlines , later. Print 1040ez Table 1. Print 1040ez Included Items These items are included in gross income, unless the pay is for service in a combat zone. Print 1040ez Basic pay • Active duty   Bonus pay • Career status   • Attendance at a designated service school     • Enlistment  • Officer   • Back wages     • Overseas extension   • CONUS COLA       • Reenlistment   • Drills         • Reserve training         • Training duty   Other pay  • Accrued leave          • High deployment per diem Special • Aviation career incentives      • Personal money allowances paid to pay • Career sea     high-ranking officers   • Diving duty      • Student loan repayment from programs   • Foreign duty (outside the 48 contiguous     such as the Department of Defense   states and the District of Columbia)     Educational Loan Repayment Program   • Foreign language proficiency     when year's service (requirement) is not   • Hardship duty     attributable to a combat zone   • Hostile fire or imminent danger         • Medical and dental officers   Incentive pay  • Submarine   • Nuclear-qualified officers      • Flight   • Optometry      • Hazardous duty   • Pharmacy      • High altitude/Low Opening (HALO)   • Special compensation for assistance with activities of daily living (SCAADL)         • Special duty assignment pay         • Veterinarian         • Voluntary Separation Incentive       Basic allowance for housing (BAH). Print 1040ez   You can still deduct mortgage interest and real estate taxes on your home if you pay these expenses with your BAH. Print 1040ez Table 2. Print 1040ez Excluded Items The exclusion for certain items applies whether the item is furnished in kind or is a reimbursement or allowance. Print 1040ez There is no exclusion for the personal use of a government-provided vehicle. Print 1040ez Combat  zone pay • Compensation for active service while in a combat zone Note: Limited amount for officers     • Housing and cost-of-living allowances abroad paid by the U. Print 1040ez S. Print 1040ez Government or by a foreign government         • OHA (Overseas Housing Allowance)                     Other pay • Defense counseling         • Disability, including payments received for injuries incurred as a direct result of a terrorist or military action         • Group-term life insurance   Moving • Dislocation   • Professional education   allowances • Military base realignment and   • ROTC educational and subsistence     closure benefit    allowances     (the exclusion is limited as   • State bonus pay for service in a     described above)   combat zone     • Move-in housing   • Survivor and retirement protection     • Moving household and   plan premiums     personal items   • Uniform allowances     • Moving trailers or mobile homes   • Uniforms furnished to enlisted     • Storage   personnel     • Temporary lodging and         temporary lodging expenses                 Travel • Annual round trip for dependent Death • Burial services   allowances students allowances • Death gratuity payments to     • Leave between consecutive   eligible survivors     overseas tours   • Travel of dependents to burial site     • Reassignment in a dependent         restricted status Family • Certain educational expenses for     • Transportation for you or your allowances dependents     dependents during ship overhaul   • Emergencies     or inactivation   • Evacuation to a place of safety     • Per diem   • Separation             In-kind military • Dependent-care assistance program Living • BAH (Basic Allowance for Housing)   benefits • Legal assistance allowances • BAS (Basic Allowance for Subsistence)     • Medical/dental care         • Commissary/exchange discounts         • Space-available travel on government aircraft           Death gratuity. Print 1040ez   Any death gratuity paid to a survivor of a member of the Armed Forces is excluded from gross income. Print 1040ez Differential wage payments. Print 1040ez   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and that represent all or a portion of the wages the individual would have received from the employer if the individual was performing services for the employer. Print 1040ez These amounts are taxable and cannot be excluded as combat pay. Print 1040ez Military base realignment and closure benefit. Print 1040ez   Payments made under the Homeowners Assistance Program (HAP) generally are excluded from income. Print 1040ez However, the excludable amount cannot be more than the maximum amount described in subsection (c) of 42 USC 3374 as in effect on November 6, 2009. Print 1040ez Any part of the payment that is more than this limit is included in gross income. Print 1040ez For more information about the HAP, see http://hap. Print 1040ez usace. Print 1040ez army. Print 1040ez mil/Overview. Print 1040ez html. Print 1040ez Qualified reservist distribution (QRD). Print 1040ez   A QRD is a distribution to an individual of all or part of the individual's balance in a cafeteria plan or health flexible spending arrangement if: The individual was a reservist who was ordered or called to active duty for more than 179 days or for an indefinite period, and The distribution is made no sooner than the date the reservist was ordered or called to active duty and no later than the last day reimbursements could otherwise be made under the arrangement for the plan year which includes the date of the order or the call to duty. Print 1040ez A QRD is included in gross income and is subject to employment taxes. Print 1040ez The employer must include the QRD (reduced by after-tax contributions to the health flexible spending arrangement) as wages on Form W-2, Wage and Tax Statement. Print 1040ez Thrift Savings Plan (TSP) distributions. Print 1040ez   If you participate in the Uniformed Services TSP and receive a distribution from your account, the distribution is generally included in your taxable income. Print 1040ez   If your contributions included tax-exempt combat zone pay, the part of the distribution attributable to those contributions is tax exempt. Print 1040ez However, the earnings on the tax-exempt portion of the distribution are taxable. Print 1040ez The TSP will provide a statement showing the taxable and non-taxable portions of the distribution. Print 1040ez Roth Thrift Savings Plan (TSP) balance. Print 1040ez   You may be able to contribute to a designated Roth Account through the TSP known as the Roth TSP. Print 1040ez Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. Print 1040ez Qualified distributions from a Roth TSP are not included in your income. Print 1040ez For more details, see Thrift Savings Accounts in Part II of Publication 721, Tax Guide to U. Print 1040ez S. Print 1040ez Civil Service Retirement Benefits. Print 1040ez State bonus payments. Print 1040ez   Bonus payments made by a state (or a political subdivision thereof) to a member or former member of the uniformed services of the United States or to a dependent of such member are considered combat pay (and therefore may not be taxable) if the payments are made only because of the member's service in a combat zone. Print 1040ez See Combat Zone , later, for a list of designated combat zones. Print 1040ez Foreign Source Income If you are a U. Print 1040ez S. Print 1040ez citizen with income from sources outside the United States (foreign income), you must report all of that income (except for amounts that U. Print 1040ez S. Print 1040ez law allows you to exclude) on your tax return. Print 1040ez This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or a Form 1099. Print 1040ez This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Print 1040ez Certain taxpayers can exclude income earned in foreign countries. Print 1040ez For 2013, this exclusion amount can be as much as $97,600. Print 1040ez However, the foreign earned income exclusion does not apply to the wages and salaries of military and civilian employees of the U. Print 1040ez S. Print 1040ez Government. Print 1040ez Employees of the U. Print 1040ez S. Print 1040ez Government include those who work at United States Armed Forces exchanges, commissioned and noncommissioned officers' messes, Armed Forces motion picture services, and similar personnel. Print 1040ez Other foreign income earned by military personnel or their spouses may be eligible for the foreign earned income exclusion. Print 1040ez For more information on the exclusion, see Publication 54. Print 1040ez Residents of American Samoa may be able to exclude income from American Samoa. Print 1040ez This possession exclusion does not apply to wages and salaries of military and civilian employees of the U. Print 1040ez S. Print 1040ez Government. Print 1040ez If you need information on the possession exclusion, see Publication 570, Tax Guide for Individuals With Income From U. Print 1040ez S. Print 1040ez Possessions. Print 1040ez Military Spouses Residency Relief Act (MSRRA) If you are the civilian spouse of an active duty U. Print 1040ez S. Print 1040ez military servicemember and your domicile is the same as the servicemember's, you can choose to keep your prior residence or domicile for tax purposes when you accompany the servicemember spouse, who is relocating under military orders to a new duty station in one of the 50 states, the District of Columbia, or a U. Print 1040ez S. Print 1040ez possession. Print 1040ez See Publication 570 for more information. Print 1040ez Domicile. Print 1040ez   Your domicile is the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. Print 1040ez It is not always where you presently live. Print 1040ez Community Property The pay you earn as a member of the Armed Forces may be subject to community property laws depending on your marital status, your domicile, and the nature of the payment. Print 1040ez The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Print 1040ez Marital status. Print 1040ez   Community property rules apply to married persons whose domicile during the tax year was in a community property state. Print 1040ez The rules may affect your tax liability if you file separate returns or are divorced during the year. Print 1040ez Nevada, Washington, and California domestic partners. Print 1040ez   A registered domestic partner in Nevada, Washington, or California generally must report half the combined income of the individual and his or her domestic partner. Print 1040ez See Form 8958 and Publication 555, Community Property. Print 1040ez Nature of the payment. Print 1040ez   Active duty military pay is subject to community property laws. Print 1040ez Armed Forces retired or retainer pay may be subject to community property laws. Print 1040ez   For more information on community property laws, see Publication 555. Print 1040ez Form W-2 Codes Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Print 1040ez Form W-2 also shows other amounts that you may find important in box 12. Print 1040ez The amounts shown in box 12 are generally preceded by a code. Print 1040ez A list of codes used in box 12 is shown, next. Print 1040ez Form W-2 Reference Guide for Box 12 Codes A Uncollected social security or RRTA J Nontaxable sick pay T Adoption benefits   tax on tips             K 20% excise tax on excess golden V Income from exercise of B Uncollected Medicare tax on tips   parachute payments   nonstatutory stock option(s)             C Taxable cost of group-term life L Substantiated employee business W Employer contributions (including   insurance over $50,000   expense reimbursements   employee contributions through a           cafeteria plan) to an employee's D Elective deferrals under a section M Uncollected social security or RRTA   health savings account (HSA)   401(k) cash or deferred arrangement   tax on taxable cost of group-term life       plan (including a SIMPLE 401(k)   insurance over $50,000 (former Y Deferrals under a section 409A   arrangement)   employees only)   nonqualified deferred           compensation plan E Elective deferrals under a section N Uncollected Medicare tax on taxable       403(b) salary reduction agreement   cost of group-term life insurance Z Income under section 409A on a       over $50,000 (former employees only)   nonqualified deferred F Elective deferrals under a section       compensation plan   408(k)(6) salary reduction SEP P Excludable moving expense           reimbursements paid directly to AA Designated Roth contributions G Elective deferrals and employer   employee   under a section 401(k) plan   contributions (including nonelective           deferrals) to a section 457(b) Q Nontaxable combat pay BB Designated Roth contributions   deferred compensation plan       under a section 403(b) plan     R Employer contributions to an Archer     H Elective deferrals to a section   MSA DD Cost of employer-sponsored   501(c)(18)(D) tax-exempt       health coverage   organization plan S Employee salary reduction contributions under a section 408(p) SIMPLE  EE  Designated Roth contributions under a governmental section 457(b) plan  Note. Print 1040ez For more information on these codes, see your Form(s) W-2. Print 1040ez Adjustments to Income Adjusted gross income is your total income minus certain adjustments. Print 1040ez The following adjustments are of particular interest to members of the Armed Forces. Print 1040ez Armed Forces Reservists If you are a member of a reserve component of the Armed Forces and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your unreimbursed travel expenses as an adjustment to income on line 24 of Form 1040, U. Print 1040ez S. Print 1040ez Individual Income Tax Return, rather than as a miscellaneous itemized deduction. Print 1040ez Include all unreimbursed expenses from the time you leave home until the time you return home. Print 1040ez The deduction is limited to the amount the federal government generally reimburses its employees for travel expenses. Print 1040ez For more information about this limit, see Per Diem and Car Allowances in chapter 6 of Publication 463. Print 1040ez Member of a reserve component. Print 1040ez   You are a member of a reserve component of the Armed Forces if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Print 1040ez How to report. Print 1040ez   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Print 1040ez Then enter on Form 1040, line 24, the part of your expenses, up to the federal rate, included on Form 2106, line 10, or Form 2106-EZ, line 6, that is for reserve-related travel more than 100 miles from your home. Print 1040ez Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. Print 1040ez Example. Print 1040ez Captain Harris, a member of the Army Reserve, traveled to a location 220 miles from his home to perform his work in the reserves in April 2013. Print 1040ez He incurred $1,549 of unreimbursed expenses consisting of $249 for mileage (440 miles × 56. Print 1040ez 5 cents per mile), $300 for meals, and $1,000 for lodging. Print 1040ez He also had other deductible mileage expenses of $110 for several trips to a location 20 miles from his home. Print 1040ez Only 50% of his meal expenses are deductible. Print 1040ez He shows his total deductible travel expenses of $1,509 ($249 + $150 (50% of $300) + $1,000 + $110) on Form 2106, line 10. Print 1040ez He enters the $1,399 ($249 + $150 + $1,000) for travel over 100 miles from home on Form 1040, line 24. Print 1040ez He then subtracts that $1,399 from the amount on Form 2106, $1,509, and enters $110 on Schedule A (Form 1040), line 21. Print 1040ez Individual Retirement Arrangements Generally, you can deduct the lesser of the contributions to your traditional individual retirement arrangement (IRA) for the year or the general limit (or spousal IRA limit, if applicable). Print 1040ez However, if you or your spouse was covered by an employer-maintained retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Print 1040ez The Form W-2 you or your spouse receives from an employer has a box used to indicate whether you were covered for the year. Print 1040ez The “Retirement plan” box should have a mark in it if you were covered. Print 1040ez For purposes of a deduction for contributions to a traditional IRA, Armed Forces members (including reservists on active duty for more than 90 days during the year) are considered covered by an employer-maintained retirement plan. Print 1040ez Individuals serving in the U. Print 1040ez S. Print 1040ez Armed Forces or in support of the U. Print 1040ez S. Print 1040ez Armed Forces in designated combat zones have additional time to make a qualified retirement contribution to an IRA. Print 1040ez For more information on this extension of deadline provision, see Extension of Deadlines , later. Print 1040ez For more information on IRAs, see Publication 590. Print 1040ez Combat Pay For IRA purposes, your compensation includes nontaxable combat pay. Print 1040ez This means that even though you do not have to include the combat pay in your gross income, you do include it in your compensation when figuring the limits on contributions and deductions of contributions to IRAs. Print 1040ez Qualified Reservist Distributions A qualified reservist distribution is defined below. Print 1040ez It is not subject to the 10% additional tax on early distributions from certain retirement plans. Print 1040ez Definition. Print 1040ez   A distribution you receive is a qualified reservist distribution if the following requirements are met. Print 1040ez You were ordered or called to active duty after September 11, 2001. Print 1040ez You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component (see Member of a reserve component , earlier, under Armed Forces Reservists. Print 1040ez ) The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement. Print 1040ez The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period. Print 1040ez Qualified Reservist Repayments You may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined earlier) you received. Print 1040ez You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Print 1040ez You make these repayment contributions to an IRA, even if you received the qualified reservist distribution from a section 401(k) or 403(b) plan or a similar arrangement. Print 1040ez Limit. Print 1040ez   Your qualified reservist repayments cannot be more than your qualified reservist distributions. Print 1040ez When repayment contributions can be made. Print 1040ez   You cannot make these repayment contributions after the date that is 2 years after your active duty period ends. Print 1040ez No deduction. Print 1040ez   You cannot deduct qualified reservist repayments. Print 1040ez Figuring your IRA deduction. Print 1040ez   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Print 1040ez Reporting the repayment. Print 1040ez   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606, Nondeductible IRAs. Print 1040ez Moving Expenses To deduct moving expenses, you generally must meet certain time and distance tests. Print 1040ez However, if you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet these tests. Print 1040ez You can deduct your unreimbursed moving expenses on Form 3903. Print 1040ez Permanent change of station. Print 1040ez   A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. Print 1040ez The move must occur within 1 year of ending your active duty or within the period allowed under the Joint Federal Travel Regulations. Print 1040ez Spouse and dependents. Print 1040ez   If you are the spouse or dependent of a member of the Armed Forces who deserts, is imprisoned, or dies, a permanent change of station for you includes a move to: The member's place of enlistment or induction, Your, or the member's, home of record, or A nearer point in the United States. Print 1040ez   If the military moves you to or from a different location than the member, the moves are treated as a single move to your new main job location. Print 1040ez Services or reimbursements provided by the government. Print 1040ez   Do not include in your income the value of moving and storage services provided by the government because of a permanent change of station. Print 1040ez Similarly, do not include in income amounts received as a dislocation allowance, temporary lodging expense, temporary lodging allowance, or move-in housing allowance. Print 1040ez   Generally, if the total reimbursements or allowances that you receive from the government because of the move are more than your actual moving expenses, the excess is included in your wages on Form W-2. Print 1040ez However, if any reimbursements or allowances (other than dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess still must be included in gross income on Form 1040, line 7. Print 1040ez   Use Form 3903 to deduct qualified expenses that exceed your reimbursements and allowances (including dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances that are excluded from gross income). Print 1040ez   If you must relocate and your spouse and dependents move to or from a different location, do not include in income reimbursements, allowances, or the value of moving and storage services provided by the government to move you and your spouse and dependents to and from the separate locations. Print 1040ez   Do not deduct any expenses for moving services that were provided by the government. Print 1040ez Also, do not deduct any expenses that were reimbursed by an allowance you did not include in income. Print 1040ez Deductible Moving Expenses If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. Print 1040ez You can deduct expenses (if not reimbursed or furnished in kind) for: Moving household goods and personal effects, and Travel. Print 1040ez Moving household goods and personal effects. Print 1040ez   You can deduct the expenses of moving your household goods and personal effects, including expenses for hauling a trailer, packing, crating, in-transit storage, and insurance. Print 1040ez You cannot deduct expenses for moving furniture or other goods you bought on the way from your old home to your new home. Print 1040ez Storing and insuring household goods and personal effects. Print 1040ez   You can include only the cost of storing and insuring your household goods and personal effects within any period of 30 consecutive days after the day these goods and effects are moved from your former home and before they are delivered to your new home. Print 1040ez Travel. Print 1040ez   You can deduct the expenses of traveling (including lodging but not meals) from your old home to your new home, including car expenses and air fare. Print 1040ez You can deduct as car expenses either: Your actual out-of-pocket expenses such as gas and oil, or The standard mileage rate of 24 cents a mile. Print 1040ez   You can add parking fees and tolls to the amount claimed under either method. Print 1040ez You cannot deduct any expenses for meals. Print 1040ez You cannot deduct the cost of unnecessary side trips or lavish and extravagant lodging. Print 1040ez Member of your household. Print 1040ez   A member of your household is anyone who has both your former home and your new home as his or her main home. Print 1040ez It does not include a tenant or employee unless you can claim that person as a dependent. Print 1040ez Foreign Moves A foreign move is a move from the United States or its possessions to a foreign country or from one foreign country to another foreign country. Print 1040ez A move from a foreign country to the United States or its possessions is not a foreign move. Print 1040ez For a foreign move, the deductible moving expenses described earlier are expanded to include the reasonable expenses of: Moving your household goods and personal effects to and from storage, and Storing these items for part or all of the time the new job location remains your main job location. Print 1040ez The new job location must be outside the United States. Print 1040ez Reporting Moving Expenses Figure moving expense deductions on Form 3903. Print 1040ez Carry the deduction from Form 3903 to Form 1040, line 26. Print 1040ez For more information, see Publication 521 and Form 3903. Print 1040ez Combat Zone Exclusion If you are a member of the U. Print 1040ez S. Print 1040ez Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. Print 1040ez This pay is generally referred to as “combat pay. Print 1040ez ” You do not actually need to show the exclusion on your tax return because income that qualifies for the combat zone exclusion is not included in the wages reported on your Form W-2. Print 1040ez (See Form W-2 , later. Print 1040ez ) The month for which you receive the pay must be a month in which you either served in a combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. Print 1040ez You do not have to receive the excluded pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. Print 1040ez If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income. Print 1040ez (Other officer personnel are discussed under Amount of Exclusion , later. Print 1040ez ) Active duty pay earned in any month you served in a combat zone. Print 1040ez Imminent danger/hostile fire pay. Print 1040ez A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. Print 1040ez Pay for accrued leave earned in any month you served in a combat zone. Print 1040ez The Department of Defense must determine that the unused leave was earned during that period. Print 1040ez Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. Print 1040ez The pay must be earned in a month you served in a combat zone. Print 1040ez Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone. Print 1040ez Student loan repayments. Print 1040ez If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. Print 1040ez If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. Print 1040ez For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion. Print 1040ez Retirement pay and pensions do not qualify for the combat zone exclusion. Print 1040ez Partial (month) service. Print 1040ez   If you serve in a combat zone for any part of one or more days during a particular month, you are entitled to an exclusion for that entire month. Print 1040ez Form W-2. Print 1040ez   The wages shown in box 1 of your 2013 Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. Print 1040ez If it does, you will need to get a corrected Form W-2 from your finance office. Print 1040ez   You cannot exclude as combat pay any wages shown in box 1 of Form W-2. Print 1040ez Combat Zone A combat zone is any area the President of the United States designates by Executive Order as an area in which the U. Print 1040ez S. Print 1040ez Armed Forces are engaging or have engaged in combat. Print 1040ez An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order. Print 1040ez Afghanistan area. Print 1040ez   By Executive Order No. Print 1040ez 13239, Afghanistan (and airspace above) was designated as a combat zone beginning September 19, 2001. Print 1040ez On December 14, 2001, the following countries were certified by the Department of Defense for combat zone tax benefits due to their direct support of military operations in the Afghanistan combat zone. Print 1040ez Djibouti. Print 1040ez Jordan. Print 1040ez Kyrgyzstan. Print 1040ez Pakistan. Print 1040ez Somalia. Print 1040ez Syria. Print 1040ez Tajikistan. Print 1040ez Uzbekistan. Print 1040ez Yemen. Print 1040ez The Philippines. Print 1040ez  Note. Print 1040ez For the Philippines only, the personnel must be deployed in conjunction with Operation Enduring Freedom supporting military operations in the Afghanistan combat zone. Print 1040ez The Kosovo area. Print 1040ez   By Executive Order No. Print 1040ez 13119, the following locations (including airspace above) were designated as a combat zone beginning March 24, 1999. Print 1040ez Federal Republic of Yugoslavia (Serbia/Montenegro). Print 1040ez Albania. Print 1040ez Kosovo. Print 1040ez The Adriatic Sea. Print 1040ez The Ionian Sea—north of the 39th parallel. Print 1040ez Note. Print 1040ez The combat zone designation for Montenegro and Kosovo (previously a province within Serbia) under Executive Order 13119 remains in force even though Montenegro and Kosovo became independent nations since EO 13119 was signed. Print 1040ez Arabian peninsula. Print 1040ez   By Executive Order No. Print 1040ez 12744, the following locations (and airspace above) were designated as a combat zone beginning January 17, 1991. Print 1040ez The Persian Gulf. Print 1040ez The Red Sea. Print 1040ez The Gulf of Oman. Print 1040ez The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude. Print 1040ez The Gulf of Aden. Print 1040ez The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates. Print 1040ez Jordan which is in direct support of the Arabian Peninsula. Print 1040ez Serving in a Combat Zone You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone. Print 1040ez Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. Print 1040ez If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes. Print 1040ez Hospitalized While Serving in a Combat Zone If you are hospitalized while serving in a combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary. Print 1040ez Example. Print 1040ez You are hospitalized for a specific disease in a combat zone where you have been serving for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. Print 1040ez The disease is presumed to have been incurred while you were serving in the combat zone. Print 1040ez On the other hand, if the incubation period of the disease is 1 year, the disease would not have been incurred while you were serving in the combat zone. Print 1040ez Hospitalized After Leaving a Combat Zone In some cases, the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left. Print 1040ez In that case, you can exclude military pay earned while you are hospitalized as a result of the wound, disease, or injury. Print 1040ez Example. Print 1040ez You were hospitalized for a specific disease 3 weeks after you left the combat zone. Print 1040ez The incubation period of the disease is from 2 to 4 weeks. Print 1040ez The disease is presumed to have been incurred while serving in the combat zone. Print 1040ez Nonqualifying Presence in Combat Zone None of the following types of military service qualify as service in a combat zone. Print 1040ez Presence in a combat zone while on leave from a duty station located outside the combat zone. Print 1040ez Passage over or through a combat zone during a trip between two points that are outside a combat zone. Print 1040ez Presence in a combat zone solely for your personal convenience. Print 1040ez Service Outside Combat Zone Considered Service in Combat Zone Military service outside a combat zone is considered to be performed in a combat zone if: The Department of Defense designates that the service is in direct support of military operations in the combat zone, and The service qualifies you for special military pay for duty subject to hostile fire or imminent danger. Print 1040ez Military pay received for this service will qualify for the combat zone exclusion if all of the requirements (other than service in a combat zone) are met and the pay is verifiable by reference to military pay records. Print 1040ez Amount of Exclusion If you are an enlisted member, warrant officer, or commissioned warrant officer and you serve in a combat zone during any part of a month, you can exclude all of your military pay for that month. Print 1040ez It should not be included in the wages reported on your Form W-2. Print 1040ez You also can exclude military pay earned while you are hospitalized as a result of wounds, disease, or injury incurred in the combat zone. Print 1040ez If you are hospitalized, you cannot exclude any military pay received for any month of service that begins more than 2 years after the end of combat activities in the combat zone. Print 1040ez Your hospitalization does not have to be in the combat zone. Print 1040ez If you are a commissioned officer (other than a commissioned warrant officer), you can exclude your pay according to the rules just discussed. Print 1040ez However, the amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. Print 1040ez Alien Status For tax purposes, an alien is an individual who is not a U. Print 1040ez S. Print 1040ez citizen. Print 1040ez An alien is in one of three categories: resident, nonresident, or dual-status. Print 1040ez Placement in the correct category is crucial in determining what income to report and what forms to file. Print 1040ez Under peacetime enlistment rules, you generally cannot enlist in the Armed Forces unless you are a citizen or have been legally admitted to the United States for permanent residence. Print 1040ez If you are an alien enlistee in the Armed Forces, you are probably a resident alien. Print 1040ez If, under an income tax treaty, you are considered a resident of a foreign country, see your base legal officer. Print 1040ez Other aliens who are in the United States only because of military assignments and who have a home outside the United States are nonresident aliens. Print 1040ez Guam and Puerto Rico have special rules. Print 1040ez Residents of those areas should contact their taxing authority with their questions. Print 1040ez Most members of the Armed Forces are U. Print 1040ez S. Print 1040ez citizens or resident aliens. Print 1040ez However, if you have questions about your alien status or the alien status of your dependents or spouse, you should read the information in the following paragraphs and see Publication 519. Print 1040ez Resident Aliens You are considered a resident alien of the United States for tax purposes if you meet either the “green card test” or the “substantial presence test” for the calendar year (January 1–December 31). Print 1040ez If you meet the substantial presence test for 2014, you did not meet either the green card test or the substantial presence test for 2012 or 2013, and you did not choose to be treated as a resident for part of 2012, you may be able to choose to be treated as a U. Print 1040ez S. Print 1040ez resident for part of 2013. Print 1040ez See First-Year Choice in Publication 519. Print 1040ez These tests are explained in Publication 519. Print 1040ez Generally, resident aliens are taxed on their worldwide income and file the same tax forms as U. Print 1040ez S. Print 1040ez citizens. Print 1040ez Treating nonresident alien spouse as resident alien. Print 1040ez   A nonresident alien spouse can be treated as a resident alien if all the following conditions are met. Print 1040ez One spouse is a U. Print 1040ez S. Print 1040ez citizen or resident alien at the end of the tax year. Print 1040ez That spouse is married to the nonresident alien at the end of the tax year. Print 1040ez You both choose to treat the nonresident alien spouse as a resident alien. Print 1040ez Making the choice. Print 1040ez   Both you and your spouse must sign a statement and attach it to your joint return for the first tax year for which the choice applies. Print 1040ez Include in the statement: A declaration that one spouse was a nonresident alien and the other was a U. Print 1040ez S. Print 1040ez citizen or resident alien on the last day of the year, A declaration that both spouses choose to be treated as U. Print 1040ez S. Print 1040ez residents for the entire tax year, and The name, address, and taxpayer identification number (social security number or individual taxpayer identification number) of each spouse. Print 1040ez If the nonresident alien spouse is not eligible to get a social security number, he or she should file Form W-7, Application for IRS Individual Taxpayer Identification Number. Print 1040ez    Once you make this choice, the nonresident alien spouse's worldwide income is subject to U. Print 1040ez S. Print 1040ez tax. Print 1040ez If the nonresident alien spouse has substantial foreign income, there may be no advantage to making this choice. Print 1040ez Ending the choice. Print 1040ez   Once you make this choice, it applies to all later years unless one of the following situations occurs. Print 1040ez You or your spouse revokes the choice. Print 1040ez You or your spouse dies. Print 1040ez You and your spouse become legally separated under a decree of divorce or separate maintenance. Print 1040ez The Internal Revenue Service ends the choice because you or your spouse kept inadequate records. Print 1040ez For specific details on these situations, see Publication 519. Print 1040ez   If the choice is ended for any of these reasons, neither spouse can make the choice for any later year. Print 1040ez Choice not made. Print 1040ez   If you and your nonresident alien spouse do not make this choice: You cannot file a joint return. Print 1040ez You can file as married filing separately, or head of household if you qualify. Print 1040ez You can claim an exemption for your nonresident alien spouse if he or she has no gross income for U. Print 1040ez S. Print 1040ez tax purposes and is not another taxpayer's dependent. Print 1040ez The nonresident alien spouse generally does not have to file a federal income tax return if he or she had no income from sources in the United States. Print 1040ez If a return has to be filed, see the next discussion. Print 1040ez The nonresident alien spouse is not eligible for the earned income credit if he or she has to file a return. Print 1040ez Nonresident Aliens If you are an alien who does not meet the requirements discussed earlier to be a resident alien, you are a nonresident alien. Print 1040ez If you are required to file a federal tax return, you must file either Form 1040NR, U. Print 1040ez S. Print 1040ez Nonresident Alien Income Tax Return, or Form 1040NR-EZ, U. Print 1040ez S. Print 1040ez Income Tax Return for Certain Nonresident Aliens With No Dependents. Print 1040ez See the form instructions for information on who must file and filing status. Print 1040ez If you are a nonresident alien, you generally must pay tax on income from sources in the United States. Print 1040ez Your income from conducting a trade or business in the United States is taxed at graduated U. Print 1040ez S. Print 1040ez tax rates. Print 1040ez Other income from U. Print 1040ez S. Print 1040ez sources is taxed at a flat 30% (or lower treaty) rate. Print 1040ez For example, dividends from a U. Print 1040ez S. Print 1040ez corporation paid to a nonresident alien generally are subject to a 30% (or lower treaty) rate. Print 1040ez Dual-Status Aliens You can be both a nonresident and resident alien during the same tax year. Print 1040ez This usually occurs in the year you arrive in or depart from the United States. Print 1040ez If you are a dual-status alien, you are taxed on income from all sources for the part of the year you are a resident alien. Print 1040ez Generally, for the part of the year you are a nonresident alien, you are taxed only on income from sources in the United States. Print 1040ez Sale of Home You may not have to pay tax on all or part of the gain from the sale of your main home. Print 1040ez Usually, your main home is the one you live in most of the time. Print 1040ez It can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Print 1040ez You generally can exclude up to $250,000 of gain ($500,000, in most cases, if married filing a joint return) realized on the sale or exchange of a main home in 2013. Print 1040ez The exclusion is allowed each time you sell or exchange a main home, but generally not more than once every 2 years. Print 1040ez To be eligible, during the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years (the ownership test), and lived in the home as your main home for at least 2 years (the use test). Print 1040ez Exception to ownership and use tests. Print 1040ez   You can exclude gain, but the maximum amount of gain you can exclude will be reduced if you do not meet the ownership and use tests due to a move to a new permanent duty station. Print 1040ez 5-year test period suspended. Print 1040ez   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty as a member of the Armed Forces. Print 1040ez This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Print 1040ez Example. Print 1040ez David bought and moved into a home in 2005. Print 1040ez He lived in it as his main home for 2½ years. Print 1040ez For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Print 1040ez He then sold the home at a gain in 2013. Print 1040ez To meet the use test, David chooses to suspend the 5-year test period for the 6 years he was on qualifying official extended duty. Print 1040ez This means he can disregard those 6 years. Print 1040ez Therefore, David's 5-year test period consists of the 5 years before he went on qualifying official extended duty. Print 1040ez He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Print 1040ez Period of suspension. Print 1040ez   The period of suspension cannot last more than 10 years. Print 1040ez You cannot suspend the 5-year period for more than one property at a time. Print 1040ez You can revoke your choice to suspend the 5-year period at any time. Print 1040ez Qualified official extended duty. Print 1040ez   You are on qualified official extended duty if you serve on extended duty either: At a duty station at least 50 miles from your main home, or While you live in Government quarters under Government orders. Print 1040ez   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Print 1040ez Property used for rental or business. Print 1040ez   You may be able to exclude your gain from the sale of a home that you have used as a rental property or for business. Print 1040ez However, you must meet the ownership and use tests discussed in Publication 523. Print 1040ez Nonqualified use. Print 1040ez   If the sale of your main home results in a gain that is allocated to one or more period(s) of nonqualified use, you cannot exclude that gain from your income. Print 1040ez   Nonqualified use means any period after 2008 when neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions. Print 1040ez For example, a period of nonqualified use does not include any period (not to exceed a total of 10 years) during which you or your spouse is serving on qualified official extended duty. Print 1040ez Loss. Print 1040ez   You cannot deduct a loss from the sale of your main home. Print 1040ez More information. Print 1040ez   For more information, see Publication 523. Print 1040ez Foreclosures There may be tax consequences as a result of compensation payments for foreclosures. Print 1040ez Payments made for violations of the Service Members Civil Relief Act (SCRA). Print 1040ez   All service members who received a settlement payment reported on a Form 1099 may need to report the amount on their tax return. Print 1040ez Generally, you must include settlement payments in income. Print 1040ez However, the tax treatment of settlement payments will depend on the facts and circumstances. Print 1040ez Lump Sum Portion of Settlement Payment. Print 1040ez    Generally, you must include the lump sum payment in gross income. Print 1040ez In limited circumstances you may be able to exclude part or all of the lump sum payment from gross income. Print 1040ez For example, you may qualify to exclude part or all of the payment from gross income if you can show that the payment was made to reimburse specific nondeductible expenses (such as living expenses) you incurred because of the SCRA violation. Print 1040ez Interest Payment on Lump Sum Portion of Settlement Payment. Print 1040ez    You must include any interest on the lump sum portion of your settlement payment in your income. Print 1040ez Lost Equity Portion of Settlement Payment. Print 1040ez    If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. Print 1040ez You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. Print 1040ez In many cases, this gain may be excluded from income. Print 1040ez For more information on the rules for excluding all or part of any gain from the sale (including a foreclosure) of a main home, see Pub. Print 1040ez 523, Selling Your Home. Print 1040ez The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Print 1040ez    To find rules for reporting gain or loss on the foreclosure of property that was not your main home, see Pub. Print 1040ez 544, Sales and Other Dispositions of Assets. Print 1040ez Interest Payment on Lost Equity Portion of Settlement Payment. Print 1040ez    You must include any interest on the lost equity portion of your settlement payment in your income. Print 1040ez Itemized Deductions To figure your taxable income, you must subtract either your standard deduction or your itemized deductions from adjusted gross income. Print 1040ez For information on the standard deduction, see Publication 501. Print 1040ez Itemized deductions are figured on Schedule A (Form 1040). Print 1040ez This chapter discusses miscellaneous itemized deductions of particular interest to members of the Armed Forces. Print 1040ez For information on other itemized deductions, see the publications listed below. Print 1040ez Publication 502, Medical and Dental Expenses. Print 1040ez Publication 526, Charitable Contributions. Print 1040ez Publication 547, Casualties, Disasters, and Thefts. Print 1040ez Publication 550, Investment Income and Expenses. Print 1040ez You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Print 1040ez For information on deductions that are not subject to the 2% limit, see Publication 529. Print 1040ez Employee Business Expenses Deductible employee business expenses generally are miscellaneous itemized deductions subject to the 2% limit. Print 1040ez Certain employee business expenses are deductible as adjustments to income. Print 1040ez For information on many employee business expenses, see Publication 463. Print 1040ez Generally, you must file Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to claim these expenses. Print 1040ez You do not have to file Form 2106 or Form 2106-EZ if you are claiming only unreimbursed expenses for uniforms, professional society dues, and work-related educational expenses (all discussed later). Print 1040ez You can deduct these expenses directly on Schedule A (Form 1040). Print 1040ez Reimbursement. Print 1040ez   Generally, to receive advances, reimbursements, or other allowances from the government, you must adequately account for your expenses and return any excess reimbursement. Print 1040ez Your reimbursed expenses are not deductible. Print 1040ez   If your expenses are more than your reimbursement, the excess expenses are deductible (subject to the 2% limit) if you can prove them. Print 1040ez You must file Form 2106 to report these expenses. Print 1040ez   You can use the shorter Form 2106-EZ if you meet all three of the following conditions. Print 1040ez You are an employee deducting expenses related to your job. Print 1040ez You were not reimbursed by your employer for your expenses. Print 1040ez (Amounts included in box 1 of Form W-2 are not considered reimbursements. Print 1040ez ) If you claim car expenses, you use the standard mileage rate. Print 1040ez    For 2013, the standard mileage rate is 56. Print 1040ez 5 cents a mile for all business miles driven. Print 1040ez This rate is adjusted periodically. Print 1040ez Travel Expenses You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home. Print 1040ez If you are a member of the U. Print 1040ez S. Print 1040ez Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Print 1040ez You cannot deduct your expenses for meals and lodging while at your permanent duty station. Print 1040ez You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Print 1040ez A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a home aboard ship for travel expense purposes. Print 1040ez To be deductible, your travel expenses must be work related. Print 1040ez You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty. Print 1040ez Away from home. Print 1040ez   Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. Print 1040ez You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home. Print 1040ez   Examples of deductible travel expenses include: Expenses for business-related meals (generally limited to 50% of your unreimbursed cost), lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary duty or temporary additional duty, and Expenses of carrying out official business while on “No Cost” orders. Print 1040ez    You cannot deduct any expenses for travel away from home if the temporary assignment in a single location is realistically expected to last (and does in fact last) for more than 1 year. Print 1040ez This rule may not apply if you are participating in a federal crime investigation or prosecution. Print 1040ez For more information, see Publication 463 and the Form 2106 instructions. Print 1040ez Transportation Expenses These expenses include the ordinary and necessary costs of: Getting from one workplace to another when you are not away from home, Going to a business meeting away from your regular workplace, and Getting from your home to a temporary workplace when you have a regular place of work. Print 1040ez These expenses include the costs of transportation by air, bus, rail, taxi, and driving and maintaining your car. Print 1040ez Transportation expenses incurred while traveling away from home are included with your travel expenses, discussed earlier. Print 1040ez However, if you use your car while traveling away from home overnight, see the rules in chapter 4 of Publication 463 to figure your car expense deduction. Print 1040ez If you must go from one workplace to another while on duty (for example, as a courier or to attend meetings) without being away from home, your unreimbursed transportation expenses are deductible. Print 1040ez However, the expenses of getting to and from your regular place of work (commuting) are not deductible. Print 1040ez Temporary work location. Print 1040ez   If you have one or more regular places of business away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location. Print 1040ez   Generally, if your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary. Print 1040ez   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Print 1040ez If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Print 1040ez    If you do not have a regular place of business, but you ordinarily work in the metropolitan area where you live, you can deduct daily transportation expenses between your home and a temporary work site outside your metropolitan area. Print 1040ez However, you cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Print 1040ez These are nondeductible commuting costs. Print 1040ez Armed Forces reservists. Print 1040ez   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Print 1040ez You can deduct the expense of getting from one workplace to the other. Print 1040ez You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Print 1040ez In this case, your transportation generally is a nondeductible commuting expense. Print 1040ez However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Print 1040ez   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Print 1040ez If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Print 1040ez See Armed Forces Reservists under Adjustments to Income, earlier. Print 1040ez Uniforms You usually cannot deduct the expenses for uniform cost and upkeep. Print 1040ez Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty. Print 1040ez If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. Print 1040ez Unreimbursed expenses for the cost and upkeep of the following articles are deductible. Print 1040ez Military battle dress uniforms and utility uniforms that you cannot wear when off duty. Print 1040ez Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords. Print 1040ez Reservists' uniforms if you can wear the uniform only while performing duties as a reservist. Print 1040ez Professional Dues You can deduct unreimbursed dues paid to professional societies directly related to your military position. Print 1040ez However, you cannot deduct amounts paid to an officers' club or a noncommissioned officers' club. Print 1040ez Example. Print 1040ez Lieutenant Margaret Allen, an electrical engineer at Maxwell Air Force Base, can deduct professional dues paid to the American Society of Electrical Engineers. Print 1040ez Educational Expenses You can deduct the unreimbursed costs of qualifying work-related education. Print 1040ez This is education that meets at least one of the following two tests. Print 1040ez The education is required by your employer or the law to keep your present salary, status, or job. Print 1040ez The required education must serve a bona fide business purpose of your employer. Print 1040ez The education maintains or improves skills needed in your present work. Print 1040ez However, even if the education meets one or both of the above tests, it is not qualifying education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Print 1040ez You can deduct the expenses for qualifying work-related education even if the education could lead to a degree. Print 1040ez Example 1. Print 1040ez Lieutenant Colonel Mason has a degree in financial management and is in charge of base finances at her post of duty. Print 1040ez She took an advanced finance course. Print 1040ez She already meets the minimum qualifications for her job. Print 1040ez By taking the course, she is improving skills in her current position. Print 1040ez The course does not qualify her for a new trade or business. Print 1040ez She can deduct educational expenses that are more than the educational allowance she received. Print 1040ez Example 2. Print 1040ez Major Williams worked in the military base legal office as a legal intern. Print 1040ez He was placed in excess leave status by his employer to attend law school. Print 1040ez He paid all his educational expenses and was not reimbursed. Print 1040ez After obtaining his law degree, he passed the state bar exam and worked as a judge advocate. Print 1040ez His educational expenses are not deductible because the law degree qualified him for a new trade or business, even though the education maintained and improved his skills in his work. Print 1040ez Travel to obtain education. Print 1040ez   If your work-related education qualifies, you can deduct the costs of travel, including meals (subject to the 50% limit), and lodging, if the main purpose of the trip is to obtain the education. Print 1040ez   You cannot deduct the cost of travel that is itself a form of education, even if it is directly related to your duties in your work or business. Print 1040ez Transportation for education. Print 1040ez   If your work-related education qualifies for a deduction, you can deduct the costs of transportation to obtain that education. Print 1040ez However, you cannot deduct the cost of services provided in kind, such as base-provided transportation to or from class. Print 1040ez Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Print 1040ez   If you need more information on educational expenses, see Publication 970. Print 1040ez Repayments If you had to repay to your employer an amount that you included in your income in an earlier year, you may be able to deduct the repaid amount from your income for the year in which you repaid it. Print 1040ez Repayment of $3,000 or less. Print 1040ez   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Print 1040ez If you reported it as wages, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Print 1040ez Repayment over $3,000. Print 1040ez   If the amount you repaid was more than $3,000, see Repayments in Publication 525. Print 1040ez Credits After you have figured your taxable income and tax liability, you can determine if you are entitled to any tax credits. Print 1040ez This publication discusses the first-time homebuyer credit, child tax credit, earned income credit, and credit for excess social security tax withheld. Print 1040ez For information on other credits, see your tax form instructions. Print 1040ez First-Time Homebuyer Credit The first-time homebuyer credit is not available for homes purchased after 2011. Print 1040ez In 2011, this credit had already expired for most taxpayers, however, certain members of the uniformed services and Foreign Service and certain employees of the intelligence community could claim the credit for homes purchased in 2011. Print 1040ez If you bought the home (and claimed the credit) after 2008, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. Print 1040ez If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit. Print 1040ez If you bought your home in 2008, you generally must repay the credit over a 15-year period in 15 equal installments. Print 1040ez For more information, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. Print 1040ez Child Tax Credit The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. Print 1040ez The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. Print 1040ez The child tax credit is not the same as the credit for child and dependent care expenses. Print 1040ez See Publication 503 for information on the credit for child and dependent care expenses. Print 1040ez Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you, later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. Print 1040ez S. Print 1040ez citizen, a U. Print 1040ez S. Print 1040ez national, or a U. Print 1040ez S. Print 1040ez resident alien. Print 1040ez If the child was adopted, see Adopted child . Print 1040ez For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c, column (4). Print 1040ez Exceptions to time lived with you. Print 1040ez   A child is considered to have lived with you for all of 2013 if the child was born or died in 2013 and your home was this child's home for the entire time he or she was alive. Print 1040ez Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. Print 1040ez   There are also exceptions for kidnapped children and children of divorced or separated parents. Print 1040ez For details, see Publication 501. Print 1040ez Qualifying child of more than one person. Print 1040ez   A special rule applies if your qualifying child is the qualifying child of more than one person. Print 1040ez For details, see Publication 501. Print 1040ez Adopted child. Print 1040ez   An adopted child is always treated as your own child. Print 1040ez An adopted child includes a child lawfully placed with you for legal adoption. Print 1040ez   If you are a U. Print 1040ez S. Print 1040ez citizen or U. Print 1040ez S. Print 1040ez national and your adopted child lived with you as a member of your household all year, that child meets condition (7) above to be a qualifying child for the child tax credit. Print 1040ez Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. Print 1040ez Limits on the credit. Print 1040ez   You must reduce your child tax credit if either (1) or (2), below, applies. Print 1040ez The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. Print 1040ez If the amount is zero, you cannot take this credit because there is no tax to reduce. Print 1040ez However, you may be able to take the additional child tax credit. Print 1040ez See Additional Child Tax Credit , later. Print 1040ez Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. Print 1040ez Married filing jointly — $110,000. Print 1040ez Single, head of household,  or qualifying widow(er) — $75,000. Print 1040ez Married filing separately — $55,000. Print 1040ez Modified AGI. Print 1040ez   For purposes of the child tax credit, your modified AGI is the amount on Form 1040, line 38, or Form 1040A, line 22, plus the following amounts that may apply to you. Print 1040ez Any amount excluded from income because of the exclusion of income from Puerto Rico. Print 1040ez Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. Print 1040ez Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. Print 1040ez Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Print 1040ez   If you do not have any of the above, your modified AGI is the same as your AGI. Print 1040ez Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. Print 1040ez For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A. Print 1040ez Also attach Schedule 8812, Child Tax Credit, if required. Print 1040ez Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. Print 1040ez The additional child tax credit may give you a refund even if you do not owe any tax. Print 1040ez For more information, see the instructions for Form 1040 or Form 1040A, and Schedule 8812. Print 1040ez Earned Income Credit The earned income credit (EIC) is a cr
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Print 1040ez 2. Print 1040ez   Entertainment Table of Contents Directly-Related Test Associated TestMeetings at conventions. Print 1040ez 50% LimitExceptions to the 50% Limit What Entertainment Expenses Are Deductible?A meal as a form of entertainment. Print 1040ez Deduction may depend on your type of business. Print 1040ez Exception for events that benefit charitable organizations. Print 1040ez Food and beverages in skybox seats. Print 1040ez What Entertainment Expenses Are Not Deductible?Out-of-pocket expenses. Print 1040ez You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. Print 1040ez The rules and definitions are summarized in Table 2-1 . Print 1040ez You can deduct entertainment expenses only if they are both ordinary and necessary and meet one of the following tests. Print 1040ez Directly-related test. Print 1040ez Associated test. Print 1040ez Both of these tests are explained later. Print 1040ez An ordinary expense is one that is common and accepted in your trade or business. Print 1040ez A necessary expense is one that is helpful and appropriate for your business. Print 1040ez An expense does not have to be required to be considered necessary. Print 1040ez The amount you can deduct for entertainment expenses may be limited. Print 1040ez Generally, you can deduct only 50% of your unreimbursed entertainment expenses. Print 1040ez This limit is discussed later under 50% Limit. Print 1040ez Directly-Related Test To meet the directly-related test for entertainment expenses (including entertainment-related meals), you must show that: The main purpose of the combined business and entertainment was the active conduct of business, You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit at some future time. Print 1040ez Business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. Print 1040ez Even if you show that business was the main purpose, you generally cannot deduct the expenses for the use of an entertainment facility. Print 1040ez See Entertainment facilities under What Entertainment Expenses Are Not Deductible? later in this chapter. Print 1040ez You must consider all the facts, including the nature of the business transacted and the reasons for conducting business during the entertainment. Print 1040ez It is not necessary to devote more time to business than to entertainment. Print 1040ez However, if the business discussion is only incidental to the entertainment, the entertainment expenses do not meet the directly-related test. Print 1040ez Table 2-1. Print 1040ez When Are Entertainment Expenses Deductible? General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. Print 1040ez Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. Print 1040ez An ordinary expense is one that is common and accepted in your trade or business. Print 1040ez A necessary expense is one that is helpful and appropriate. Print 1040ez Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. Print 1040ez   Associated test Entertainment is associated with your trade or business, and Entertainment is directly before or after a substantial business discussion. Print 1040ez Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. Print 1040ez You cannot deduct expenses that are lavish or extravagant under the circumstances. Print 1040ez You generally can deduct only 50% of your unreimbursed entertainment expenses (see 50% Limit ). Print 1040ez You do not have to show that business income or other business benefit actually resulted from each entertainment expense. Print 1040ez Clear business setting. Print 1040ez   If the entertainment takes place in a clear business setting and is for your business or work, the expenses are considered directly related to your business or work. Print 1040ez The following situations are examples of entertainment in a clear business setting. Print 1040ez Entertainment in a hospitality room at a convention where business goodwill is created through the display or discussion of business products. Print 1040ez Entertainment that is mainly a price rebate on the sale of your products (such as a restaurant owner providing an occasional free meal to a loyal customer). Print 1040ez Entertainment of a clear business nature occurring under circumstances where there is no meaningful personal or social relationship between you and the persons entertained. Print 1040ez An example is entertainment of business and civic leaders at the opening of a new hotel or play when the purpose is to get business publicity rather than to create or maintain the goodwill of the persons entertained. Print 1040ez Expenses not considered directly related. Print 1040ez   Entertainment expenses generally are not considered directly related if you are not there or in situations where there are substantial distractions that generally prevent you from actively conducting business. Print 1040ez The following are examples of situations where there are substantial distractions. Print 1040ez A meeting or discussion at a nightclub, theater, or sporting event. Print 1040ez A meeting or discussion during what is essentially a social gathering, such as a cocktail party. Print 1040ez A meeting with a group that includes persons who are not business associates at places such as cocktail lounges, country clubs, golf clubs, athletic clubs, or vacation resorts. Print 1040ez Associated Test Even if your expenses do not meet the directly-related test, they may meet the associated test. Print 1040ez To meet the associated test for entertainment expenses (including entertainment-related meals), you must show that the entertainment is: Associated with the active conduct of your trade or business, and Directly before or after a substantial business discussion (defined later). Print 1040ez Associated with trade or business. Print 1040ez   Generally, an expense is associated with the active conduct of your trade or business if you can show that you had a clear business purpose for having the expense. Print 1040ez The purpose may be to get new business or to encourage the continuation of an existing business relationship. Print 1040ez Substantial business discussion. Print 1040ez   Whether a business discussion is substantial depends on the facts of each case. Print 1040ez A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit. Print 1040ez   The meeting does not have to be for any specified length of time, but you must show that the business discussion was substantial in relation to the meal or entertainment. Print 1040ez It is not necessary that you devote more time to business than to entertainment. Print 1040ez You do not have to discuss business during the meal or entertainment. Print 1040ez Meetings at conventions. Print 1040ez   You are considered to have a substantial business discussion if you attend meetings at a convention or similar event, or at a trade or business meeting sponsored and conducted by a business or professional organization. Print 1040ez However, your reason for attending the convention or meeting must be to further your trade or business. Print 1040ez The organization that sponsors the convention or meeting must schedule a program of business activities that is the main activity of the convention or meeting. Print 1040ez Directly before or after business discussion. Print 1040ez   If the entertainment is held on the same day as the business discussion, it is considered to be held directly before or after the business discussion. Print 1040ez   If the entertainment and the business discussion are not held on the same day, you must consider the facts of each case to see if the associated test is met. Print 1040ez Among the facts to consider are the place, date, and duration of the business discussion. Print 1040ez If you or your business associates are from out of town, you must also consider the dates of arrival and departure, and the reasons the entertainment and the discussion did not take place on the same day. Print 1040ez Example. Print 1040ez A group of business associates comes from out of town to your place of business to hold a substantial business discussion. Print 1040ez If you entertain those business guests on the evening before the business discussion, or on the evening of the day following the business discussion, the entertainment generally is considered to be held directly before or after the discussion. Print 1040ez The expense meets the associated test. Print 1040ez 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. Print 1040ez (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. Print 1040ez See Individuals subject to “hours of service” limits , later. Print 1040ez ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. Print 1040ez Figure A summarizes the general rules explained in this section. Print 1040ez The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. Print 1040ez Included expenses. Print 1040ez   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. Print 1040ez However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. Print 1040ez Figure A. Print 1040ez Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. Print 1040ez See Exceptions to the 50% Limit . Print 1040ez Please click here for the text description of the image. Print 1040ez Figure A. Print 1040ez Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions Application of 50% limit. Print 1040ez   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later. Print 1040ez   The 50% limit also applies to certain meal and entertainment expenses that are not business related. Print 1040ez It applies to meal and entertainment expenses you have for the production of income, including rental or royalty income. Print 1040ez It also applies to the cost of meals included in deductible educational expenses. Print 1040ez When to apply the 50% limit. Print 1040ez   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. Print 1040ez You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this publication. Print 1040ez Example 1. Print 1040ez You spend $200 for a business-related meal. Print 1040ez If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Print 1040ez Your deduction cannot be more than $45 (50% × $90). Print 1040ez Example 2. Print 1040ez You purchase two tickets to a concert and give them to a client. Print 1040ez You purchased the tickets through a ticket agent. Print 1040ez You paid $200 for the two tickets, which had a face value of $80 each ($160 total). Print 1040ez Your deduction cannot be more than $80 (50% × $160). Print 1040ez Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. Print 1040ez Figure A can help you determine if the 50% limit applies to you. Print 1040ez Expenses not subject to 50% limit. Print 1040ez   Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. Print 1040ez 1 - Employee's reimbursed expenses. Print 1040ez   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Print 1040ez Accountable plans are discussed in chapter 6. Print 1040ez 2 - Self-employed. Print 1040ez   If you are self-employed, your deductible meal and entertainment expenses are not subject to the 50% limit if all of the following requirements are met. Print 1040ez You have these expenses as an independent contractor. Print 1040ez Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform. Print 1040ez You provide adequate records of these expenses to your customer or client. Print 1040ez (See chapter 5 . Print 1040ez )   In this case, your client or customer is subject to the 50% limit on the expenses. Print 1040ez Example. Print 1040ez You are a self-employed attorney who adequately accounts for meal and entertainment expenses to a client who reimburses you for these expenses. Print 1040ez You are not subject to the directly-related or associated test, nor are you subject to the 50% limit. Print 1040ez If the client can deduct the expenses, the client is subject to the 50% limit. Print 1040ez If you (as an independent contractor) have expenses for meals and entertainment related to providing services for a client but do not adequately account for and seek reimbursement from the client for those expenses, you are subject to the directly-related or associated test and to the 50% limit. Print 1040ez 3 - Advertising expenses. Print 1040ez   You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Print 1040ez For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit. Print 1040ez 4 - Sale of meals or entertainment. Print 1040ez   You are not subject to the 50% limit if you actually sell meals, entertainment, goods and services, or use of facilities to the public. Print 1040ez For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is not subject to the 50% limit. Print 1040ez 5 - Charitable sports event. Print 1040ez   You are not subject to the 50% limit if you pay for a package deal that includes a ticket to a qualified charitable sports event. Print 1040ez For the conditions the sports event must meet, see Exception for events that benefit charitable organizations under What Entertainment Expenses Are Deductible?, later. Print 1040ez Individuals subject to “hours of service” limits. Print 1040ez   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. Print 1040ez The percentage is 80%. Print 1040ez   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. Print 1040ez Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. Print 1040ez Interstate truck operators and bus drivers who are under Department of Transportation regulations. Print 1040ez Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. Print 1040ez Certain merchant mariners who are under Coast Guard regulations. Print 1040ez What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. Print 1040ez Entertainment. Print 1040ez   Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Print 1040ez Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. Print 1040ez   Entertainment also may include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families. Print 1040ez A meal as a form of entertainment. Print 1040ez   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. Print 1040ez A meal expense includes the cost of food, beverages, taxes, and tips for the meal. Print 1040ez To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. Print 1040ez    You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. Print 1040ez    Meals sold in the normal course of your business are not considered entertainment. Print 1040ez Deduction may depend on your type of business. Print 1040ez   Your kind of business may determine if a particular activity is considered entertainment. Print 1040ez For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally is not considered entertainment. Print 1040ez This is because fashion shows are typical in your business. Print 1040ez But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show generally is considered entertainment. Print 1040ez Separating costs. Print 1040ez   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. Print 1040ez You must have a reasonable basis for making this allocation. Print 1040ez For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. Print 1040ez Taking turns paying for meals or entertainment. Print 1040ez   If a group of business acquaintances takes turns picking up each others' meal or entertainment checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. Print 1040ez Lavish or extravagant expenses. Print 1040ez   You cannot deduct expenses for entertainment that are lavish or extravagant. Print 1040ez An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. Print 1040ez Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Print 1040ez Allocating between business and nonbusiness. Print 1040ez   If you entertain business and nonbusiness individuals at the same event, you must divide your entertainment expenses between business and nonbusiness. Print 1040ez You can deduct only the business part. Print 1040ez If you cannot establish the part of the expense for each person participating, allocate the expense to each participant on a pro rata basis. Print 1040ez Example. Print 1040ez You entertain a group of individuals that includes yourself, three business prospects, and seven social guests. Print 1040ez Only 4/11 of the expense qualifies as a business entertainment expense. Print 1040ez You cannot deduct the expenses for the seven social guests because those costs are nonbusiness expenses. Print 1040ez Trade association meetings. Print 1040ez   You can deduct entertainment expenses that are directly related to and necessary for attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. Print 1040ez These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. Print 1040ez Entertainment tickets. Print 1040ez   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. Print 1040ez For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. Print 1040ez Exception for events that benefit charitable organizations. Print 1040ez   Different rules apply when the cost of a ticket to a sports event benefits a charitable organization. Print 1040ez You can take into account the full cost you pay for the ticket, even if it is more than the face value, if all of the following conditions apply. Print 1040ez The event's main purpose is to benefit a qualified charitable organization. Print 1040ez The entire net proceeds go to the charity. Print 1040ez The event uses volunteers to perform substantially all the event's work. Print 1040ez    The 50% limit on entertainment does not apply to any expense for a package deal that includes a ticket to such a charitable sports event. Print 1040ez Example 1. Print 1040ez You purchase tickets to a golf tournament organized by the local volunteer fire company. Print 1040ez All net proceeds will be used to buy new fire equipment. Print 1040ez The volunteers will run the tournament. Print 1040ez You can deduct the entire cost of the tickets as a business expense if they otherwise qualify as an entertainment expense. Print 1040ez Example 2. Print 1040ez You purchase tickets to a college football game through a ticket broker. Print 1040ez After having a business discussion, you take a client to the game. Print 1040ez Net proceeds from the game go to colleges that qualify as charitable organizations. Print 1040ez However, since the colleges also pay individuals to perform services, such as coaching and recruiting, you can only use the face value of the tickets in determining your business deduction. Print 1040ez Skyboxes and other private luxury boxes. Print 1040ez   If you rent a skybox or other private luxury box for more than one event at the same sports arena, you generally cannot deduct more than the price of a nonluxury box seat ticket. Print 1040ez   To determine whether a skybox has been rented for more than one event, count each game or other performance as one event. Print 1040ez For example, renting a skybox for a series of playoff games is considered renting it for more than one event. Print 1040ez All skyboxes you rent in the same arena, along with any rentals by related parties, are considered in making this determination. Print 1040ez   Related parties include: Family members (spouses, ancestors, and lineal descendants), Parties who have made a reciprocal arrangement involving the sharing of skyboxes, Related corporations, A partnership and its principal partners, and A corporation and a partnership with common ownership. Print 1040ez Example. Print 1040ez You pay $3,000 to rent a 10-seat skybox at Team Stadium for three baseball games. Print 1040ez The cost of regular nonluxury box seats at each event is $30 a seat. Print 1040ez You can deduct (subject to the 50% limit) $900 ((10 seats × $30 each) × 3 events). Print 1040ez Food and beverages in skybox seats. Print 1040ez   If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. Print 1040ez The amounts separately stated for food and beverages must be reasonable. Print 1040ez You cannot inflate the charges for food and beverages to avoid the limited deduction for skybox rentals. Print 1040ez What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. Print 1040ez Club dues and membership fees. Print 1040ez   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. Print 1040ez This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities, discussed later. Print 1040ez   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. Print 1040ez You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Print 1040ez Entertainment facilities. Print 1040ez   Generally, you cannot deduct any expense for the use of an entertainment facility. Print 1040ez This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. Print 1040ez   An entertainment facility is any property you own, rent, or use for entertainment. Print 1040ez Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. Print 1040ez Out-of-pocket expenses. Print 1040ez   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. Print 1040ez These are not expenses for the use of an entertainment facility. Print 1040ez However, these expenses are subject to the directly-related and associated tests and to the 50% limit , all discussed earlier. Print 1040ez Expenses for spouses. Print 1040ez   You generally cannot deduct the cost of entertainment for your spouse or for the spouse of a customer. Print 1040ez However, you can deduct these costs if you can show you had a clear business purpose, rather than a personal or social purpose, for providing the entertainment. Print 1040ez Example. Print 1040ez You entertain a customer. Print 1040ez The cost is an ordinary and necessary business expense and is allowed under the entertainment rules. Print 1040ez The customer's spouse joins you because it is impractical to entertain the customer without the spouse. Print 1040ez You can deduct the cost of entertaining the customer's spouse. Print 1040ez If your spouse joins the party because the customer's spouse is present, the cost of the entertainment for your spouse is also deductible. Print 1040ez Gift or entertainment. Print 1040ez   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Print 1040ez However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift. Print 1040ez   If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Print 1040ez You can treat the tickets as either a gift or entertainment, whichever is to your advantage. Print 1040ez   You can change your treatment of the tickets at a later date by filing an amended return. Print 1040ez Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Print 1040ez   If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Print 1040ez You cannot choose, in this case, to treat the tickets as a gift. Print 1040ez Prev  Up  Next   Home   More Online Publications