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Aarp Tax Help

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Aarp Tax Help

Aarp tax help Publication 557 - Additional Material Table of Contents Appendix. Aarp tax help Sample Articles of Organization, continued Organization Reference Chart Section of 1986 Code Description of organization General nature of activities Application  Form Annual return required to be  filed Contributions  allowable 501(c)(1) Corporations Organized under Act of Congress (including Federal Credit Unions) Instrumentalities of the  United States No Form None Yes, if made for exclusively public purposes 501(c)(2) Title Holding Corporation For Exempt Organization Holding title to property of an  exempt organization 1024 9901 or 990-EZ8 No2 501(c)(3) Religious, Educational, Charitable, Scientific, Literary, Testing for Public Safety, to Foster National or International Amateur Sports Competition, or Prevention of Cruelty to Children or Animals Organizations Activities of nature implied by description of class of organization 1023 9901 or 990-EZ8, or 990-PF Yes, generally 501(c)(4) Civic Leagues, Social Welfare Organizations, and Local Associations of Employees Promotion of community welfare; charitable, educational, or recreational 1024 9901 or 990-EZ8 No, generally 2, 3 501(c)(5) Labor, Agricultural, and Horticultural Organizations Educational or instructive, the  purpose being to improve conditions of work, and to improve products of efficiency 1024 9901 or 990-EZ8 No2 501(c)(6) Business Leagues, Chambers of Commerce, Real Estate Boards, etc. Aarp tax help Improvement of business  conditions of one or more lines of business 1024 9901 or 990-EZ8 No2 501(c)(7) Social and Recreational Clubs Pleasure, recreation, social activities 1024 9901 or 990-EZ8 No2 501(c)(8) Fraternal Beneficiary Societies  and Associations Lodge providing for payment of life, sickness, accident or other benefits  to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. Aarp tax help 501(c)(3) purposes 501(c)(9) Voluntary Employees Beneficiary Associations Providing for payment of life, sickness, accident, or other benefits to members 1024 9901 or 990-EZ8 No2 501(c)(10) Domestic Fraternal Societies  and Associations Lodge devoting its net earnings to charitable, fraternal, and other  specified purposes. Aarp tax help No life, sickness, or accident benefits to members 1024 9901 or 990-EZ8 Yes, if for certain Sec. Aarp tax help 501(c)(3) purposes 501(c)(11) Teachers' Retirement Fund Associations Teachers' association for payment of retirement benefits Letter6 9901 or 990-EZ8 No2 501(c)(12) Benevolent Life Insurance Associations, Mutual Ditch or  Irrigation Companies, Mutual or Cooperative Telephone Companies, etc. Aarp tax help Activities of a mutually beneficial  nature similar to those implied by the description of class of organization 1024 9901 or 990-EZ8 No2 501(c)(13) Cemetery Companies Burials and incidental activities 1024 9901 or 990-EZ8 Yes, generally 501(c)(14) State-Chartered Credit Unions,  Mutual Reserve Funds Loans to members Letter6 9901 or 990-EZ8 No2 501(c)(15) Mutual Insurance Companies or Associations Providing insurance to members substantially at cost 1024 9901 or 990-EZ8 No2 501(c)(16) Cooperative Organizations to  Finance Crop Operations Financing crop operations in  conjunction with activities of a marketing  or purchasing association Form 1120-C6 9901 or 990-EZ8 No2 501(c)(17) Supplemental Unemployment  Benefit Trusts Provides for payment of  supplemental unemployment compensation benefits 1024 9901 or 990-EZ8 No2 501(c)(18) Employee Funded Pension Trust (created before June 25, 1959) Payment of benefits under a  pension plan funded by employees Letter6 9901 or 990-EZ8 No2 501(c)(19) Post or Organization of Past or  Present Members of the Armed Forces Activities implied by nature of organization 1024 9901 or 990-EZ8 No, generally7 501(c)(21) Black Lung Benefit Trusts Funded by coal mine operators to satisfy their liability for disability or  death due to black lung diseases Letter6 990-BL No4 501(c)(22) Withdrawal Liability Payment Fund To provide funds to meet the  liability of employers withdrawing from  a multi-employer pension fund Letter6 9901 or 990-EZ8 No5 501(c)(23) Veterans' Organization (created before 1880) To provide insurance and other  benefits to veterans Letter6 9901 or 990-EZ8 No, generally7 501(c)(25) Title Holding Corporations or Trusts with Multiple Parent Corporations Holding title and paying over  income from property to 35 or fewer parents or beneficiaries 1024 9901 or 990-EZ8 No 501(c)(26) State-Sponsored Organization Providing Health Coverage for High-Risk Individuals Provides health care coverage to high-risk individuals Letter6 9901 or 990-EZ8 No 501(c)(27) State-Sponsored Workers' Compensation Reinsurance Organization Reimburses members for losses  under workers' compensation acts Letter6 9901 or 990-EZ8 No 501(c)(28) National Railroad Retirement Investment Trust Manages and invests the assets of the Railroad Retirement Account No Form 99011 No11 501(c)(29) CO-OP health insurance issuers A qualified health insurance issuer which has received a loan or grant under the CO-OP program Letter and Form 871814 9901 No13 501(d) Religious and Apostolic Associations Regular business activities;  Communal religious community No Form 10659 No2 501(e) Cooperative Hospital Service Organizations Performs cooperative services for hospitals 1023 9901 or 990-EZ8 Yes 501(f) Cooperative Service Organizations  of Operating Educational Organizations Performs collective investment  services for educational organizations 1023 9901 or 990-EZ8 Yes 501(k) Child Care Organizations Provides care for children 1023 9901 or 990-EZ8 Yes 501(n) Charitable Risk Pools Pools certain insurance risks of sec. Aarp tax help 501(c)(3) organizations 1023 9901 or 990-EZ8 Yes 501(q) Credit Counseling Organization Credit counseling services 1023 102312 No 521(a) Farmers' Cooperative Associations Cooperative marketing and  purchasing for agricultural procedures 1028 1120-C No 527 Political organizations A party, committee, fund,  association, etc. Aarp tax help , that directly or indirectly accepts contributions or makes expenditures for political campaigns 8871 1120-POL10 9901 or 990-EZ8 No 1For exceptions to the filing requirement, see chapter 2 and the form instructions. Aarp tax help Note: For annual tax periods beginning after 2006, most tax-exempt organizations, other than churches, are required to file an annual Form 990, 990-EZ, or 990-PF with the IRS or to submit an annual electronic notice, Form 990-N (e-Postcard), to the IRS. Aarp tax help Tax-exempt organizations failing to file an annual return or submit an annual notice as required for 3 consecutive years will automatically lose their tax-exempt status. Aarp tax help    2An organization exempt under a subsection of section 501 other than 501(c)(3) can establish a charitable fund, contributions to which are deductible. Aarp tax help Such a fund must itself meet the requirements of section 501(c)(3) and the related notice requirements of section 508(a). Aarp tax help    3Contributions to volunteer fire companies and similar organizations are deductible, but only if made for exclusively public purposes. Aarp tax help    4Deductible as a business expense to the extent allowed by section 192. Aarp tax help    5Deductible as a business expense to the extent allowed by section 194A. Aarp tax help 6Application is by letter to the address shown on Form 8718. Aarp tax help A copy of the organizing document should be attached and the letter should be signed by an officer. Aarp tax help    7Contributions to these organizations are deductible only if 90% or more of the organization's members are war veterans. Aarp tax help    8For limits on the use of Form 990-EZ, see chapter 2 and the general instructions for Form 990-EZ (or Form 990). Aarp tax help    9Although the organization files a partnership return, all distributions are deemed dividends. Aarp tax help The members are not entitled to pass through treatment of the organization's income or expenses. Aarp tax help    10Form 1120-POL is required only if the organization has taxable income as defined in section 527(c). Aarp tax help    11Only required to annually file so much of the Form 990 that relates to the names and addresses of the officers, directors, trustees, and key employees, and their titles, compensation, and hours devoted to their positions (Part VII of Form 990), and to complete Item I in the Heading of Form 990 to confirm its tax-exempt status under section 501(c)(28). Aarp tax help    12See section 501(q) if the organization provides credit counseling services and seeks recognition of exemption under section 501(c)(4). Aarp tax help Use Form 1024 if applying for recognition under section 501(c)(4). Aarp tax help    13See section 501(c)(29) for details. Aarp tax help    14See Revenue Procedure 2012-11, sec. Aarp tax help 4. Aarp tax help 01, 2012-7 I. Aarp tax help R. Aarp tax help B. Aarp tax help 368, for details. Aarp tax help Appendix. Aarp tax help Sample Articles of Organization The following are examples of Articles of Incorporation (Draft A) and a declaration of trust (Draft B) that contain the required information as to purposes and powers of an organization and disposition of its assets upon dissolution. Aarp tax help You should bear in mind that requirements for these instruments may vary under applicable state law. Aarp tax help See Private Foundations and Public Charities , earlier for the special provisions required in a private foundation's governing instrument in order for it to qualify for exemption. Aarp tax help DRAFT A  Articles of Incorporation of the undersigned, a majority of whom are citizens of the United States, desiring to form a Non-Profit Corporation under the Non-Profit Corporation Law of , do hereby certify: First: The name of the Corporation shall be . Aarp tax help Second: The place in this state where the principal office of the Corporation is to be located is the City of , County. Aarp tax help Third: Said corporation is organized exclusively for charitable, religious, educational, and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Aarp tax help Fourth: The names and addresses of the persons who are the initial trustees of the corporation are as follows: Name , Address Fifth: No part of the net earnings of the corporation shall inure to the benefit of, or be distributable to its members, trustees, officers, or other private persons, except that the corporation shall be authorized and empowered to pay reasonable compensation for services rendered and to make payments and distributions in furtherance of the purposes set forth in Article Third hereof. Aarp tax help No substantial part of the activities of the corporation shall be the carrying on of propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate in, or intervene in (including the publishing or distribution of statements) any political campaign on behalf of or in opposition to any candidate for public office. Aarp tax help Notwithstanding any other provision of these articles, the corporation shall not carry on any other activities not permitted to be carried on (a) by a corporation exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or (b) by a corporation, contributions to which are deductible under section 170(c)(2) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Aarp tax help   If reference to federal law in articles of incorporation imposes a limitation that is invalid in your state, you may wish to substitute the following for the last sentence of the preceding paragraph: “Notwithstanding any other provision of these articles, this corporation shall not, except to an insubstantial degree, engage in any activities or exercise any powers that are not in furtherance of the purposes of this corporation. Aarp tax help ” Sixth: Upon the dissolution of the corporation, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Aarp tax help Any such assets not so disposed of shall be disposed of by a Court of Competent Jurisdiction of the county in which the principal office of the corporation is then located, exclusively for such purposes or to such organization or organizations, as said Court shall determine, which are organized and operated exclusively for such purposes. Aarp tax help   In witness whereof, we have hereunto subscribed our names this day of , 20. Aarp tax help Appendix. Aarp tax help Sample Articles of Organization, continued Draft B The Charitable Trust. Aarp tax help Declaration of Trust made as of the day of , 20 , by , of , and , of , who hereby declare and agree that they have received this day from , as Donor, the sum of Ten Dollars ($10) and that they will hold and manage the same, and any additions to it, in trust, as follows: First: This trust shall be called “The Charitable Trust. Aarp tax help ” Second: The trustees may receive and accept property, whether real, personal, or mixed, by way of gift, bequest, or devise, from any person, firm, trust, or corporation, to be held, administered, and disposed of in accordance with and pursuant to the provisions of this Declaration of Trust; but no gift, bequest, or devise of any such property shall be received and accepted if it is conditioned or limited in such manner as to require the disposition of the income or its principal to any person or organization other than a “charitable organization” or for other than “charitable purposes” within the meaning of such terms as defined in Article Third of this Declaration of Trust, or as shall, in the opinion of the trustees, jeopardize the federal income tax exemption of this trust pursuant to section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Aarp tax help Third: a) The principal and income of all property received and accepted by the trustees to be administered under this Declaration of Trust shall be held in trust by them, and the trustees may make payments or distributions from income or principal, or both, to or for the use of such charitable organizations, within the meaning of that term as defined in paragraph C, in such amounts and for such charitable purposes of the trust as the trustees shall from time to time select and determine; and the trustees may make payments or distributions from income or principal, or both, directly for such charitable purposes, within the meaning of that term as defined in paragraph D, in such amounts as the trustees shall from time to time select and determine without making use of any other charitable organization. Aarp tax help The trustees may also make payments or distributions of all or any part of the income or principal to states, territories, or possessions of the United States, any political subdivision of any of the foregoing, or to the United States or the District of Columbia but only for charitable purposes within the meaning of that term as defined in paragraph D. Aarp tax help Income or principal derived from contributions by corporations shall be distributed by the trustees for use solely within the United States or its possessions. Aarp tax help No part of the net earnings of this trust shall inure or be payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of this trust shall be the carrying on of propaganda, or otherwise attempting to influence legislation. Aarp tax help No part of the activities of this trust shall be the participation in, or intervention in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office. Aarp tax help b) The trust shall continue forever unless the trustees terminate it and distribute all of the principal and income, which action may be taken by the trustees in their discretion at any time. Aarp tax help On such termination, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose. Aarp tax help The donor authorizes and empowers the trustees to form and organize a nonprofit corporation limited to the uses and purposes provided for in this Declaration of Trust, such corporation to be organized under the laws of any state or under the laws of the United States as may be determined by the trustees; such corporation when organized to have power to administer and control the affairs and property and to carry out the uses, objects, and purposes of this trust. Aarp tax help Upon the creation and organization of such corporation, the trustees are authorized and empowered to convey, transfer, and deliver to such corporation all the property and assets to which this trust may be or become entitled. Aarp tax help The charter, bylaws, and other provisions for the organization and management of such corporation and its affairs and property shall be such as the trustees shall determine, consistent with the provisions of this paragraph. Aarp tax help c) In this Declaration of Trust and in any amendments to it, references to “charitable organizations” or “charitable organization” mean corporations, trusts, funds, foundations, or community chests created or organized in the United States or in any of its possessions, whether under the laws of the United States, any state or territory, the District of Columbia, or any possession of the United States, organized and operated exclusively for charitable purposes, no part of the net earnings of which inures or is payable to or for the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting to influence legislation, and which do not participate in or intervene in (including the publishing or distributing of statements) any political campaign on behalf of or in opposition to any candidate for public office. Aarp tax help It is intended that the organization described in this paragraph C shall be entitled to exemption from federal income tax under section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Aarp tax help d) In this Declaration of Trust and in any amendments to it, the term “charitable purposes” shall be limited to and shall include only religious, charitable, scientific, literary, or educational purposes within the meaning of those terms as used in section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code, but only such purposes as also constitute public charitable purposes under the law of trusts of the State of. Aarp tax help Fourth: This Declaration of Trust may be amended at any time or times by written instrument or instruments signed and sealed by the trustees, and acknowledged by any of the trustees, provided that no amendment shall authorize the trustees to conduct the affairs of this trust in any manner or for any purpose contrary to the provisions of section 501(c)(3) of the Internal Revenue Code, or the corresponding section of any future federal tax code. Aarp tax help An amendment of the provisions of this Article Fourth (or any amendment to it) shall be valid only if and to the extent that such amendment further restricts the trustees' amending power. Aarp tax help All instruments amending this Declaration of Trust shall be noted upon or kept attached to the executed original of this Declaration of Trust held by the trustees. Aarp tax help Fifth: Any trustee under this Declaration of Trust may, by written instrument, signed and acknowledged, resign his office. Aarp tax help The number of trustees shall be at all times not less than two, and whenever for any reason the number is reduced to one, there shall be, and at any other time there may be, appointed one or more additional trustees. Aarp tax help Appointments shall be made by the trustee or trustees for the time in office by written instruments signed and acknowledged. Aarp tax help Any succeeding or additional trustee shall, upon his or her acceptance of the office by written instrument signed and acknowledged, have the same powers, rights, and duties, and the same title to the trust estate jointly with the surviving or remaining trustee or trustees as if originally appointed. Aarp tax help  None of the trustees shall be required to furnish any bond or surety. Aarp tax help None of them shall be responsible or liable for the acts or omissions of any other of the trustees or of any predecessor or of a custodian, agent, depositary, or counsel selected with reasonable care. Aarp tax help  The one or more trustees, whether original or successor, for the time being in office, shall have full authority to act even though one or more vacancies may exist. Aarp tax help A trustee may, by appropriate written instrument, delegate all or any part of his or her powers to another or others of the trustees for such periods and subject to such conditions as such delegating trustee may determine. Aarp tax help  The trustees serving under this Declaration of Trust are authorized to pay to themselves amounts for reasonable expenses incurred and reasonable compensation for services rendered in the administration of this trust, but in no event shall any trustee who has made a contribution to this trust ever receive any compensation thereafter. Aarp tax help Sixth: In extension and not in limitation of the common law and statutory powers of trustees and other powers granted in this Declaration of Trust, the trustees shall have the following discretionary powers. Aarp tax help a) To invest and reinvest the principal and income of the trust in such property, real, personal, or mixed, and in such manner as they shall deem proper, and from time to time to change investments as they shall deem advisable; to invest in or retain any stocks, shares, bonds, notes, obligations, or personal or real property (including without limitation any interests in or obligations of any corporation, association, business trust, investment trust, common trust fund, or investment company) although some or all of the property so acquired or retained is of a kind or size which but for this express authority would not be considered proper and although all of the trust funds are invested in the securities of one company. Aarp tax help No principal or income, however, shall be loaned, directly or indirectly, to any trustee or to anyone else, corporate or otherwise, who has at any time made a contribution to this trust, nor to anyone except on the basis of an adequate interest charge and with adequate security. Aarp tax help b) To sell, lease, or exchange any personal, mixed, or real property, at public auction or by private contract, for such consideration and on such terms as to credit or otherwise, and to make such contracts and enter into such undertakings relating to the trust property, as they consider advisable, whether or not such leases or contracts may extend beyond the duration of the trust. Aarp tax help c) To borrow money for such periods, at such rates of interest, and upon such terms as the trustees consider advisable, and as security for such loans to mortgage or pledge any real or personal property with or without power of sale; to acquire or hold any real or personal property, subject to any mortgage or pledge on or of property acquired or held by this trust. Aarp tax help d) To execute and deliver deeds, assignments, transfers, mortgages, pledges, leases, covenants, contracts, promissory notes, releases, and other instruments, sealed or unsealed, incident to any transaction in which they engage. Aarp tax help e) To vote, to give proxies, to participate in the reorganization, merger, or consolidation of any concern, or in the sale, lease, disposition, or distribution of its assets; to join with other security holders in acting through a committee, depositary, voting trustees, or otherwise, and in this connection to delegate authority to such committee, depositary, or trustees and to deposit securities with them or transfer securities to them; to pay assessments levied on securities or to exercise subscription rights in respect of securities. Aarp tax help f) To employ a bank or trust company as custodian of any funds or securities and to delegate to it such powers as they deem appropriate; to hold trust property without indication of fiduciary capacity but only in the name of a registered nominee, provided the trust property is at all times identified as such on the books of the trust; to keep any or all of the trust property or funds in any place or places in the United States of America; to employ clerks, accountants, investment counsel, investment agents, and any special services, and to pay the reasonable compensation and expenses of all such services in addition to the compensation of the trustees. Aarp tax help Seventh: The trustees' powers are exercisable solely in the fiduciary capacity consistent with and in furtherance of the charitable purposes of this trust as specified in Article Third and not otherwise. Aarp tax help Eighth: In this Declaration of Trust and in any amendment to it, references to “trustees” mean the one or more trustees, whether original or successor, for the time being in office. Aarp tax help Ninth: Any person may rely on a copy, certified by a notary public, of the executed original of this Declaration of Trust held by the trustees, and of any of the notations on it and writings attached to it, as fully as he might rely on the original documents themselves. Aarp tax help Any such person may rely fully on any statements of fact certified by anyone who appears from such original documents or from such certified copy to be a trustee under this Declaration of Trust. Aarp tax help No one dealing with the trustees need inquire concerning the validity of anything the trustees purport to do. Aarp tax help No one dealing with the trustees need see to the application of anything paid or transferred to or upon the order of the trustees of the trust. Aarp tax help Tenth: This Declaration of Trust is to be governed in all respects by the laws of the State of . Aarp tax help Trustee Trustee Prev  Up  Next   Home   More Online Publications
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1099-K Reporting Requirements for Payment Settlement Entities

Beginning in January, 2012, payment settlement entities (PSEs) are required by the Housing Assistance Tax Act of 2008 to report on Form 1099-K the following transactions:

  • All payments made in settlement of payment card transactions (e.g., credit card);
  • Payments in settlement of third party network transactions IF:
    -Gross payments to a participating payee exceed $20,000; AND
    -There are more than 200 transactions with the participating payee.

Filing Deadlines & Procedures

Your 1099-Ks are due to merchants by January 31, 2014. Electronically filed 1099-Ks are due to the IRS April 1, 2014 (normally March 31), while paper 1099-Ks are due February 28, 2014.

File your 1099-K electronically through the FIRE (Filing Information Returns Electronically) option. For information, review Publication 1220 (PDF). If you are considering filing on paper, review General Instructions for Certain Information Returns.

Verification Processes

We verify that tax returns are correct and complete using the following processes:

More Information

You can find more about the 1099-K and other information returns at our Third Party Reporting Information Center.

You may also want to see Frequently Asked Question about Backup Withholding

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Page Last Reviewed or Updated: 20-Mar-2014

The Aarp Tax Help

Aarp tax help 22. Aarp tax help   Taxes Table of Contents IntroductionIndian tribal government. Aarp tax help Useful Items - You may want to see: Tests To Deduct Any Tax Income TaxesState and Local Income Taxes Foreign Income Taxes General Sales TaxesMotor vehicles. Aarp tax help Real Estate TaxesReal estate taxes for prior years. Aarp tax help Examples. Aarp tax help Form 1099-S. Aarp tax help Real Estate-Related Items You Cannot Deduct Personal Property Taxes Taxes and Fees You Cannot Deduct Where To Deduct Introduction This chapter discusses which taxes you can deduct if you itemize deductions on Schedule A (Form 1040). Aarp tax help It also explains which taxes you can deduct on other schedules or forms and which taxes you cannot deduct. Aarp tax help This chapter covers the following topics. Aarp tax help Income taxes (federal, state, local, and foreign). Aarp tax help General sales taxes (state and local). Aarp tax help Real estate taxes (state, local, and foreign). Aarp tax help Personal property taxes (state and local). Aarp tax help Taxes and fees you cannot deduct. Aarp tax help Use Table 22-1 as a guide to determine which taxes you can deduct. Aarp tax help The end of the chapter contains a section that explains which forms you use to deduct different types of taxes. Aarp tax help Business taxes. Aarp tax help   You can deduct certain taxes only if they are ordinary and necessary expenses of your trade or business or of producing income. Aarp tax help For information on these taxes, see Publication 535, Business Expenses. Aarp tax help State or local taxes. Aarp tax help   These are taxes imposed by the 50 states, U. Aarp tax help S. Aarp tax help possessions, or any of their political subdivisions (such as a county or city), or by the District of Columbia. Aarp tax help Indian tribal government. Aarp tax help   An Indian tribal government recognized by the Secretary of the Treasury as performing substantial government functions will be treated as a state for purposes of claiming a deduction for taxes. Aarp tax help Income taxes, real estate taxes, and personal property taxes imposed by that Indian tribal government (or by any of its subdivisions that are treated as political subdivisions of a state) are deductible. Aarp tax help General sales taxes. Aarp tax help   These are taxes imposed at one rate on retail sales of a broad range of classes of items. Aarp tax help Foreign taxes. Aarp tax help   These are taxes imposed by a foreign country or any of its political subdivisions. Aarp tax help Useful Items - You may want to see: Publication 514 Foreign Tax Credit for Individuals 530 Tax Information for Homeowners Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule E (Form 1040) Supplemental Income and Loss 1116 Foreign Tax Credit Tests To Deduct Any Tax The following two tests must be met for you to deduct any tax. Aarp tax help The tax must be imposed on you. Aarp tax help You must pay the tax during your tax year. Aarp tax help The tax must be imposed on you. Aarp tax help   In general, you can deduct only taxes imposed on you. Aarp tax help   Generally, you can deduct property taxes only if you are an owner of the property. Aarp tax help If your spouse owns the property and pays the real estate taxes, the taxes are deductible on your spouse's separate return or on your joint return. Aarp tax help You must pay the tax during your tax year. Aarp tax help   If you are a cash basis taxpayer, you can deduct only those taxes you actually paid during your tax year. Aarp tax help If you pay your taxes by check, the day you mail or deliver the check is the date of payment, provided the check is honored by the financial institution. Aarp tax help If you use a pay-by-phone account (such as a credit card or electronic funds withdrawal), the date reported on the statement of the financial institution showing when payment was made is the date of payment. Aarp tax help If you contest a tax liability and are a cash basis taxpayer, you can deduct the tax only in the year you actually pay it (or transfer money or other property to provide for satisfaction of the contested liability). Aarp tax help See Publication 538, Accounting Periods and Methods, for details. Aarp tax help    If you use an accrual method of accounting, see Publication 538 for more information. Aarp tax help Income Taxes This section discusses the deductibility of state and local income taxes (including employee contributions to state benefit funds) and foreign income taxes. Aarp tax help State and Local Income Taxes You can deduct state and local income taxes. Aarp tax help However, you can elect to deduct state and local general sales taxes instead of state and local income taxes. Aarp tax help See General Sales Taxes , later. Aarp tax help Exception. Aarp tax help    You cannot deduct state and local income taxes you pay on income that is exempt from federal income tax, unless the exempt income is interest income. Aarp tax help For example, you cannot deduct the part of a state's income tax that is on a cost-of-living allowance exempt from federal income tax. Aarp tax help What To Deduct Your deduction may be for withheld taxes, estimated tax payments, or other tax payments as follows. Aarp tax help Withheld taxes. Aarp tax help   You can deduct state and local income taxes withheld from your salary in the year they are withheld. Aarp tax help Your Form(s) W-2 will show these amounts. Aarp tax help Forms W-2G, 1099-G, 1099-R, and 1099-MISC may also show state and local income taxes withheld. Aarp tax help Estimated tax payments. Aarp tax help   You can deduct estimated tax payments you made during the year to a state or local government. Aarp tax help However, you must have a reasonable basis for making the estimated tax payments. Aarp tax help Any estimated state or local tax payments that are not made in good faith at the time of payment are not deductible. Aarp tax help For example, you made an estimated state income tax payment. Aarp tax help However, the estimate of your state tax liability shows that you will get a refund of the full amount of your estimated payment. Aarp tax help You had no reasonable basis to believe you had any additional liability for state income taxes and you cannot deduct the estimated tax payment. Aarp tax help Refund applied to taxes. Aarp tax help   You can deduct any part of a refund of prior-year state or local income taxes that you chose to have credited to your 2013 estimated state or local income taxes. Aarp tax help    Do not reduce your deduction by either of the following items. Aarp tax help Any state or local income tax refund (or credit) you expect to receive for 2013. Aarp tax help Any refund of (or credit for) prior-year state and local income taxes you actually received in 2013. Aarp tax help   However, part or all of this refund (or credit) may be taxable. Aarp tax help See Refund (or credit) of state or local income taxes , later. Aarp tax help Separate federal returns. Aarp tax help   If you and your spouse file separate state, local, and federal income tax returns, you each can deduct on your federal return only the amount of your own state and local income tax that you paid during the tax year. Aarp tax help Joint state and local returns. Aarp tax help   If you and your spouse file joint state and local returns and separate federal returns, each of you can deduct on your separate federal return a part of the total state and local income taxes paid during the tax year. Aarp tax help You can deduct only the amount of the total taxes that is proportionate to your gross income compared to the combined gross income of you and your spouse. Aarp tax help However, you cannot deduct more than the amount you actually paid during the year. Aarp tax help You can avoid this calculation if you and your spouse are jointly and individually liable for the full amount of the state and local income taxes. Aarp tax help If so, you and your spouse can deduct on your separate federal returns the amount you each actually paid. Aarp tax help Joint federal return. Aarp tax help   If you file a joint federal return, you can deduct the total of the state and local income taxes both of you paid. Aarp tax help Contributions to state benefit funds. Aarp tax help    As an employee, you can deduct mandatory contributions to state benefit funds withheld from your wages that provide protection against loss of wages. Aarp tax help For example, certain states require employees to make contributions to state funds providing disability or unemployment insurance benefits. Aarp tax help Mandatory payments made to the following state benefit funds are deductible as state income taxes on Schedule A (Form 1040), line 5. Aarp tax help Alaska Unemployment Compensation Fund. Aarp tax help California Nonoccupational Disability Benefit Fund. Aarp tax help New Jersey Nonoccupational Disability Benefit Fund. Aarp tax help New Jersey Unemployment Compensation Fund. Aarp tax help New York Nonoccupational Disability Benefit Fund. Aarp tax help Pennsylvania Unemployment Compensation Fund. Aarp tax help Rhode Island Temporary Disability Benefit Fund. Aarp tax help Washington State Supplemental Workmen's Compensation Fund. Aarp tax help    Employee contributions to private or voluntary disability plans are not deductible. Aarp tax help Refund (or credit) of state or local income taxes. Aarp tax help   If you receive a refund of (or credit for) state or local income taxes in a year after the year in which you paid them, you may have to include the refund in income on Form 1040, line 10, in the year you receive it. Aarp tax help This includes refunds resulting from taxes that were overwithheld, applied from a prior year return, not figured correctly, or figured again because of an amended return. Aarp tax help If you did not itemize your deductions in the previous year, do not include the refund in income. Aarp tax help If you deducted the taxes in the previous year, include all or part of the refund on Form 1040, line 10, in the year you receive the refund. Aarp tax help For a discussion of how much to include, see Recoveries in chapter 12. Aarp tax help Foreign Income Taxes Generally, you can take either a deduction or a credit for income taxes imposed on you by a foreign country or a U. Aarp tax help S. Aarp tax help possession. Aarp tax help However, you cannot take a deduction or credit for foreign income taxes paid on income that is exempt from U. Aarp tax help S. Aarp tax help tax under the foreign earned income exclusion or the foreign housing exclusion. Aarp tax help For information on these exclusions, see Publication 54, Tax Guide for U. Aarp tax help S. Aarp tax help Citizens and Resident Aliens Abroad. Aarp tax help For information on the foreign tax credit, see Publication 514. Aarp tax help General Sales Taxes You can elect to deduct state and local general sales taxes, instead of state and local income taxes, as an itemized deduction on Schedule A (Form 1040), line 5b. Aarp tax help You can use either your actual expenses or the state and local sales tax tables to figure your sales tax deduction. Aarp tax help Actual expenses. Aarp tax help   Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) if the tax rate was the same as the general sales tax rate. Aarp tax help However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. Aarp tax help If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. Aarp tax help If you use the actual expenses method, you must have receipts to show the general sales taxes paid. Aarp tax help Do not include sales taxes paid on items used in your trade or business. Aarp tax help Motor vehicles. Aarp tax help   For purposes of this section, motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Aarp tax help This also includes sales taxes on a leased motor vehicle, but not on vehicles used in your trade or business. Aarp tax help Optional sales tax tables. Aarp tax help   Instead of using your actual expenses, you can figure your state and local general sales tax deduction using the state and local sales tax tables in the Instructions for Schedule A (Form 1040). Aarp tax help You may also be able to add the state and local general sales taxes paid on certain specified items. Aarp tax help   Your applicable table amount is based on the state where you live, your income, and the number of exemptions claimed on your tax return. Aarp tax help Your income is your adjusted gross income plus any nontaxable items such as the following. Aarp tax help Tax-exempt interest. Aarp tax help Veterans' benefits. Aarp tax help Nontaxable combat pay. Aarp tax help Workers' compensation. Aarp tax help Nontaxable part of social security and railroad retirement benefits. Aarp tax help Nontaxable part of IRA, pension, or annuity distributions, excluding rollovers. Aarp tax help Public assistance payments. Aarp tax help If you lived in different states during the same tax year, you must prorate your applicable table amount for each state based on the days you lived in each state. Aarp tax help See the Instructions for Schedule A (Form 1040), line 5, for details. Aarp tax help Real Estate Taxes Deductible real estate taxes are any state, local, or foreign taxes on real property levied for the general public welfare. Aarp tax help You can deduct these taxes only if they are based on the assessed value of the real property and charged uniformly against all property under the jurisdiction of the taxing authority. Aarp tax help Deductible real estate taxes generally do not include taxes charged for local benefits and improvements that increase the value of the property. Aarp tax help They also do not include itemized charges for services (such as trash collection) assessed against specific property or certain people, even if the charge is paid to the taxing authority. Aarp tax help For more information about taxes and charges that are not deductible, see Real Estate-Related Items You Cannot Deduct , later. Aarp tax help Tenant-shareholders in a cooperative housing corporation. Aarp tax help   Generally, if you are a tenant-stockholder in a cooperative housing corporation, you can deduct the amount paid to the corporation that represents your share of the real estate taxes the corporation paid or incurred for your dwelling unit. Aarp tax help The corporation should provide you with a statement showing your share of the taxes. Aarp tax help For more information, see Special Rules for Cooperatives in Publication 530. Aarp tax help Division of real estate taxes between buyers and sellers. Aarp tax help   If you bought or sold real estate during the year, the real estate taxes must be divided between the buyer and the seller. Aarp tax help   The buyer and the seller must divide the real estate taxes according to the number of days in the real property tax year (the period to which the tax is imposed relates) that each owned the property. Aarp tax help The seller is treated as paying the taxes up to, but not including, the date of sale. Aarp tax help The buyer is treated as paying the taxes beginning with the date of sale. Aarp tax help This applies regardless of the lien dates under local law. Aarp tax help Generally, this information is included on the settlement statement provided at the closing. Aarp tax help    If you (the seller) cannot deduct taxes until they are paid because you use the cash method of accounting, and the buyer of your property is personally liable for the tax, you are considered to have paid your part of the tax at the time of the sale. Aarp tax help This lets you deduct the part of the tax to the date of sale even though you did not actually pay it. Aarp tax help However, you must also include the amount of that tax in the selling price of the property. Aarp tax help The buyer must include the same amount in his or her cost of the property. Aarp tax help   You figure your deduction for taxes on each property bought or sold during the real property tax year as follows. Aarp tax help Worksheet 22-1. Aarp tax help Figuring Your Real Estate Tax Deduction 1. Aarp tax help Enter the total real estate taxes for the real property tax year   2. Aarp tax help Enter the number of days in the real property tax year that you owned the property   3. Aarp tax help Divide line 2 by 365 (for leap years, divide line 2 by 366) . Aarp tax help 4. Aarp tax help Multiply line 1 by line 3. Aarp tax help This is your deduction. Aarp tax help Enter it on Schedule A (Form 1040), line 6   Note. Aarp tax help Repeat steps 1 through 4 for each property you bought or sold during the real property tax year. Aarp tax help Your total deduction is the sum of the line 4 amounts for all of the properties. Aarp tax help Real estate taxes for prior years. Aarp tax help   Do not divide delinquent taxes between the buyer and seller if the taxes are for any real property tax year before the one in which the property is sold. Aarp tax help Even if the buyer agrees to pay the delinquent taxes, the buyer cannot deduct them. Aarp tax help The buyer must add them to the cost of the property. Aarp tax help The seller can deduct these taxes paid by the buyer. Aarp tax help However, the seller must include them in the selling price. Aarp tax help Examples. Aarp tax help   The following examples illustrate how real estate taxes are divided between buyer and seller. Aarp tax help Example 1. Aarp tax help Dennis and Beth White's real property tax year for both their old home and their new home is the calendar year, with payment due August 1. Aarp tax help The tax on their old home, sold on May 7, was $620. Aarp tax help The tax on their new home, bought on May 3, was $732. Aarp tax help Dennis and Beth are considered to have paid a proportionate share of the real estate taxes on the old home even though they did not actually pay them to the taxing authority. Aarp tax help On the other hand, they can claim only a proportionate share of the taxes they paid on their new property even though they paid the entire amount. Aarp tax help Dennis and Beth owned their old home during the real property tax year for 126 days (January 1 to May 6, the day before the sale). Aarp tax help They figure their deduction for taxes on their old home as follows. Aarp tax help Worksheet 22-1. Aarp tax help Figuring Your Real Estate Tax Deduction — Taxes on Old Home 1. Aarp tax help Enter the total real estate taxes for the real property tax year $620 2. Aarp tax help Enter the number of days in the real property tax year that you owned the property 126 3. Aarp tax help Divide line 2 by 365 (for leap years, divide line 2 by 366) . Aarp tax help 3452 4. Aarp tax help Multiply line 1 by line 3. Aarp tax help This is your deduction. Aarp tax help Enter it on Schedule A (Form 1040), line 6 $214 Since the buyers of their old home paid all of the taxes, Dennis and Beth also include the $214 in the selling price of the old home. Aarp tax help (The buyers add the $214 to their cost of the home. Aarp tax help ) Dennis and Beth owned their new home during the real property tax year for 243 days (May 3 to December 31, including their date of purchase). Aarp tax help They figure their deduction for taxes on their new home as follows. Aarp tax help Worksheet 22-1. Aarp tax help Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Aarp tax help Enter the total real estate taxes for the real property tax year $732 2. Aarp tax help Enter the number of days in the real property tax year that you owned the property 243 3. Aarp tax help Divide line 2 by 365 (for leap years, divide line 2 by 366) . Aarp tax help 6658 4. Aarp tax help Multiply line 1 by line 3. Aarp tax help This is your deduction. Aarp tax help Enter it on Schedule A (Form 1040), line 6 $487 Since Dennis and Beth paid all of the taxes on the new home, they add $245 ($732 paid less $487 deduction) to their cost of the new home. Aarp tax help (The sellers add this $245 to their selling price and deduct the $245 as a real estate tax. Aarp tax help ) Dennis and Beth's real estate tax deduction for their old and new homes is the sum of $214 and $487, or $701. Aarp tax help They will enter this amount on Schedule A (Form 1040), line 6. Aarp tax help Example 2. Aarp tax help George and Helen Brown bought a new home on May 3, 2013. Aarp tax help Their real property tax year for the new home is the calendar year. Aarp tax help Real estate taxes for 2012 were assessed in their state on January 1, 2013. Aarp tax help The taxes became due on May 31, 2013, and October 31, 2013. Aarp tax help The Browns agreed to pay all taxes due after the date of purchase. Aarp tax help Real estate taxes for 2012 were $680. Aarp tax help They paid $340 on May 31, 2013, and $340 on October 31, 2013. Aarp tax help These taxes were for the 2012 real property tax year. Aarp tax help The Browns cannot deduct them since they did not own the property until 2013. Aarp tax help Instead, they must add $680 to the cost of their new home. Aarp tax help In January 2014, the Browns receive their 2013 property tax statement for $752, which they will pay in 2014. Aarp tax help The Browns owned their new home during the 2013 real property tax year for 243 days (May 3 to December 31). Aarp tax help They will figure their 2014 deduction for taxes as follows. Aarp tax help Worksheet 22-1. Aarp tax help Figuring Your Real Estate Tax Deduction — Taxes on New Home 1. Aarp tax help Enter the total real estate taxes for the real property tax year $752 2. Aarp tax help Enter the number of days in the real property tax year that you owned the property 243 3. Aarp tax help Divide line 2 by 365 (for leap years, divide line 2 by 366) . Aarp tax help 6658 4. Aarp tax help Multiply line 1 by line 3. Aarp tax help This is your deduction. Aarp tax help Claim it on Schedule A (Form 1040), line 6 $501 The remaining $251 ($752 paid less $501 deduction) of taxes paid in 2014, along with the $680 paid in 2013, is added to the cost of their new home. Aarp tax help Because the taxes up to the date of sale are considered paid by the seller on the date of sale, the seller is entitled to a 2013 tax deduction of $931. Aarp tax help This is the sum of the $680 for 2012 and the $251 for the 122 days the seller owned the home in 2013. Aarp tax help The seller must also include the $931 in the selling price when he or she figures the gain or loss on the sale. Aarp tax help The seller should contact the Browns in January 2014 to find out how much real estate tax is due for 2013. Aarp tax help Form 1099-S. Aarp tax help   For certain sales or exchanges of real estate, the person responsible for closing the sale (generally the settlement agent) prepares Form 1099-S, Proceeds From Real Estate Transactions, to report certain information to the IRS and to the seller of the property. Aarp tax help Box 2 of Form 1099-S is for the gross proceeds from the sale and should include the portion of the seller's real estate tax liability that the buyer will pay after the date of sale. Aarp tax help The buyer includes these taxes in the cost basis of the property, and the seller both deducts this amount as a tax paid and includes it in the sales price of the property. Aarp tax help   For a real estate transaction that involves a home, any real estate tax the seller paid in advance but that is the liability of the buyer appears on Form 1099-S, box 5. Aarp tax help The buyer deducts this amount as a real estate tax, and the seller reduces his or her real estate tax deduction (or includes it in income) by the same amount. Aarp tax help See Refund (or rebate) , later. Aarp tax help Taxes placed in escrow. Aarp tax help   If your monthly mortgage payment includes an amount placed in escrow (put in the care of a third party) for real estate taxes, you may not be able to deduct the total amount placed in escrow. Aarp tax help You can deduct only the real estate tax that the third party actually paid to the taxing authority. Aarp tax help If the third party does not notify you of the amount of real estate tax that was paid for you, contact the third party or the taxing authority to find the proper amount to show on your return. Aarp tax help Tenants by the entirety. Aarp tax help   If you and your spouse held property as tenants by the entirety and you file separate federal returns, each of you can deduct only the taxes each of you paid on the property. Aarp tax help Divorced individuals. Aarp tax help   If your divorce or separation agreement states that you must pay the real estate taxes for a home owned by you and your spouse, part of your payments may be deductible as alimony and part as real estate taxes. Aarp tax help See Taxes and insurance in chapter 18 for more information. Aarp tax help Ministers' and military housing allowances. Aarp tax help   If you are a minister or a member of the uniformed services and receive a housing allowance that you can exclude from income, you still can deduct all of the real estate taxes you pay on your home. Aarp tax help Refund (or rebate). Aarp tax help   If you received a refund or rebate in 2013 of real estate taxes you paid in 2013, you must reduce your deduction by the amount refunded to you. Aarp tax help If you received a refund or rebate in 2013 of real estate taxes you deducted in an earlier year (either as an itemized deduction or an increase to your standard deduction), you generally must include the refund or rebate in income in the year you receive it. Aarp tax help However, the amount you include in income is limited to the amount of the deduction that reduced your tax in the earlier year. Aarp tax help For more information, see Recoveries in chapter 12. Aarp tax help Table 22-1. Aarp tax help Which Taxes Can You Deduct? Type of Tax You Can Deduct You Cannot Deduct Fees and Charges Fees and charges that are expenses of your trade or business or of producing income. Aarp tax help Fees and charges that are not expenses of your trade or business or of producing income, such as fees for driver's licenses, car inspections, parking, or charges for water bills (see Taxes and Fees You Cannot Deduct ). Aarp tax help     Fines and penalties. Aarp tax help Income Taxes State and local income taxes. Aarp tax help Federal income taxes. Aarp tax help   Foreign income taxes. Aarp tax help     Employee contributions to state funds listed under Contributions to state benefit funds . Aarp tax help Employee contributions to private or voluntary disability plans. Aarp tax help     State and local general sales taxes if you choose to deduct state and local income taxes. Aarp tax help General Sales Taxes State and local general sales taxes, including compensating use taxes. Aarp tax help State and local income taxes if you choose to deduct state and local general sales taxes. Aarp tax help Other Taxes Taxes that are expenses of your trade or business. Aarp tax help Federal excise taxes, such as tax on gasoline, that are not expenses of your trade or business or of producing income. Aarp tax help   Taxes on property producing rent or royalty income. Aarp tax help Per capita taxes. Aarp tax help   Occupational taxes. Aarp tax help See chapter 28. Aarp tax help     One-half of self-employment tax paid. Aarp tax help   Personal Property Taxes State and local personal property taxes. Aarp tax help Customs duties that are not expenses of your trade or business or of producing income. Aarp tax help Real Estate Taxes State and local real estate taxes. Aarp tax help Real estate taxes that are treated as imposed on someone else (see Division of real estate taxes between buyers and sellers ). Aarp tax help   Foreign real estate taxes. Aarp tax help Taxes for local benefits (with exceptions). Aarp tax help See Real Estate-Related Items You Cannot Deduct . Aarp tax help   Tenant's share of real estate taxes paid by  cooperative housing corporation. Aarp tax help Trash and garbage pickup fees (with exceptions). Aarp tax help See Real Estate-Related Items You Cannot Deduct . Aarp tax help     Rent increase due to higher real estate taxes. Aarp tax help     Homeowners' association charges. Aarp tax help Real Estate-Related Items You Cannot Deduct Payments for the following items generally are not deductible as real estate taxes. Aarp tax help Taxes for local benefits. Aarp tax help Itemized charges for services (such as trash and garbage pickup fees). Aarp tax help Transfer taxes (or stamp taxes). Aarp tax help Rent increases due to higher real estate taxes. Aarp tax help Homeowners' association charges. Aarp tax help Taxes for local benefits. Aarp tax help   Deductible real estate taxes generally do not include taxes charged for local benefits and improvements tending to increase the value of your property. Aarp tax help These include assessments for streets, sidewalks, water mains, sewer lines, public parking facilities, and similar improvements. Aarp tax help You should increase the basis of your property by the amount of the assessment. Aarp tax help   Local benefit taxes are deductible only if they are for maintenance, repair, or interest charges related to those benefits. Aarp tax help If only a part of the taxes is for maintenance, repair, or interest, you must be able to show the amount of that part to claim the deduction. Aarp tax help If you cannot determine what part of the tax is for maintenance, repair, or interest, none of it is deductible. Aarp tax help    Taxes for local benefits may be included in your real estate tax bill. Aarp tax help If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Aarp tax help You should use the rules above to determine if the local benefit tax is deductible. Aarp tax help Contact the taxing authority if you need additional information about a specific charge on your real estate tax bill. Aarp tax help Itemized charges for services. Aarp tax help    An itemized charge for services assessed against specific property or certain people is not a tax, even if the charge is paid to the taxing authority. Aarp tax help For example, you cannot deduct the charge as a real estate tax if it is: A unit fee for the delivery of a service (such as a $5 fee charged for every 1,000 gallons of water you use), A periodic charge for a residential service (such as a $20 per month or $240 annual fee charged to each homeowner for trash collection), or A flat fee charged for a single service provided by your government (such as a $30 charge for mowing your lawn because it was allowed to grow higher than permitted under your local ordinance). Aarp tax help    You must look at your real estate tax bill to determine if any nondeductible itemized charges, such as those listed above, are included in the bill. Aarp tax help If your taxing authority (or mortgage lender) does not furnish you a copy of your real estate tax bill, ask for it. Aarp tax help Exception. Aarp tax help   Service charges used to maintain or improve services (such as trash collection or police and fire protection) are deductible as real estate taxes if: The fees or charges are imposed at a like rate against all property in the taxing jurisdiction, The funds collected are not earmarked; instead, they are commingled with general revenue funds, and Funds used to maintain or improve services are not limited to or determined by the amount of these fees or charges collected. Aarp tax help Transfer taxes (or stamp taxes). Aarp tax help   Transfer taxes and similar taxes and charges on the sale of a personal home are not deductible. Aarp tax help If they are paid by the seller, they are expenses of the sale and reduce the amount realized on the sale. Aarp tax help If paid by the buyer, they are included in the cost basis of the property. Aarp tax help Rent increase due to higher real estate taxes. Aarp tax help   If your landlord increases your rent in the form of a tax surcharge because of increased real estate taxes, you cannot deduct the increase as taxes. Aarp tax help Homeowners' association charges. Aarp tax help   These charges are not deductible because they are imposed by the homeowners' association, rather than the state or local government. Aarp tax help Personal Property Taxes Personal property tax is deductible if it is a state or local tax that is: Charged on personal property, Based only on the value of the personal property, and Charged on a yearly basis, even if it is collected more or less than once a year. Aarp tax help A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. Aarp tax help For example, a yearly tax based on value qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicles or using them on the highways. Aarp tax help If the tax is partly based on value and partly based on other criteria, it may qualify in part. Aarp tax help Example. Aarp tax help Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. Aarp tax help You paid $32 based on the value ($1,500) and weight (3,400 lbs. Aarp tax help ) of your car. Aarp tax help You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. Aarp tax help The remaining $17 ($. Aarp tax help 50 × 34), based on the weight, is not deductible. Aarp tax help Taxes and Fees You Cannot Deduct Many federal, state, and local government taxes are not deductible because they do not fall within the categories discussed earlier. Aarp tax help Other taxes and fees, such as federal income taxes, are not deductible because the tax law specifically prohibits a deduction for them. Aarp tax help See Table 22-1. Aarp tax help Taxes and fees that are generally not deductible include the following items. Aarp tax help Employment taxes. Aarp tax help This includes social security, Medicare, and railroad retirement taxes withheld from your pay. Aarp tax help However, one-half of self-employment tax you pay is deductible. Aarp tax help In addition, the social security and other employment taxes you pay on the wages of a household worker may be included in medical expenses that you can deduct or child care expenses that allow you to claim the child and dependent care credit. Aarp tax help For more information, see chapters 21 and 32. Aarp tax help Estate, inheritance, legacy, or succession taxes. Aarp tax help However, you can deduct the estate tax attributable to income in respect of a decedent if you, as a beneficiary, must include that income in your gross income. Aarp tax help In that case, deduct the estate tax as a miscellaneous deduction that is not subject to the 2%-of-adjusted-gross-income limit. Aarp tax help For more information, see Publication 559, Survivors, Executors, and Administrators. Aarp tax help Federal income taxes. Aarp tax help This includes income taxes withheld from your pay. Aarp tax help Fines and penalties. Aarp tax help You cannot deduct fines and penalties paid to a government for violation of any law, including related amounts forfeited as collateral deposits. Aarp tax help Gift taxes. Aarp tax help License fees. Aarp tax help You cannot deduct license fees for personal purposes (such as marriage, driver's, and dog license fees). Aarp tax help Per capita taxes. Aarp tax help You cannot deduct state or local per capita taxes. Aarp tax help Many taxes and fees other than those listed above are also nondeductible, unless they are ordinary and necessary expenses of a business or income producing activity. Aarp tax help For other nondeductible items, see Real Estate-Related Items You Cannot Deduct , earlier. Aarp tax help Where To Deduct You deduct taxes on the following schedules. Aarp tax help State and local income taxes. Aarp tax help    These taxes are deducted on Schedule A (Form 1040), line 5, even if your only source of income is from business, rents, or royalties. Aarp tax help Check box a on line 5. Aarp tax help General sales taxes. Aarp tax help   Sales taxes are deducted on Schedule A (Form 1040), line 5. Aarp tax help You must check box b on line 5. Aarp tax help If you elect to deduct sales taxes, you cannot deduct state and local income taxes on Schedule A (Form 1040), line 5, box a. Aarp tax help Foreign income taxes. Aarp tax help   Generally, income taxes you pay to a foreign country or U. Aarp tax help S. Aarp tax help possession can be claimed as an itemized deduction on Schedule A (Form 1040), line 8, or as a credit against your U. Aarp tax help S. Aarp tax help income tax on Form 1040, line 47. Aarp tax help To claim the credit, you may have to complete and attach Form 1116. Aarp tax help For more information, see chapter 37, the Form 1040 instructions, or Publication 514. Aarp tax help Real estate taxes and personal property taxes. Aarp tax help    Real estate and personal property taxes are deducted on Schedule A (Form 1040), lines 6 and 7, respectively, unless they are paid on property used in your business, in which case they are deducted on Schedule C, Schedule C-EZ, or Schedule F (Form 1040). Aarp tax help Taxes on property that produces rent or royalty income are deducted on Schedule E (Form 1040). Aarp tax help Self-employment tax. Aarp tax help    Deduct one-half of your self-employment tax on Form 1040, line 27. Aarp tax help Other taxes. Aarp tax help    All other deductible taxes are deducted on Schedule A (Form 1040), line 8. Aarp tax help Prev  Up  Next   Home   More Online Publications