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2010 Tax Return Form

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2010 Tax Return Form

2010 tax return form Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. 2010 tax return form Stock. 2010 tax return form Options. 2010 tax return form Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). 2010 tax return form What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. 2010 tax return form Fair market value. 2010 tax return form   Fair market value (FMV) is the price that property would sell for on the open market. 2010 tax return form It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. 2010 tax return form If you put a restriction on the use of property you donate, the FMV must reflect that restriction. 2010 tax return form Example 1. 2010 tax return form If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. 2010 tax return form Usually, such items are worth far less than what you paid for them. 2010 tax return form Example 2. 2010 tax return form If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. 2010 tax return form Factors. 2010 tax return form   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. 2010 tax return form These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. 2010 tax return form   These factors are discussed later. 2010 tax return form Also, see Table 1 for a summary of questions to ask as you consider each factor. 2010 tax return form Date of contribution. 2010 tax return form   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. 2010 tax return form Stock. 2010 tax return form   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. 2010 tax return form If the certificate is mailed and received through the regular mail, it is the date of mailing. 2010 tax return form If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. 2010 tax return form Options. 2010 tax return form   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. 2010 tax return form The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. 2010 tax return form Example. 2010 tax return form You grant an option to a local university, which is a qualified organization, to buy real property. 2010 tax return form Under the option, the university could buy the property at any time during a 2-year period for $40,000. 2010 tax return form The FMV of the property on the date the option is granted is $50,000. 2010 tax return form In the following tax year, the university exercises the option. 2010 tax return form The FMV of the property on the date the option is exercised is $55,000. 2010 tax return form Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. 2010 tax return form Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. 2010 tax return form Usually it is not that simple. 2010 tax return form Using such formulas, etc. 2010 tax return form , seldom results in an acceptable determination of FMV. 2010 tax return form There is no single formula that always applies when determining the value of property. 2010 tax return form This is not to say that a valuation is only guesswork. 2010 tax return form You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. 2010 tax return form For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. 2010 tax return form When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. 2010 tax return form On the other hand, it may be an antique, the value of which could not be determined by using any formula. 2010 tax return form Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. 2010 tax return form However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. 2010 tax return form The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. 2010 tax return form Example. 2010 tax return form Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. 2010 tax return form The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. 2010 tax return form The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. 2010 tax return form Tom gave the gems to a qualified charity 13 months after buying them. 2010 tax return form The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. 2010 tax return form The best evidence of FMV depends on actual transactions and not on some artificial estimate. 2010 tax return form The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. 2010 tax return form Terms of the purchase or sale. 2010 tax return form   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. 2010 tax return form These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. 2010 tax return form Rate of increase or decrease in value. 2010 tax return form   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. 2010 tax return form For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. 2010 tax return form Example. 2010 tax return form Bill Brown bought a painting for $10,000. 2010 tax return form Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. 2010 tax return form The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. 2010 tax return form Arm's-length offer. 2010 tax return form   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. 2010 tax return form To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. 2010 tax return form Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. 2010 tax return form Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. 2010 tax return form The weight to be given to each sale depends on the following. 2010 tax return form The degree of similarity between the property sold and the donated property. 2010 tax return form The time of the sale—whether it was close to the valuation date. 2010 tax return form The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. 2010 tax return form The conditions of the market in which the sale was made—whether unusually inflated or deflated. 2010 tax return form The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. 2010 tax return form Example 1. 2010 tax return form Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. 2010 tax return form The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. 2010 tax return form The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. 2010 tax return form Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. 2010 tax return form At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. 2010 tax return form The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. 2010 tax return form Example 2. 2010 tax return form The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. 2010 tax return form The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. 2010 tax return form The principal and interest on the note would not be due for 12 years. 2010 tax return form According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. 2010 tax return form She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. 2010 tax return form At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. 2010 tax return form The difference between the two prices was solely at the discretion of the buyer. 2010 tax return form The promoter was a willing seller for $10,000. 2010 tax return form Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. 2010 tax return form Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. 2010 tax return form However, there must be a reasonable relationship between the replacement cost and the FMV. 2010 tax return form The replacement cost is the amount it would cost to replace the donated item on the valuation date. 2010 tax return form Often there is no relationship between the replacement cost and the FMV. 2010 tax return form If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. 2010 tax return form To determine the replacement cost of the donated property, find the “estimated replacement cost new. 2010 tax return form ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. 2010 tax return form You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. 2010 tax return form ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. 2010 tax return form For an expert's opinion to deserve much weight, the facts must support the opinion. 2010 tax return form For additional information, see Appraisals, later. 2010 tax return form Table 1. 2010 tax return form Factors That Affect FMV IF the factor you are considering is. 2010 tax return form . 2010 tax return form . 2010 tax return form THEN you should ask these questions. 2010 tax return form . 2010 tax return form . 2010 tax return form     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. 2010 tax return form Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. 2010 tax return form When you rely on sales of comparable property, the sales must have been made in an open market. 2010 tax return form If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. 2010 tax return form For example, liquidation sale prices usually do not indicate the FMV. 2010 tax return form Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. 2010 tax return form Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. 2010 tax return form However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. 2010 tax return form The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. 2010 tax return form Example. 2010 tax return form You give a rare, old book to your former college. 2010 tax return form The book is a third edition and is in poor condition because of a missing back cover. 2010 tax return form You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. 2010 tax return form Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. 2010 tax return form Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. 2010 tax return form Future Events You may not consider unexpected events happening after your donation of property in making the valuation. 2010 tax return form You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. 2010 tax return form Example. 2010 tax return form You give farmland to a qualified charity. 2010 tax return form The transfer provides that your mother will have the right to all income and full use of the property for her life. 2010 tax return form Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. 2010 tax return form You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. 2010 tax return form Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. 2010 tax return form Example. 2010 tax return form You give all your rights in a successful patent to your favorite charity. 2010 tax return form Your records show that before the valuation date there were three stages in the patent's history of earnings. 2010 tax return form First, there was rapid growth in earnings when the invention was introduced. 2010 tax return form Then, there was a period of high earnings when the invention was being exploited. 2010 tax return form Finally, there was a decline in earnings when competing inventions were introduced. 2010 tax return form The entire history of earnings may be relevant in estimating the future earnings. 2010 tax return form However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. 2010 tax return form The market conditions at those times do not represent the condition of the market at the valuation date. 2010 tax return form What is most significant is the trend of decline in earnings up to the valuation date. 2010 tax return form For more information about donations of patents, see Patents, later. 2010 tax return form Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. 2010 tax return form For information on appraisals, see Appraisals, later. 2010 tax return form Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. 2010 tax return form Such used property may have little or no market value because of its worn condition. 2010 tax return form It may be out of style or no longer useful. 2010 tax return form You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. 2010 tax return form A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. 2010 tax return form See Deduction over $500 for certain clothing or household items, later. 2010 tax return form If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. 2010 tax return form Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. 2010 tax return form Valuation of items of clothing does not lend itself to fixed formulas or methods. 2010 tax return form The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. 2010 tax return form You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. 2010 tax return form An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. 2010 tax return form See Deduction over $500 for certain clothing or household items, later. 2010 tax return form For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. 2010 tax return form Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. 2010 tax return form The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. 2010 tax return form If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. 2010 tax return form The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. 2010 tax return form Sentimental personal value has no effect on FMV. 2010 tax return form But if the jewelry was owned by a famous person, its value might increase. 2010 tax return form Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. 2010 tax return form Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. 2010 tax return form Art valued at $20,000 or more. 2010 tax return form   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. 2010 tax return form For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. 2010 tax return form Art valued at $50,000 or more. 2010 tax return form   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. 2010 tax return form You must request the statement before filing the tax return that reports the donation. 2010 tax return form Your request must include the following. 2010 tax return form A copy of a qualified appraisal of the item. 2010 tax return form See Qualified Appraisal, later. 2010 tax return form A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. 2010 tax return form Add $250 for each item in excess of three. 2010 tax return form A completed Form 8283, Section B. 2010 tax return form The location of the IRS territory that has examination responsibility for your return. 2010 tax return form If your request lacks essential information, you will be notified and given 30 days to provide the missing information. 2010 tax return form   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. 2010 tax return form O. 2010 tax return form Box 27720 McPherson Station Washington, DC 20038 Refunds. 2010 tax return form   You can withdraw your request for a Statement of Value at any time before it is issued. 2010 tax return form However, the IRS will not refund the user fee if you do. 2010 tax return form   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. 2010 tax return form Authenticity. 2010 tax return form   The authenticity of the donated art must be determined by the appraiser. 2010 tax return form Physical condition. 2010 tax return form   Important items in the valuation of antiques and art are physical condition and extent of restoration. 2010 tax return form These have a significant effect on the value and must be fully reported in an appraisal. 2010 tax return form An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. 2010 tax return form Art appraisers. 2010 tax return form   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. 2010 tax return form Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. 2010 tax return form Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. 2010 tax return form They can report more recent comparable sales to support their opinion. 2010 tax return form   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. 2010 tax return form It lists museums both by state and by category. 2010 tax return form   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. 2010 tax return form The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. 2010 tax return form You may be able to find a qualified appraiser on the Internet. 2010 tax return form You may also contact associations of dealers for guidance. 2010 tax return form Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. 2010 tax return form Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. 2010 tax return form Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. 2010 tax return form Reference material. 2010 tax return form   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. 2010 tax return form When using one of these price guides, you must use the current edition at the date of contribution. 2010 tax return form However, these sources are not always reliable indicators of FMV and should be supported by other evidence. 2010 tax return form   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. 2010 tax return form The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. 2010 tax return form The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. 2010 tax return form If you are donating a valuable collection, you should get an appraisal. 2010 tax return form If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. 2010 tax return form Stamp collections. 2010 tax return form   Most libraries have catalogs or other books that report the publisher's estimate of values. 2010 tax return form Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. 2010 tax return form Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. 2010 tax return form Coin collections. 2010 tax return form   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. 2010 tax return form Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. 2010 tax return form Another important factor is the coin's condition. 2010 tax return form For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. 2010 tax return form   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. 2010 tax return form Books. 2010 tax return form   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. 2010 tax return form This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. 2010 tax return form Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. 2010 tax return form Modest value of collection. 2010 tax return form   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. 2010 tax return form   A book that is very old, or very rare, is not necessarily valuable. 2010 tax return form There are many books that are very old or rare, but that have little or no market value. 2010 tax return form Condition of book. 2010 tax return form   The condition of a book may have a great influence on its value. 2010 tax return form Collectors are interested in items that are in fine, or at least good, condition. 2010 tax return form When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. 2010 tax return form Other factors. 2010 tax return form   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). 2010 tax return form Collectors usually want first editions of books. 2010 tax return form However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. 2010 tax return form Manuscripts, autographs, diaries, and similar items. 2010 tax return form   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. 2010 tax return form The writings of unknowns also may be of value if they are of unusual historical or literary importance. 2010 tax return form Determining the value of such material is difficult. 2010 tax return form For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. 2010 tax return form The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. 2010 tax return form Signatures. 2010 tax return form   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. 2010 tax return form But complete sets of the signatures of U. 2010 tax return form S. 2010 tax return form presidents are in demand. 2010 tax return form Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. 2010 tax return form Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. 2010 tax return form Prices are reported for each make, model, and year. 2010 tax return form These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. 2010 tax return form The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. 2010 tax return form But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. 2010 tax return form These publications are sometimes available from public libraries or at a bank, credit union, or finance company. 2010 tax return form You can also find pricing information about used cars on the Internet. 2010 tax return form An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. 2010 tax return form However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. 2010 tax return form The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. 2010 tax return form Example. 2010 tax return form You donate a used car in poor condition to a local high school for use by students studying car repair. 2010 tax return form A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. 2010 tax return form However, the guide shows the price for a private party sale of the car is only $750. 2010 tax return form The FMV of the car is considered to be no more than $750. 2010 tax return form Boats. 2010 tax return form   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. 2010 tax return form More information. 2010 tax return form   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. 2010 tax return form This rule applies if the claimed value of the donated vehicle is more than $500. 2010 tax return form In certain cases, you can deduct the vehicle's FMV. 2010 tax return form For details, see Publication 526. 2010 tax return form Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. 2010 tax return form For more information, see Publication 526. 2010 tax return form Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. 2010 tax return form However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. 2010 tax return form Generally, this means your deduction is the lesser of the property's FMV or its basis. 2010 tax return form For details, see Publication 526. 2010 tax return form Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. 2010 tax return form See Date of contribution, earlier, under What Is Fair Market Value (FMV). 2010 tax return form Selling prices on valuation date. 2010 tax return form   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. 2010 tax return form For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. 2010 tax return form You get the average price by adding $11 and $9 and dividing the sum by 2. 2010 tax return form No sales on valuation date. 2010 tax return form   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. 2010 tax return form Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. 2010 tax return form Example. 2010 tax return form   On the day you gave stock to a qualified organization, there were no sales of the stock. 2010 tax return form Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. 2010 tax return form The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. 2010 tax return form   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. 2010 tax return form This applies if these prices are published in a generally available listing or publication of general circulation. 2010 tax return form If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. 2010 tax return form See also Unavailable prices or closely held corporation, later. 2010 tax return form Bid and asked prices on valuation date. 2010 tax return form   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. 2010 tax return form Example. 2010 tax return form Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. 2010 tax return form The FMV is $15, the average price between the bid and asked prices. 2010 tax return form No prices on valuation date. 2010 tax return form   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. 2010 tax return form Both dates must be within a reasonable period. 2010 tax return form Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. 2010 tax return form Example. 2010 tax return form On the day you gave stock to a qualified organization, no prices were available. 2010 tax return form Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. 2010 tax return form The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. 2010 tax return form   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. 2010 tax return form Large blocks of stock. 2010 tax return form   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. 2010 tax return form On the other hand, market forces may exist that will afford higher prices for large blocks of stock. 2010 tax return form Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. 2010 tax return form Unavailable prices or closely held corporation. 2010 tax return form   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. 2010 tax return form For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. 2010 tax return form For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. 2010 tax return form Other factors. 2010 tax return form   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. 2010 tax return form For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. 2010 tax return form   You should keep complete financial and other information on which the valuation is based. 2010 tax return form This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. 2010 tax return form Restricted securities. 2010 tax return form   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. 2010 tax return form These restricted securities usually trade at a discount in relation to freely traded securities. 2010 tax return form   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. 2010 tax return form Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. 2010 tax return form The appraiser must be thoroughly trained in the application of appraisal principles and theory. 2010 tax return form In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. 2010 tax return form The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. 2010 tax return form The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. 2010 tax return form In general, there are three main approaches to the valuation of real estate. 2010 tax return form An appraisal may require the combined use of two or three methods rather than one method only. 2010 tax return form 1. 2010 tax return form Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. 2010 tax return form The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. 2010 tax return form If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. 2010 tax return form , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. 2010 tax return form For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. 2010 tax return form The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. 2010 tax return form Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. 2010 tax return form Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. 2010 tax return form 2. 2010 tax return form Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. 2010 tax return form The key elements are the determination of the income to be capitalized and the rate of capitalization. 2010 tax return form 3. 2010 tax return form Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. 2010 tax return form Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. 2010 tax return form Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. 2010 tax return form Generally, this method serves to support the value determined from other methods. 2010 tax return form When the replacement cost method is applied to improved realty, the land and improvements are valued separately. 2010 tax return form The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. 2010 tax return form This cost represents the total cost of labor and material, overhead, and profit. 2010 tax return form After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. 2010 tax return form Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. 2010 tax return form The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. 2010 tax return form The value of the goodwill of the business should also be taken into consideration. 2010 tax return form You should keep complete financial and other information on which you base the valuation. 2010 tax return form This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. 2010 tax return form Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. 2010 tax return form The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. 2010 tax return form To determine present value, you must know the applicable interest rate and use actuarial tables. 2010 tax return form Interest rate. 2010 tax return form   The applicable interest rate varies. 2010 tax return form It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. 2010 tax return form The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. 2010 tax return form You can call the IRS office at 1-800-829-1040 to obtain this rate. 2010 tax return form Actuarial tables. 2010 tax return form   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. 2010 tax return form   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). 2010 tax return form Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. 2010 tax return form For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. 2010 tax return form   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. 2010 tax return form Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. 2010 tax return form You can download Publications 1457 and 1458 from www. 2010 tax return form irs. 2010 tax return form gov. 2010 tax return form In addition, they are available for purchase via the website of the U. 2010 tax return form S. 2010 tax return form Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. 2010 tax return form O. 2010 tax return form Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. 2010 tax return form 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. 2010 tax return form 664-4(e), and other transfers in Regulation 20. 2010 tax return form 2031-7(d)(6). 2010 tax return form Special factors. 2010 tax return form   If you need a special factor for an actual transaction, you can request a letter ruling. 2010 tax return form Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. 2010 tax return form Also include copies of the relevant instruments. 2010 tax return form IRS charges a user fee for providing special factors. 2010 tax return form   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. 2010 tax return form R. 2010 tax return form B. 2010 tax return form 1. 2010 tax return form Revenue Procedure 2006-1 is available at www. 2010 tax return form irs. 2010 tax return form gov/irb/2006-01_IRB/ar06. 2010 tax return form html. 2010 tax return form   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. 2010 tax return form Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. 2010 tax return form But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. 2010 tax return form If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. 2010 tax return form Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. 2010 tax return form However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. 2010 tax return form Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. 2010 tax return form To determine this value, you must know the FMV of the property on the date of the contribution. 2010 tax return form Multiply this value by the appropriate factor. 2010 tax return form Publications 1457 and 1458 contain these factors. 2010 tax return form You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). 2010 tax return form You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. 2010 tax return form See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. 2010 tax return form You can download Publication 1459 from www. 2010 tax return form irs. 2010 tax return form gov. 2010 tax return form For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. 2010 tax return form If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. 2010 tax return form This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. 2010 tax return form Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. 2010 tax return form For more information, see section 1. 2010 tax return form 170A-12 of the Income Tax Regulations. 2010 tax return form Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. 2010 tax return form It must extend over the entire term of your interest in the property. 2010 tax return form For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. 2010 tax return form You can claim a deduction for the contribution if you do not have any other interest in the property. 2010 tax return form To figure the value of a contribution involving a partial interest, see Publication 1457. 2010 tax return form If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. 2010 tax return form Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. 2010 tax return form Qualified organization. 2010 tax return form   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. 2010 tax return form , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. 2010 tax return form The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. 2010 tax return form Conservation purposes. 2010 tax return form   Your contribution must be made only for one of the following conservation purposes. 2010 tax return form Preserving land areas for outdoor recreation by, or for the education of, the general public. 2010 tax return form Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. 2010 tax return form Preserving open space, including farmland and forest land, if it yields a significant public benefit. 2010 tax return form It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. 2010 tax return form Preserving a historically important land area or a certified historic structure. 2010 tax return form There must be some visual public access to the property. 2010 tax return form Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. 2010 tax return form Building in registered historic district. 2010 tax return form   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. 2010 tax return form The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. 2010 tax return form You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. 2010 tax return form If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. 2010 tax return form   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. 2010 tax return form See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. 2010 tax return form Qualified real property interest. 2010 tax return form   This is any of the following interests in real property. 2010 tax return form Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). 2010 tax return form A remainder interest. 2010 tax return form A restriction (granted in perpetuity) on the use that may be made of the real property. 2010 tax return form Valuation. 2010 tax return form   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. 2010 tax return form If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. 2010 tax return form If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. 2010 tax return form   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. 2010 tax return form If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. 2010 tax return form   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. 2010 tax return form If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. 2010 tax return form   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. 2010 tax return form You should also consider any zoning, conservation, or historical preservation laws that would restrict development. 2010 tax return form Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. 2010 tax return form Example. 2010 tax return form   You own 10 acres of farmland. 2010 tax return form Similar land in the area has an FMV of $2,000 an acre. 2010 tax return form However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. 2010 tax return form Your county wants to preserve open space and prevent further development in your area. 2010 tax return form   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. 2010 tax return form The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. 2010 tax return form More information. 2010 tax return form   For more information about qualified conservation contributions, see Publication 526. 2010 tax return form Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. 2010 tax return form (There is one exception, described next, for certain clothing and household items. 2010 tax return form ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. 2010 tax return form There are exceptions. 2010 tax return form See Deductions of More Than $5,000, later. 2010 tax return form The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. 2010 tax return form An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. 2010 tax return form The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. 2010 tax return form The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. 2010 tax return form The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. 2010 tax return form All facts associated with the donation must be considered. 2010 tax return form Deduction over $500 for certain clothing or household items. 2010 tax return form   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. 2010 tax return form See Household Goods and Used Clothing, earlier. 2010 tax return form Cost of appraisals. 2010 tax return form   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. 2010 tax return form However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. 2010 tax return form Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. 2010 tax return form There are exceptions, discussed later. 2010 tax return form You should keep the appraiser's report with your written records. 2010 tax return form Records are discussed in Publication 526. 2010 tax return form The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. 2010 tax return form For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. 2010 tax return form You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. 2010 tax return form Exceptions. 2010 tax return form   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. 2010 tax return form   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. 2010 tax return form Publicly traded securities. 2010 tax return form   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. 2010 tax return form Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. 2010 tax return form   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. 2010 tax return form   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. 2010 tax return form A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. 2010 tax return form   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. 2010 tax return form Bid and asked quotations are not taken into account. 2010 tax return form   The computation period is weekly during October through December and monthly during January through September. 2010 tax return form The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. 2010 tax return form Nonpublicly traded stock. 2010 tax return form   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. 2010 tax return form However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. 2010 tax return form Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. 2010 tax return form This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. 2010 tax return form If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. 2010 tax return form Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. 2010 tax return form You must also complete Form 8283, Section B, and attach it to your tax return. 2010 tax return form See Deductions of More Than $5,000, earlier. 2010 tax return form A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. 2010 tax return form 170A-13(c)(3) and Notice 2006-96, 2006-46 I. 2010 tax return form R. 2010 tax return form B. 2010 tax return form 902 (available at www. 2010 tax return form irs. 2010 tax return form gov/irb/2006-46_IRB/ar13. 2010 tax return form html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). 2010 tax return form You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. 2010 tax return form If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. 2010 tax return form Form 8283, Section B, must be attached to your tax return. 2010 tax return form Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. 2010 tax return form There are four exceptions. 2010 tax return form If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. 2010 tax return form See Paintings, Antiques, and Other Objects of Art, earlier. 2010 tax return form If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. 2010 tax return form See Deductions of More Than $500,000, earlier. 2010 tax return form If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. 2010 tax return form See Deduction over $500 for certain clothing or household items, earlier. 2010 tax return form If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. 2010 tax return form See Building in registered historic district, earlier. 2010 tax return form Prohibited appraisal fee. 2010 tax return form   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. 2010 tax return form If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. 2010 tax return form However, appraisals are not disqualified when an otherwise prohi
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More than Half of all Income Tax Returns Have Been Received. IRS Issues Publication on Business Expenses

 

IR-2014-32, March 20, 2014

WASHINGTON — With the tax deadline getting closer, the IRS has received more than half of all the returns it expects to receive during 2014, the agency announced today. The IRS received more than 75 million individual tax returns as of March 14 and projects that it will receive about 149 million individual income tax returns by the end of the year.

Millions of individual tax filers have business income either as sole proprietors or as sub contractors. Many individual filers also have unreimbursed business expenses. The IRS recently issued Publication 535, Business Expenses, which provides valuable information for these filers. The publication contains useful hints for Tax Year 2013, for which many taxpayers are still completing returns and for Tax Year 2014, for which taxpayers are tracking expenses and making financial decisions.

For Tax Year 2013

Optional safe harbor method to determine the business use of a home deduction, also known as the simplified option for claiming the home office deduction. Beginning in 2013, taxpayers can use the optional safe harbor method to determine the deduction for the business use of a home. 

Standard mileage rate. Beginning in 2013, the standard mileage rate for the cost of operating a car, van, pickup, or panel truck for each mile of business use is 56.5 cents per mile.

Additional Medicare Tax. Beginning in 2013, a 0.9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than:

  • $125,000 if married filing separately,
  • $250,000 if married filing jointly, or
  • $200,000 if single, head of household, or qualifying widow(er) with dependent child.

Medicare wages and self-employment income are combined to determine if a taxpayer’s income exceeds the threshold. RRTA compensation should be separately compared to the threshold. 

For Tax Year 2014

Standard mileage rate. Beginning in 2014, the standard mileage rate for the cost of operating a car, van, pickup, or panel truck for each mile of business use is 56 cents per mile.

  [The filing season statistics table follows.]

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2014 FILING SEASON STATISTICS

Cumulative statistics comparing 3/15/13 and 3/14/14

Individual Income Tax Returns:

2013

2014

% Change

Total Receipts

74,882,000

75,100,000

0.3

Total Processed

69,153,000

73,157,000

5.8

 

 

 

 

E-filing Receipts:

 

 

 

TOTAL           

68,029,000

68,966,000

1.4

Tax Professionals

40,117,000

39,413,000

-1.8

Self-prepared

27,912,000

29,553,000

5.9

 

 

 

 

Web Usage:

 

 

 

Visits to IRS.gov

218,469,657

195,637,190

-10.4

 

 

 

 

Total Refunds:

 

 

 

Number

60,243,000

61,645,000

2.3

Amount

$172.494

Billion

$179.793

Billion

4.2

Average refund

$2,863

$2,917

1.9

 

 

 

 

Direct Deposit Refunds:

 

 

 

Number

52,414,000

52,770,000

0.7

Amount

$157.786

Billion

$158.983

Billion

0.8

Average refund

$3,010

$3,013

0.08

 

Page Last Reviewed or Updated: 21-Mar-2014

The 2010 Tax Return Form

2010 tax return form Publication 503 - Main Content Table of Contents Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. 2010 tax return form Employment Taxes for Household Employers How To Get Tax HelpLow Income Taxpayer Clinics Tests To Claim the Credit To be able to claim the credit for child and dependent care expenses, you must file Form 1040, Form 1040A, or Form 1040NR, not Form 1040EZ or Form 1040NR-EZ, and meet all the following tests. 2010 tax return form The care must be for one or more qualifying persons who are identified on Form 2441. 2010 tax return form (See Qualifying Person Test. 2010 tax return form ) You (and your spouse if filing jointly) must have earned income during the year. 2010 tax return form (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. 2010 tax return form ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. 2010 tax return form (See Work-Related Expense Test, later. 2010 tax return form ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. 2010 tax return form If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. 2010 tax return form You cannot make payments to: Your spouse, or The parent of your qualifying person if your qualifying person is your child and under age 13. 2010 tax return form See Payments to Relatives or Dependents under Work-Related Expense Test, later. 2010 tax return form Your filing status may be single, head of household, or qualifying widow(er) with dependent child. 2010 tax return form If you are married, you must file a joint return, unless an exception applies to you. 2010 tax return form See Joint Return Test, later. 2010 tax return form You must identify the care provider on your tax return. 2010 tax return form (See Provider Identification Test, later. 2010 tax return form ) If you exclude or deduct dependent care benefits provided by a dependent care benefit plan, the total amount you exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person was cared for or $6,000 if two or more qualifying persons were cared for). 2010 tax return form (If two or more qualifying persons were cared for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or deduct is limited to $5,000. 2010 tax return form See Reduced Dollar Limit under How To Figure the Credit, later. 2010 tax return form ) These tests are presented in Figure A and are also explained in detail in this publication. 2010 tax return form Qualifying Person Test Your child and dependent care expenses must be for the care of one or more qualifying persons. 2010 tax return form A qualifying person is: Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents living apart , later), Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. 2010 tax return form Dependent defined. 2010 tax return form   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. 2010 tax return form To be your dependent, a person must be your qualifying child (or your qualifying relative). 2010 tax return form Qualifying child. 2010 tax return form   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. 2010 tax return form More information. 2010 tax return form   For more information about who is a dependent or a qualifying child, see Publication 501. 2010 tax return form Physically or mentally not able to care for oneself. 2010 tax return form   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. 2010 tax return form Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. 2010 tax return form Person qualifying for part of year. 2010 tax return form   You determine a person's qualifying status each day. 2010 tax return form For example, if the person for whom you pay child and dependent care expenses no longer qualifies on September 16, count only those expenses through September 15. 2010 tax return form Also see Yearly limit under Dollar Limit, later. 2010 tax return form Birth or death of otherwise qualifying person. 2010 tax return form   In determining whether a person is a qualifying person, a person who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the person's home more than half the time he or she was alive in 2013. 2010 tax return form Taxpayer identification number. 2010 tax return form   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). 2010 tax return form If the correct information is not shown, the credit may be reduced or disallowed. 2010 tax return form Individual taxpayer identification number (ITIN) for aliens. 2010 tax return form   If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), use that person's ITIN. 2010 tax return form The ITIN is entered wherever an SSN is requested on a tax return. 2010 tax return form If the alien does not have an ITIN, he or she must apply for one. 2010 tax return form See Form W-7, Application for IRS Individual Taxpayer Identification Number, for details. 2010 tax return form   An ITIN is for tax use only. 2010 tax return form It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. 2010 tax return form S. 2010 tax return form law. 2010 tax return form Adoption taxpayer identification number (ATIN). 2010 tax return form   If your qualifying person is a child who was placed in your home for adoption and for whom you do not have an SSN, you must get an ATIN for the child. 2010 tax return form File Form W-7A, Application for Taxpayer Identification Number for Pending U. 2010 tax return form S. 2010 tax return form Adoptions. 2010 tax return form Child of divorced or separated parents or parents living apart. 2010 tax return form   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if: The child was under age 13 or was not physically or mentally able to care for himself or herself, The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the calendar year, The child was in the custody of one or both parents for more than half the year, and You were the child's custodial parent. 2010 tax return form   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. 2010 tax return form If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. 2010 tax return form For details and an exception for a parent who works at night, see Publication 501. 2010 tax return form   The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents. 2010 tax return form Please click here for the text description of the image. 2010 tax return form Figure a. 2010 tax return form Can you claim the credit Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. 2010 tax return form Earned income. 2010 tax return form   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. 2010 tax return form A net loss from self-employment reduces earned income. 2010 tax return form Earned income also includes strike benefits and any disability pay you report as wages. 2010 tax return form   Generally, only taxable compensation is included. 2010 tax return form However, you can elect to include nontaxable combat pay in earned income. 2010 tax return form If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. 2010 tax return form (In other words, if one of you makes the election, the other one can also make it but does not have to. 2010 tax return form ) Including this income will give you a larger credit only if your (or your spouse's) other earned income is less than the amount entered on line 3 of Form 2441. 2010 tax return form You should figure your credit both ways and make the election if it gives you a greater tax benefit. 2010 tax return form    You can choose to include your nontaxable combat pay in earned income when figuring your credit for child and dependent care expenses, even if you choose not to include it in earned income for the earned income credit or the exclusion or deduction for dependent care benefits. 2010 tax return form Members of certain religious faiths opposed to social security. 2010 tax return form   This section is for persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes. 2010 tax return form These forms are: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, and Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits, for use by members of recognized religious groups. 2010 tax return form   Each form is discussed here in terms of what is or is not earned income for purposes of the child and dependent care credit. 2010 tax return form For information on the use of these forms, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2010 tax return form Form 4361. 2010 tax return form   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee are earned income. 2010 tax return form This includes wages, salaries, tips, and other taxable employee compensation. 2010 tax return form   However, amounts you received for ministerial duties, but not as an employee, do not count as earned income. 2010 tax return form Examples include fees for performing marriages and honoraria for delivering speeches. 2010 tax return form   Any amount you received for work that is not related to your ministerial duties is earned income. 2010 tax return form Form 4029. 2010 tax return form   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation are earned income. 2010 tax return form   However, amounts you received as a self-employed individual do not count as earned income. 2010 tax return form What is not earned income?   Earned income does not include: Pensions and annuities, Social security and railroad retirement benefits, Workers' compensation, Interest and dividends, Unemployment compensation, Scholarships or fellowship grants, except for those reported on Form W-2 and paid to you for teaching or other services, Nontaxable workfare payments, Child support payments received, Income of a nonresident alien that is not effectively connected with a U. 2010 tax return form S. 2010 tax return form trade or business, or Any amount received for work while an inmate in a penal institution. 2010 tax return form Rule for student-spouse or spouse not able to care for self. 2010 tax return form   Your spouse is treated as having earned income for any month that he or she is: A full-time student, or Physically or mentally not able to care for himself or herself. 2010 tax return form (Your spouse also must live with you for more than half the year. 2010 tax return form )   If you are filing a joint return, this rule also applies to you. 2010 tax return form You can be treated as having earned income for any month you are a full-time student or not able to care for yourself. 2010 tax return form   Figure the earned income of the nonworking spouse, described under (1) or (2) above, as shown under Earned Income Limit under How To Figure the Credit, later. 2010 tax return form   This rule applies to only one spouse for any one month. 2010 tax return form If, in the same month, both you and your spouse do not work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month. 2010 tax return form Full-time student. 2010 tax return form    You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full time. 2010 tax return form You must have been a full-time student for some part of each of 5 calendar months during the year. 2010 tax return form (The months need not be consecutive. 2010 tax return form ) School. 2010 tax return form   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. 2010 tax return form A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. 2010 tax return form Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. 2010 tax return form Expenses are considered work-related only if both of the following are true. 2010 tax return form They allow you (and your spouse if filing jointly) to work or look for work. 2010 tax return form They are for a qualifying person's care. 2010 tax return form Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. 2010 tax return form If you are married, generally both you and your spouse must work or look for work. 2010 tax return form One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. 2010 tax return form Your work can be for others or in your own business or partnership. 2010 tax return form It can be either full time or part time. 2010 tax return form Work also includes actively looking for work. 2010 tax return form However, if you do not find a job and have no earned income for the year, you cannot take this credit. 2010 tax return form See Earned Income Test, earlier. 2010 tax return form An expense is not considered work-related merely because you had it while you were working. 2010 tax return form The purpose of the expense must be to allow you to work. 2010 tax return form Whether your expenses allow you to work or look for work depends on the facts. 2010 tax return form Example 1. 2010 tax return form The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. 2010 tax return form Example 2. 2010 tax return form You work during the day. 2010 tax return form Your spouse works at night and sleeps during the day. 2010 tax return form You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. 2010 tax return form Your expenses are considered work-related. 2010 tax return form Volunteer work. 2010 tax return form   For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. 2010 tax return form Work for part of year. 2010 tax return form   If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. 2010 tax return form For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work related. 2010 tax return form However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (2½ months × $250). 2010 tax return form Temporary absence from work. 2010 tax return form   You do not have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. 2010 tax return form Instead, you can figure your credit including the expenses you paid for the period of absence. 2010 tax return form   An absence of 2 weeks or less is a short, temporary absence. 2010 tax return form An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. 2010 tax return form Example. 2010 tax return form You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. 2010 tax return form You become ill and miss 4 months of work but receive sick pay. 2010 tax return form You continue to pay the nanny to care for the children while you are ill. 2010 tax return form Your absence is not a short, temporary absence, and your expenses are not considered work-related. 2010 tax return form Part-time work. 2010 tax return form   If you work part-time, you generally must figure your expenses for each day. 2010 tax return form However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. 2010 tax return form Any day when you work at least 1 hour is a day of work. 2010 tax return form Example 1. 2010 tax return form You work 3 days a week. 2010 tax return form While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. 2010 tax return form You can pay the center $150 for any 3 days a week or $250 for 5 days a week. 2010 tax return form Your child attends the center 5 days a week. 2010 tax return form Your work-related expenses are limited to $150 a week. 2010 tax return form Example 2. 2010 tax return form The facts are the same as in Example 1 except the center does not offer a 3-day option. 2010 tax return form The entire $250 weekly fee may be a work-related expense. 2010 tax return form Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. 2010 tax return form You do not have to choose the least expensive way of providing the care. 2010 tax return form The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost. 2010 tax return form Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. 2010 tax return form Expenses for household services qualify if part of the services is for the care of qualifying persons. 2010 tax return form See Household Services, later. 2010 tax return form Expenses not for care. 2010 tax return form   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. 2010 tax return form However, you can include small amounts paid for these items if they are incidental to and cannot be separated from the cost of caring for the qualifying person. 2010 tax return form Otherwise, see the discussion of Expenses partly work-related, later. 2010 tax return form   Child support payments are not for care and do not qualify for the credit. 2010 tax return form Education. 2010 tax return form   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. 2010 tax return form   Expenses to attend kindergarten or a higher grade are not expenses for care. 2010 tax return form Do not use these expenses to figure your credit. 2010 tax return form   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. 2010 tax return form   Summer school and tutoring programs are not for care. 2010 tax return form Example 1. 2010 tax return form You take your 3-year-old child to a nursery school that provides lunch and a few educational activities as part of its preschool childcare service. 2010 tax return form The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. 2010 tax return form You can count the total cost when you figure the credit. 2010 tax return form Example 2. 2010 tax return form You place your 10-year-old child in a boarding school so you can work full time. 2010 tax return form Only the part of the boarding school expense that is for the care of your child is a work-related expense. 2010 tax return form You can count that part of the expense in figuring your credit if it can be separated from the cost of education. 2010 tax return form You cannot count any part of the amount you pay the school for your child's education. 2010 tax return form Care outside your home. 2010 tax return form   You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home. 2010 tax return form Dependent care center. 2010 tax return form   You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers. 2010 tax return form   A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit. 2010 tax return form Camp. 2010 tax return form   The cost of sending your child to an overnight camp is not considered a work-related expense. 2010 tax return form    The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. 2010 tax return form Transportation. 2010 tax return form   If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. 2010 tax return form This includes transportation by bus, subway, taxi, or private car. 2010 tax return form However, transportation not provided by a care provider is not for the care of a qualifying person. 2010 tax return form Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for care of a qualifying person. 2010 tax return form Fees and deposits. 2010 tax return form   Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they are not directly for care. 2010 tax return form However, a forfeited deposit is not for the care of a qualifying person if care is not provided. 2010 tax return form Example 1. 2010 tax return form You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. 2010 tax return form The fee you paid is a work-related expense. 2010 tax return form Example 2. 2010 tax return form You placed a deposit with a preschool to reserve a place for your 3-year-old child. 2010 tax return form You later sent your child to a different preschool and forfeited the deposit. 2010 tax return form The forfeited deposit is not for care and so is not a work-related expense. 2010 tax return form Household Services Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person. 2010 tax return form Definition. 2010 tax return form   Household services are ordinary and usual services done in and around your home that are necessary to run your home. 2010 tax return form They include the services of a housekeeper, maid, or cook. 2010 tax return form However, they do not include the services of a chauffeur, bartender, or gardener. 2010 tax return form Housekeeper. 2010 tax return form   In this publication, the term housekeeper refers to any household employee whose services include the care of a qualifying person. 2010 tax return form Expenses partly work-related. 2010 tax return form   If part of an expense is work-related (for either household services or the care of a qualifying person) and part is for other purposes, you have to divide the expense. 2010 tax return form To figure your credit, count only the part that is work-related. 2010 tax return form However, you do not have to divide the expense if only a small part is for other purposes. 2010 tax return form Example. 2010 tax return form You pay a housekeeper to care for your 9-year-old and 15-year-old children so you can work. 2010 tax return form The housekeeper spends most of the time doing normal household work and spends 30 minutes a day driving you to and from work. 2010 tax return form You do not have to divide the expenses. 2010 tax return form You can treat the entire expense of the housekeeper as work-related because the time spent driving is minimal. 2010 tax return form Nor do you have to divide the expenses between the two children, even though the expenses are partly for the 15-year-old child who is not a qualifying person, because the expense is also partly for the care of your 9-year-old child, who is a qualifying person. 2010 tax return form However, the dollar limit (discussed later) is based on one qualifying person, not two. 2010 tax return form Meals and lodging provided for housekeeper. 2010 tax return form   If you have expenses for meals that your housekeeper eats in your home because of his or her employment, count these as work-related expenses. 2010 tax return form If you have extra expenses for providing lodging in your home to the housekeeper, count these as work-related expenses also. 2010 tax return form Example. 2010 tax return form To provide lodging to the housekeeper, you move to an apartment with an extra bedroom. 2010 tax return form You can count the extra rent and utility expenses for the housekeeper's bedroom as work-related. 2010 tax return form However, if your housekeeper moves into an existing bedroom in your home, you can count only the extra utility expenses as work-related. 2010 tax return form Taxes paid on wages. 2010 tax return form   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. 2010 tax return form For more information on a household employer's tax responsibilities, see Employment Taxes for Household Employers, later. 2010 tax return form Payments to Relatives or Dependents You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. 2010 tax return form However, do not count any amounts you pay to: A dependent for whom you (or your spouse if filing jointly) can claim an exemption, Your child who was under age 19 at the end of the year, even if he or she is not your dependent, A person who was your spouse any time during the year, or The parent of your qualifying person if your qualifying person is your child and under age 13. 2010 tax return form Joint Return Test Generally, married couples must file a joint return to take the credit. 2010 tax return form However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. 2010 tax return form Legally separated. 2010 tax return form   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. 2010 tax return form You may be eligible to take the credit on your return using head of household filing status. 2010 tax return form Married and living apart. 2010 tax return form   You are not considered married and are eligible to take the credit if all the following apply. 2010 tax return form You file a return apart from your spouse. 2010 tax return form Your home is the home of a qualifying person for more than half the year. 2010 tax return form You pay more than half the cost of keeping up your home for the year. 2010 tax return form Your spouse does not live in your home for the last 6 months of the year. 2010 tax return form Costs of keeping up a home. 2010 tax return form   The costs of keeping up a home normally include property taxes, mortgage interest, rent, utility charges, home repairs, insurance on the home, and food eaten at home. 2010 tax return form   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. 2010 tax return form   They also do not include the purchase, permanent improvement, or replacement of property. 2010 tax return form For example, you cannot include the cost of replacing a water heater. 2010 tax return form However, you can include the cost of repairing a water heater. 2010 tax return form Death of spouse. 2010 tax return form   If your spouse died during the year and you do not remarry before the end of the year, you generally must file a joint return to take the credit. 2010 tax return form If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's own return. 2010 tax return form Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. 2010 tax return form Use Form 2441, Part I, to show the information. 2010 tax return form If you do not have any care providers and you are filing Form 2441 only to report taxable income in Part III, enter “none” in line 1, column (a). 2010 tax return form Information needed. 2010 tax return form   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. 2010 tax return form    If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. 2010 tax return form If the care provider is an organization, then it is the employer identification number (EIN). 2010 tax return form   You do not have to show the taxpayer identification number if the care provider is a tax-exempt organization (such as a church or school). 2010 tax return form In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. 2010 tax return form   If you cannot provide all of the information or the information is incorrect, you must be able to show that you used due diligence (discussed later) in trying to furnish the necessary information. 2010 tax return form Getting the information. 2010 tax return form    You can use Form W-10, Dependent Care Provider's Identification and Certification, to request the required information from the care provider. 2010 tax return form If you do not use Form W-10, you can get the information from one of the other sources listed in the instructions for Form W-10, including: A copy of the provider's social security card, A copy of the provider's completed Form W-4, Employee's Withholding Allowance Certificate, if he or she is your household employee, A copy of the statement furnished by your employer if the provider is your employer's dependent care plan, or A letter or invoice from the provider if it shows the necessary information. 2010 tax return form    You should keep this information with your tax records. 2010 tax return form Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. 2010 tax return form Due diligence. 2010 tax return form   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. 2010 tax return form However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. 2010 tax return form   You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information just listed. 2010 tax return form Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. 2010 tax return form Provider refusal. 2010 tax return form    If the provider refuses to give you the identifying information, you should report on Form 2441 whatever information you have (such as the name and address). 2010 tax return form Enter “See Attached Statement” in the columns calling for the information you do not have. 2010 tax return form Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. 2010 tax return form Be sure to write your name and social security number on this statement. 2010 tax return form The statement will show that you used due diligence in trying to furnish the necessary information. 2010 tax return form U. 2010 tax return form S. 2010 tax return form citizens and resident aliens living abroad. 2010 tax return form   If you are living abroad, your care provider may not have, and may not be required to get, a U. 2010 tax return form S. 2010 tax return form taxpayer identification number (for example, an SSN or an EIN). 2010 tax return form If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. 2010 tax return form How To Figure the Credit Your credit is a percentage of your work-related expenses. 2010 tax return form Your expenses are subject to the earned income limit and the dollar limit. 2010 tax return form The percentage is based on your adjusted gross income. 2010 tax return form Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. 2010 tax return form Expenses prepaid in an earlier year. 2010 tax return form   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. 2010 tax return form Claim the expenses for the later year as if they were actually paid in that later year. 2010 tax return form Expenses not paid until the following year. 2010 tax return form   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. 2010 tax return form You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. 2010 tax return form See Payments for prior year's expenses under Amount of Credit, later. 2010 tax return form If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. 2010 tax return form You may be able to claim a credit for them on your 2014 return. 2010 tax return form Expenses reimbursed. 2010 tax return form   If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses. 2010 tax return form Example. 2010 tax return form You paid work-related expenses of $3,000. 2010 tax return form You are reimbursed $2,000 by a state social services agency. 2010 tax return form You can use only $1,000 to figure your credit. 2010 tax return form Medical expenses. 2010 tax return form   Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. 2010 tax return form You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. 2010 tax return form   If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. 2010 tax return form However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. 2010 tax return form For information on medical expenses, see Publication 502, Medical and Dental Expenses. 2010 tax return form    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. 2010 tax return form Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. 2010 tax return form See Reduced Dollar Limit, later. 2010 tax return form But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. 2010 tax return form Dependent care benefits. 2010 tax return form    Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. 2010 tax return form Your salary may have been reduced to pay for these benefits. 2010 tax return form If you received benefits as an employee, they should be shown in box 10 of your Form W-2, Wage and Tax Statement. 2010 tax return form See Statement for employee, later. 2010 tax return form Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. 2010 tax return form   Enter the amount of these benefits on Form 2441, Part III, line 12. 2010 tax return form Exclusion or deduction. 2010 tax return form   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. 2010 tax return form Your employer can tell you whether your benefit plan qualifies. 2010 tax return form To claim the exclusion, you must complete Part III of Form 2441. 2010 tax return form You cannot use Form 1040EZ. 2010 tax return form   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. 2010 tax return form Therefore, you would not get an exclusion from wages. 2010 tax return form Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. 2010 tax return form To claim the deduction, you must use Form 2441. 2010 tax return form   The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). 2010 tax return form   The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. 2010 tax return form    You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses. 2010 tax return form Statement for employee. 2010 tax return form   Your employer must give you a Form W-2 (or similar statement), showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. 2010 tax return form Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. 2010 tax return form Effect of exclusion on credit. 2010 tax return form   If you exclude dependent care benefits from your income, the amount of the excluded benefits: Is not included in your work-related expenses, and Reduces the dollar limit, discussed later. 2010 tax return form Earned Income Limit The amount of work-related expenses you use to figure your credit cannot be more than: Your earned income for the year, if you are single at the end of the year, or The smaller of your or your spouse's earned income for the year if you are married at the end of the year. 2010 tax return form Earned income for the purpose of figuring the credit is defined under Earned Income Test, earlier. 2010 tax return form For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year. 2010 tax return form Example. 2010 tax return form You remarried on December 3. 2010 tax return form Your earned income for the year was $18,000. 2010 tax return form Your new spouse's earned income for the year was $2,000. 2010 tax return form You paid work-related expenses of $3,000 for the care of your 5-year-old child and qualified to claim the credit. 2010 tax return form The amount of expenses you use to figure your credit cannot be more than $2,000 (the smaller of your earned income or that of your spouse). 2010 tax return form Separated spouse. 2010 tax return form   If you are legally separated or married and living apart from your spouse (as described under Joint Return Test, earlier), you are not considered married for purposes of the earned income limit. 2010 tax return form Use only your income in figuring the earned income limit. 2010 tax return form Surviving spouse. 2010 tax return form   If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year. 2010 tax return form Community property laws. 2010 tax return form   Disregard community property laws when you figure earned income for this credit. 2010 tax return form Self-employment earnings. 2010 tax return form   If you are self-employed, include your net earnings in earned income. 2010 tax return form For purposes of the child and dependent care credit, net earnings from self-employment generally means the amount from Schedule SE (either Section A or Section B), line 3, minus any deduction for self-employment tax on Form 1040 or Form 1040NR, line 27. 2010 tax return form Include your self-employment earnings in earned income, even if they are less than $400 and you did not file Schedule SE. 2010 tax return form Clergy or church employee. 2010 tax return form   If you are a member of the clergy or a church employee, see the Instructions for Form 2441 for details. 2010 tax return form Statutory employee. 2010 tax return form   If you filed Schedule C (Form 1040) or C-EZ (Form 1040) to report income as a statutory employee, also include as earned income the amount from line 1 of that Schedule C (Form 1040) or C-EZ (Form 1040). 2010 tax return form Net loss. 2010 tax return form   You must reduce your earned income by any net loss from self-employment. 2010 tax return form Optional method if earnings are low or a net loss. 2010 tax return form   If your net earnings from self-employment are low or you have a net loss, you may be able to figure your net earnings by using an optional method instead of the regular method. 2010 tax return form Get Publication 334, Tax Guide for Small Business, for details. 2010 tax return form If you use an optional method to figure net earnings for self-employment tax purposes, include those net earnings in your earned income for this credit. 2010 tax return form In this case, subtract any deduction you claimed on Form 1040 or Form 1040NR, line 27, from the total of the amounts on Schedule SE, Section B, lines 3 and 4b, to figure your net earnings. 2010 tax return form You or your spouse is a student or not able to care for self. 2010 tax return form   Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. 2010 tax return form His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. 2010 tax return form Spouse works. 2010 tax return form   If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. 2010 tax return form Spouse qualifies for part of month. 2010 tax return form   If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. 2010 tax return form You are a student or not able to care for self. 2010 tax return form   These rules also apply if you are a student or not able to care for yourself and are filing a joint return. 2010 tax return form For each month or part of a month you are a student or not able to care for yourself, your earned income is considered to be at least $250 (or $500). 2010 tax return form If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. 2010 tax return form Both spouses qualify. 2010 tax return form   If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. 2010 tax return form Example. 2010 tax return form Jim works and keeps up a home for himself and his wife Sharon. 2010 tax return form Because of an accident, Sharon is not able to care for herself for 11 months during the tax year. 2010 tax return form During the 11 months, Jim pays $3,300 of work-related expenses for Sharon's care. 2010 tax return form These expenses also qualify as medical expenses. 2010 tax return form Their adjusted gross income is $29,000 and the entire amount is Jim's earned income. 2010 tax return form Jim and Sharon's earned income limit is the smallest of the following amounts. 2010 tax return form   Jim and Sharon's Earned Income Limit   1) Work-related expenses Jim paid $   3,300   2) Jim's earned income $   29,000   3) Income considered earned by Sharon (11 × $250) $    2,750   Jim and Sharon can use $2,750 to figure the credit and treat the balance of $550 ($3,300 − $2,750) as a medical expense. 2010 tax return form However, if they use the $3,300 first as a medical expense, they cannot use any part of that amount to figure the credit. 2010 tax return form Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. 2010 tax return form This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. 2010 tax return form If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. 2010 tax return form This limit does not need to be divided equally among them. 2010 tax return form For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit. 2010 tax return form Yearly limit. 2010 tax return form   The dollar limit is a yearly limit. 2010 tax return form The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. 2010 tax return form Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. 2010 tax return form Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. 2010 tax return form Example 1. 2010 tax return form You pay $500 a month for after-school care for your son. 2010 tax return form He turned 13 on May 1 and is no longer a qualifying person. 2010 tax return form You can use the $2,000 of expenses for his care January through April to figure your credit because it is not more than the $3,000 yearly limit. 2010 tax return form Example 2. 2010 tax return form In July of this year, to permit your spouse to begin a new job, you enrolled your 3-year-old daughter in a nursery school that provides preschool childcare. 2010 tax return form You paid $300 per month for the childcare. 2010 tax return form You can use the full $1,800 you paid ($300 × 6 months) as qualified expenses because it is not more than the $3,000 yearly limit. 2010 tax return form Reduced Dollar Limit If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. 2010 tax return form Your reduced dollar limit is figured on Form 2441, Part III. 2010 tax return form See Dependent Care Benefits, earlier, for information on excluding or deducting these benefits. 2010 tax return form Example 1. 2010 tax return form George is a widower with one child and earns $24,000 a year. 2010 tax return form He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. 2010 tax return form His employer pays an additional $1,000 under a qualified dependent care benefit plan. 2010 tax return form This $1,000 is excluded from George's income. 2010 tax return form Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. 2010 tax return form This is because his dollar limit is reduced as shown next. 2010 tax return form   George's Reduced Dollar Limit 1) Maximum allowable expenses for one qualifying person $3,000 2) Minus: Dependent care benefits George excludes from income −1,000 3) Reduced dollar limit on expenses George can use for the credit $2,000 Example 2. 2010 tax return form Randall is married and both he and his wife are employed. 2010 tax return form Each has earned income in excess of $6,000. 2010 tax return form They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. 2010 tax return form Randall's work-related expenses are $6,000 for the year. 2010 tax return form Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. 2010 tax return form Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. 2010 tax return form Although the dollar limit for his work-related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. 2010 tax return form This is because his dollar limit is reduced as shown next. 2010 tax return form   Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits selected from employer's cafeteria plan and  excluded from Randall's income −5,000 3) Reduced dollar limit on work-related expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. 2010 tax return form This percentage depends on your adjusted gross income shown on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. 2010 tax return form The following table shows the percentage to use based on adjusted gross income. 2010 tax return form   IF your adjusted gross income is: THEN the       Over:       But not over:   percentage is:       $0   —   $15,000   35%       15,000   —   17,000   34%       17,000   —   19,000   33%       19,000   —   21,000   32%       21,000   —   23,000   31%       23,000   —   25,000   30%       25,000   —   27,000   29%       27,000   —   29,000   28%       29,000   —   31,000   27%       31,000   —   33,000   26%       33,000   —   35,000   25%       35,000   —   37,000   24%       37,000   —   39,000   23%       39,000   —   41,000   22%       41,000   —   43,000   21%       43,000   —   No limit   20%   To qualify for the credit, you must have one or more qualifying persons. 2010 tax return form You should show the expenses for each person on Form 2441, line 2, column (c). 2010 tax return form However, it is possible a qualifying person could have no expenses and a second qualifying person could have expenses exceeding $3,000. 2010 tax return form You should list -0- for the one person and the actual amount for the second person. 2010 tax return form The $6,000 limit that applies to two or more qualifying persons would still be used to compute your credit unless you already excluded or deducted, in Part III of Form 2441, certain dependent care benefits paid to you (or on your behalf) by your employer. 2010 tax return form Example. 2010 tax return form Roger and Megan Paris have two qualifying children. 2010 tax return form They received $1,000 of dependent care benefits from Megan's employer during 2013, but they incurred a total of $19,500 of child and dependent care expenses. 2010 tax return form They complete Part III of Form 2441 to exclude the $1,000 from their taxable income (offsetting $1,000 of their expenses). 2010 tax return form Roger and Megan continue to line 27 to figure their credit using the remaining $18,500 of expenses. 2010 tax return form Line 30 tells them to complete line 2 without including any dependent care benefits. 2010 tax return form They complete line 2 of Form 2441, listing both Susan and James, as shown in the Line 2 example above. 2010 tax return form Line 2 Example (a) Qualifying person's name (b) Qualifying person's social security number (c) Qualified expenses you incurred and paid in 2013 for the person listed in column (a) First Last Susan Paris 123-00-6789 -0- James Paris 987-00-4321 18,500. 2010 tax return form 00 All of Susan's expenses were covered by the $1,000 of employer-provided dependent care benefits. 2010 tax return form However, their son James has special needs and they paid $18,500 for his care. 2010 tax return form Line 3 imposes a $5,000 limit for two or more children ($6,000 limit, minus $1,000 already excluded from income = $5,000) and Roger and Megan continue to complete the form. 2010 tax return form Even though line 2 indicates one of the Paris children did not have any dependent care expenses, it does not change the fact that they had two qualifying children for the purposes of Form 2441. 2010 tax return form Payments for prior year's expenses. 2010 tax return form   If you had work-related expenses in 2012 that you paid in 2013, you may be able to increase the credit on your 2013 return. 2010 tax return form Attach a statement to your form showing how you figured the additional amount from 2012. 2010 tax return form Then enter “CPYE” (Credit for Prior Year Expenses) and the amount of the credit on the dotted line next to line 9 on Form 2441. 2010 tax return form Also enter the name and taxpayer identification number of the person for whom you paid the prior year's expenses. 2010 tax return form Then add this credit to the amount on line 9, and replace the amount on line 9 with the total. 2010 tax return form See Worksheet A. 2010 tax return form Example. 2010 tax return form In 2012, Sam and Kate had childcare expenses of $2,600 for their 12-year-old child. 2010 tax return form Of the $2,600, they paid $2,000 in 2012 and $600 in 2013. 2010 tax return form Their adjusted gross income for 2012 was $30,000. 2010 tax return form Sam's earned income of $14,000 was less than Kate's earned income. 2010 tax return form A credit for their 2012 expenses paid in 2013 is not allowed in 2012. 2010 tax return form It is allowed for the 2013 tax year, but they must use their adjusted gross income for 2012 to compute the amount. 2010 tax return form The filled-in Worksheet A they used to figure this credit is shown later. 2010 tax return form Sam and Kate add the $162 from line 13 of this worksheet to their 2013 credit and enter the total on their Form 2441, line 9. 2010 tax return form They enter “CPYE $162” and their child's name and SSN in the space to the left of line 9. 2010 tax return form Worksheet A. 2010 tax return form Worksheet for 2012 Expenses Paid in 2013 Use this worksheet to figure the credit you may claim for 2012 expenses paid in 2013. 2010 tax return form 1. 2010 tax return form   Enter your 2012 qualified expenses paid in 2012 1. 2010 tax return form     2. 2010 tax return form   Enter your 2012 qualified expenses paid in 2013 2. 2010 tax return form     3. 2010 tax return form   Add the amounts on lines 1 and 2 3. 2010 tax return form     4. 2010 tax return form   Enter $3,000 if care was for one qualifying person ($6,000 if for two or more) 4. 2010 tax return form     5. 2010 tax return form   Enter any dependent care benefits received for 2012 and excluded from your income (from your 2012 Form 2441, line 25) 5. 2010 tax return form     6. 2010 tax return form   Subtract the amount on line 5 from the amount on line 4 and enter the result 6. 2010 tax return form     7. 2010 tax return form   Compare your earned income for 2012 and your spouse's earned income for 2012 and enter the smaller amount 7. 2010 tax return form     8. 2010 tax return form   Compare the amounts on lines 3, 6, and 7 and enter the smallest amount 8. 2010 tax return form     9. 2010 tax return form   Enter the amount on which you figured the credit for 2012 (from your 2012 Form 2441, line 6) 9. 2010 tax return form     10. 2010 tax return form   Subtract the amount on line 9 from the amount on line 8 and enter the result. 2010 tax return form If zero or less, stop here. 2010 tax return form You cannot increase your 2013 credit by any previous year's expenses 10. 2010 tax return form     11. 2010 tax return form   Enter your 2012 adjusted gross income (from your 2012 Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37) 11. 2010 tax return form     12. 2010 tax return form   Find your 2012 adjusted gross income in the table below and enter the corresponding decimal amount here 12. 2010 tax return form             IF your 2012 adjusted gross income is:   THEN the decimal                 Over:   But not over:     amount is:                 $0 — $15,000     . 2010 tax return form 35                 15,000 — 17,000     . 2010 tax return form 34                 17,000 — 19,000     . 2010 tax return form 33                 19,000 — 21,000     . 2010 tax return form 32                 21,000 — 23,000     . 2010 tax return form 31                 23,000 — 25,000     . 2010 tax return form 30                 25,000 — 27,000     . 2010 tax return form 29                 27,000 — 29,000     . 2010 tax return form 28                 29,000 — 31,000     . 2010 tax return form 27                 31,000 — 33,000     . 2010 tax return form 26                 33,000 — 35,000     . 2010 tax return form 25                 35,000 — 37,000     . 2010 tax return form 24                 37,000 — 39,000     . 2010 tax return form 23                 39,000 — 41,000     . 2010 tax return form 22                 41,000 — 43,000     . 2010 tax return form 21                 43,000 — No limit     . 2010 tax return form 20           13. 2010 tax return form   Multiply line 10 by line 12. 2010 tax return form Add this amount to your 2013 credit and enter the total on your 2013 Form 2441, line 9. 2010 tax return form Enter the following on the dotted line next to line 9 of Form 2441: “CPYE” The amount of this credit for a prior year's expenses           Also, attach a statement to your tax return showing the name and taxpayer identification number of the person for whom you paid the prior year's expenses and how you figured the credit 13. 2010 tax return form       Worksheet A. 2010 tax return form Filled-in Worksheet for 2012 Expenses Paid in 2013 Use this worksheet to figure the credit you may claim for 2012 expenses paid in 2013. 2010 tax return form 1. 2010 tax return form   Enter your 2012 qualified expenses paid in 2012 1. 2010 tax return form   $2,000 2. 2010 tax return form   Enter your 2012 qualified expenses paid in 2013 2. 2010 tax return form   600 3. 2010 tax return form   Add the amounts on lines 1 and 2 3. 2010 tax return form   2,600 4. 2010 tax return form   Enter $3,000 if care was for one qualifying person ($6,000 if for two or more) 4. 2010 tax return form   3,000 5. 2010 tax return form   Enter any dependent care benefits received for 2012 and excluded from your income (from your 2012 Form 2441, line 25) 5. 2010 tax return form   0 6. 2010 tax return form   Subtract the amount on line 5 from the amount on line 4 and enter the result 6. 2010 tax return form   3,000 7. 2010 tax return form   Compare your earned income for 2012 and your spouse's earned income for 2012 and enter the smaller amount 7. 2010 tax return form   14,000 8. 2010 tax return form   Compare the amounts on lines 3, 6, and 7 and enter the smallest amount 8. 2010 tax return form   2,600 9. 2010 tax return form   Enter the amount on which you figured the credit for 2012 (from your 2012 Form 2441, line 6) 9. 2010 tax return form   2,000 10. 2010 tax return form   Subtract the amount on line 9 from the amount on line 8 and enter the result. 2010 tax return form If zero or less, stop here. 2010 tax return form You cannot increase your 2013 credit by any previous year's expenses 10. 2010 tax return form   600 11. 2010 tax return form   Enter your 2012 adjusted gross income (from your 2012 Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37) 11. 2010 tax return form   30,000 12. 2010 tax return form   Find your 2012 adjusted gross income in the table below and enter the corresponding decimal amount here 12. 2010 tax return form   . 2010 tax return form 27         IF your 2012 adjusted gross income is:   THEN the decimal                 Over   But not over     amount is:                 $0 — $15,000     . 2010 tax return form 35                 15,000 — 17,000     . 2010 tax return form 34                 17,000 — 19,000     . 2010 tax return form 33                 19,000 — 21,000     . 2010 tax return form 32                 21,000 — 23,000     . 2010 tax return form 31                 23,000 — 25,000     . 2010 tax return form 30                 25,000 — 27,000     . 2010 tax return form 29                 27,000 — 29,000     . 2010 tax return form 28                 29,000 — 31,000     . 2010 tax return form 27                 31,000 — 33,000     . 2010 tax return form 26                 33,000 — 35,000     . 2010 tax return form 25                 35,000 — 37,000     . 2010 tax return form 24                 37,000 — 39,000     . 2010 tax return form 23                 39,000 — 41,000     . 2010 tax return form 22                 41,000 — 43,000     . 2010 tax return form 21                 43,000 — No limit     . 2010 tax return form 20           13. 2010 tax return form   Multiply line 10 by line 12. 2010 tax return form Add this amount to your 2013 credit and enter the total on your 2013 Form 2441, line 9. 2010 tax return form Enter the following on the dotted line next to line 9 of Form 2441: “CPYE” The amount of this credit for a prior year's expenses             Also, attach a statement to your tax return showing the name and taxpayer identification number of the person for whom you paid the prior year's expenses and how you figured the credit 13. 2010 tax return form   $162   How To Claim the Credit To claim the credit, you can file Form 1040, Form 1040A, or Form 1040NR. 2010 tax return form You cannot claim the credit on Form 1040EZ or Form 1040NR-EZ. 2010 tax return form Form 1040, Form 1040A, or Form 1040NR. 2010 tax return form    You must complete Form 2441 and attach it to your Form 1040, Form 1040A, or Form 1040NR. 2010 tax return form Enter the credit on your Form 1040, line 48; Form 1040A, line 29; or Form 1040NR, line 46. 2010 tax return form Limit on credit. 2010 tax return form    The amount of credit you can claim is limited to your tax. 2010 tax return form For more information, see the Instructions for Form 2441. 2010 tax return form Tax credit not refundable. 2010 tax return form   You cannot get a refund for any part of the credit that is more than this limit. 2010 tax return form Recordkeeping. 2010 tax return form You should keep records of your work-related expenses. 2010 tax return form Also, if your dependent or spouse is not able to care for himself or herself, your records should show both the nature and length of the disability. 2010 tax return form Other records you should keep to support your claim for the credit are described under Provider Identification Test, earlier. 2010 tax return form Employment Taxes for Household Employers If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. 2010 tax return form If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. 2010 tax return form If the individuals who work in your home are self-employed, you are not liable for any of the taxes discussed in this section. 2010 tax return form Self-employed persons who are in business for themselves are not household employees. 2010 tax return form Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. 2010 tax return form If you use a placement agency that exercises control over what work is done and how it will be done by a babysitter or companion who works in your home, the worker is not your employee. 2010 tax return form This control could include providing rules of conduct and appearance and requiring regular reports. 2010 tax return form In this case, you do not have to pay employment taxes. 2010 tax return form But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee. 2010 tax return form If you have a household employee, you may be subject to: Social security and Medicare taxes, Federal unemployment tax, and Federal income tax withholding. 2010 tax return form Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. 2010 tax return form Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. 2010 tax return form Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. 2010 tax return form For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. 2010 tax return form State employment tax. 2010 tax return form   You may also have to pay state unemployment tax. 2010 tax return form Contact your state unemployment tax office for information. 2010 tax return form You should also find out whether you need to pay or collect other state employment taxes or carry worker's compensation insurance. 2010 tax return form For a list of state unemployment tax agencies, visit the U. 2010 tax return form S. 2010 tax return form Department of Labor's website. 2010 tax return form To find that website, use the link in Publication 926 or search online. 2010 tax return form How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. 2010 tax return form Free help with your tax return. 2010 tax return form   You can get free help preparing your return nationwide from IRS-certified volunteers. 2010 tax return form The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. 2010 tax return form The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 2010 tax return form Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 2010 tax return form In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. 2010 tax return form To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. 2010 tax return form gov, download the IRS2Go app, or call 1-800-906-9887. 2010 tax return form   As part of the TCE program, AARP offers the Tax-Aide counseling program. 2010 tax return form To find the nearest AARP Tax-Aide site, visit AARP's website at www. 2010 tax return form aarp. 2010 tax return form org/money/taxaide or call 1-888-227-7669. 2010 tax return form For more information on these programs, go to IRS. 2010 tax return form gov and enter “VITA” in the search box. 2010 tax return form Internet. 2010 tax return form    IRS. 2010 tax return form gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. 2010 tax return form Download the free IRS2Go app from the iTunes app store or from Google Play. 2010 tax return form Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 2010 tax return form Check the status of your 2013 refund with the Where's My Refund? application on IRS. 2010 tax return form gov or download the IRS2Go app and select the Refund Status option. 2010 tax return form The IRS issues more than 9 out of 10 refunds in less than 21 days. 2010 tax return form Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. 2010 tax return form You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. 2010 tax return form The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 2010 tax return form Use the Interactive Tax Assistant (ITA) to research your tax questions. 2010 tax return form No need to wait on the phone or stand in line. 2010 tax return form The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. 2010 tax return form When you reach the response screen, you can print the entire interview and the final response for your records. 2010 tax return form New subject areas are added on a regular basis. 2010 tax return form  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. 2010 tax return form gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. 2010 tax return form You can use the IRS Tax Map, to search publications and instructions by topic or keyword. 2010 tax return form The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. 2010 tax return form When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. 2010 tax return form Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. 2010 tax return form You can also ask the IRS to mail a return or an account transcript to you. 2010 tax return form Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. 2010 tax return form gov or by calling 1-800-908-9946. 2010 tax return form Tax return and tax account transcripts are generally available for the current year and the past three years. 2010 tax return form Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. 2010 tax return form Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. 2010 tax return form If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. 2010 tax return form Check the status of your amended return using Where's My Amended Return? Go to IRS. 2010 tax return form gov and enter Where's My Amended Return? in the search box. 2010 tax return form You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 2010 tax return form It can take up to 3 weeks from the date you mailed it to show up in our system. 2010 tax return form Make a payment using one of several safe and convenient electronic payment options available on IRS. 2010 tax return form gov. 2010 tax return form Select the Payment tab on the front page of IRS. 2010 tax return form gov for more information. 2010 tax return form Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. 2010 tax return form Figure your income tax withholding with the IRS Withholding Calculator on IRS. 2010 tax return form gov. 2010 tax return form Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 2010 tax return form Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 2010 tax return form gov. 2010 tax return form Request an Electronic Filing PIN by going to IRS. 2010 tax return form gov and entering Electronic Filing PIN in the search box. 2010 tax return form Download forms, instructions and publications, including accessible versions for people with disabilities. 2010 tax return form Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. 2010 tax return form gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. 2010 tax return form An employee can answer questions about your tax account or help you set up a payment plan. 2010 tax return form Before you visit, check the Office Locator on IRS. 2010 tax return form gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. 2010 tax return form If you have a special need, such as a disability, you can request an appointment. 2010 tax return form Call the local number listed in the Office Locator, or look in the phone book under Unit