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Amend Return

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Amend Return

Amend return 7. Amend return   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Amend return Custodian account for your child. Amend return Penalty for failure to supply SSN. Amend return Reporting backup withholding. Amend return Savings account with parent as trustee. Amend return Interest not reported on Form 1099-INT. Amend return Nominees. Amend return Incorrect amount. Amend return Information reporting requirement. Amend return Taxable InterestInterest subject to penalty for early withdrawal. Amend return Money borrowed to invest in certificate of deposit. Amend return U. Amend return S. Amend return Savings Bonds Education Savings Bond Program U. Amend return S. Amend return Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Amend return How To Report Interest IncomeSchedule B (Form 1040A or 1040). Amend return Reporting tax-exempt interest. Amend return U. Amend return S. Amend return savings bond interest previously reported. Amend return Reminder Foreign-source income. Amend return  If you are a U. Amend return S. Amend return citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Amend return S. Amend return law. Amend return This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Amend return Introduction This chapter discusses the following topics. Amend return Different types of interest income. Amend return What interest is taxable and what interest is nontaxable. Amend return When to report interest income. Amend return How to report interest income on your tax return. Amend return In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Amend return Exceptions to this rule are discussed later in this chapter. Amend return You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Amend return See Money borrowed to invest in certificate of deposit , later, and chapter 28. Amend return Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. Amend return S. Amend return Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Amend return S. Amend return Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Amend return Recordkeeping. Amend return You should keep a list showing sources and interest amounts received during the year. Amend return Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Amend return Tax on unearned income of certain children. Amend return    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Amend return If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Amend return If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Amend return   Some parents can choose to include the child's interest and dividends on the parent's return. Amend return If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Amend return   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Amend return Beneficiary of an estate or trust. Amend return   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Amend return You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Amend return , from the fiduciary. Amend return Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Amend return Social security number (SSN). Amend return   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Amend return This includes payers of interest. Amend return If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Amend return SSN for joint account. Amend return   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Amend return (For information on who owns the funds in a joint account, see Joint accounts , later. Amend return ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Amend return This is because only one name and SSN can be shown on Form 1099. Amend return   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Amend return For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Amend return Custodian account for your child. Amend return   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Amend return For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Amend return Penalty for failure to supply SSN. Amend return   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Amend return See Failure to supply SSN under Penalties in chapter 1. Amend return Backup withholding also may apply. Amend return Backup withholding. Amend return   Your interest income is generally not subject to regular withholding. Amend return However, it may be subject to backup withholding to ensure that income tax is collected on the income. Amend return Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Amend return   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Amend return For more information, see Backup Withholding in chapter 4. Amend return Reporting backup withholding. Amend return   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. Amend return The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Amend return ” Joint accounts. Amend return   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. Amend return Income from property given to a child. Amend return   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Amend return   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Amend return Savings account with parent as trustee. Amend return   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Amend return The savings account legally belongs to the child. Amend return The parents are not legally permitted to use any of the funds to support the child. Amend return Form 1099-INT. Amend return   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Amend return This form shows you the interest you received during the year. Amend return Keep this form for your records. Amend return You do not have to attach it to your tax return. Amend return   Report on your tax return the total interest income you receive for the tax year. Amend return Interest not reported on Form 1099-INT. Amend return   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Amend return For example, you may receive distributive shares of interest from partnerships or S corporations. Amend return This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Amend return , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Amend return Nominees. Amend return   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Amend return   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. Amend return Incorrect amount. Amend return   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Amend return The new Form 1099-INT you receive will be marked “Corrected. Amend return ” Form 1099-OID. Amend return   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Amend return For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Amend return Exempt-interest dividends. Amend return   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Amend return (However, see Information reporting requirement , next. Amend return ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Amend return You do not reduce your basis for distributions that are exempt-interest dividends. Amend return Information reporting requirement. Amend return   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Amend return This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Amend return Note. Amend return Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Amend return See Alternative Minimum Tax (AMT) in chapter 30 for more information. Amend return Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Amend return Interest on VA dividends. Amend return   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Amend return This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Amend return Individual retirement arrangements (IRAs). Amend return   Interest on a Roth IRA generally is not taxable. Amend return Interest on a traditional IRA is tax deferred. Amend return You generally do not include it in your income until you make withdrawals from the IRA. Amend return See chapter 17. Amend return Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Amend return The following are some sources of taxable interest. Amend return Dividends that are actually interest. Amend return   Certain distributions commonly called dividends are actually interest. Amend return You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Amend return  The “dividends” will be shown as interest income on Form 1099-INT. Amend return Money market funds. Amend return   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Amend return Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Amend return Certificates of deposit and other deferred interest accounts. Amend return   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Amend return You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Amend return The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Amend return If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Amend return Interest subject to penalty for early withdrawal. Amend return   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Amend return You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Amend return See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. Amend return Money borrowed to invest in certificate of deposit. Amend return   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Amend return You must report the total interest you earn on the certificate in your income. Amend return If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Amend return See Interest Expenses in chapter 3 of Publication 550. Amend return Example. Amend return You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Amend return The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Amend return The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Amend return The bank also gives you a statement showing that you paid $310 interest for 2013. Amend return You must include the $575 in your income. Amend return If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Amend return Gift for opening account. Amend return   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Amend return   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Amend return For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Amend return The value is determined by the cost to the financial institution. Amend return Example. Amend return You open a savings account at your local bank and deposit $800. Amend return The account earns $20 interest. Amend return You also receive a $15 calculator. Amend return If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Amend return You must report $35 interest income on your tax return. Amend return Interest on insurance dividends. Amend return   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Amend return However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Amend return Prepaid insurance premiums. Amend return   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Amend return U. Amend return S. Amend return obligations. Amend return   Interest on U. Amend return S. Amend return obligations, such as U. Amend return S. Amend return Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Amend return Interest on tax refunds. Amend return   Interest you receive on tax refunds is taxable income. Amend return Interest on condemnation award. Amend return   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Amend return Installment sale payments. Amend return   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Amend return That interest is taxable when you receive it. Amend return If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Amend return See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Amend return Interest on annuity contract. Amend return   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Amend return Usurious interest. Amend return   Usurious interest is interest charged at an illegal rate. Amend return This is taxable as interest unless state law automatically changes it to a payment on the principal. Amend return Interest income on frozen deposits. Amend return   Exclude from your gross income interest on frozen deposits. Amend return A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Amend return   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Amend return If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. Amend return   The interest you exclude is treated as credited to your account in the following year. Amend return You must include it in income in the year you can withdraw it. Amend return Example. Amend return $100 of interest was credited on your frozen deposit during the year. Amend return You withdrew $80 but could not withdraw any more as of the end of the year. Amend return You must include $80 in your income and exclude $20 from your income for the year. Amend return You must include the $20 in your income for the year you can withdraw it. Amend return Bonds traded flat. Amend return   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Amend return The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Amend return When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Amend return Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Amend return See Bonds Sold Between Interest Dates , later, for more information. Amend return Below-market loans. Amend return   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Amend return See Below-Market Loans in chapter 1 of Publication 550 for more information. Amend return U. Amend return S. Amend return Savings Bonds This section provides tax information on U. Amend return S. Amend return savings bonds. Amend return It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Amend return For other information on U. Amend return S. Amend return savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Amend return O. Amend return Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Amend return O. Amend return Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Amend return O. Amend return Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Amend return treasurydirect. Amend return gov/indiv/indiv. Amend return htm. Amend return Accrual method taxpayers. Amend return   If you use an accrual method of accounting, you must report interest on U. Amend return S. Amend return savings bonds each year as it accrues. Amend return You cannot postpone reporting interest until you receive it or until the bonds mature. Amend return Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Amend return Cash method taxpayers. Amend return   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Amend return S. Amend return savings bonds when you receive it. Amend return The cash method of accounting is explained in chapter 1 under Accounting Methods. Amend return But see Reporting options for cash method taxpayers , later. Amend return Series HH bonds. Amend return    These bonds were issued at face value. Amend return Interest is paid twice a year by direct deposit to your bank account. Amend return If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Amend return   Series HH bonds were first offered in 1980 and last offered in August 2004. Amend return Before 1980, series H bonds were issued. Amend return Series H bonds are treated the same as series HH bonds. Amend return If you are a cash method taxpayer, you must report the interest when you receive it. Amend return   Series H bonds have a maturity period of 30 years. Amend return Series HH bonds mature in 20 years. Amend return The last series H bonds matured in 2009. Amend return Series EE and series I bonds. Amend return   Interest on these bonds is payable when you redeem the bonds. Amend return The difference between the purchase price and the redemption value is taxable interest. Amend return Series EE bonds. Amend return   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Amend return   Before July 1980, series E bonds were issued. Amend return The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Amend return Paper series EE and series E bonds are issued at a discount. Amend return The face value is payable to you at maturity. Amend return Electronic series EE bonds are issued at their face value. Amend return The face value plus accrued interest is payable to you at maturity. Amend return As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Amend return   Owners of paper series EE bonds can convert them to electronic bonds. Amend return These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Amend return Series I bonds. Amend return   Series I bonds were first offered in 1998. Amend return These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Amend return The face value plus all accrued interest is payable to you at maturity. Amend return Reporting options for cash method taxpayers. Amend return   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Amend return Method 1. Amend return Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Amend return (However, see Savings bonds traded , later. Amend return )  Note. Amend return Series EE bonds issued in 1983 matured in 2013. Amend return If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Amend return The last series E bonds were issued in 1980 and matured in 2010. Amend return If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Amend return Method 2. Amend return Choose to report the increase in redemption value as interest each year. Amend return You must use the same method for all series EE, series E, and series I bonds you own. Amend return If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Amend return    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Amend return To learn how, see Education Savings Bond Program, later. Amend return Change from method 1. Amend return   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Amend return In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Amend return   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Amend return Change from method 2. Amend return   To change from method 2 to method 1, you must request permission from the IRS. Amend return Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Amend return You have typed or printed the following number at the top: “131. Amend return ” It includes your name and social security number under “131. Amend return ” It includes the year of change (both the beginning and ending dates). Amend return It identifies the savings bonds for which you are requesting this change. Amend return It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Amend return   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Amend return   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Amend return On the statement, type or print “Filed pursuant to section 301. Amend return 9100-2. Amend return ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Amend return    By the date you file the original statement with your return, you must also send a signed copy to the address below. Amend return   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Amend return O. Amend return Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Amend return   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. Amend return In that case, follow the form instructions for an automatic change. Amend return No user fee is required. Amend return Co-owners. Amend return   If a U. Amend return S. Amend return savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Amend return One co-owner's funds used. Amend return    If you used your funds to buy the bond, you must pay the tax on the interest. Amend return This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Amend return Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Amend return The co-owner who redeemed the bond is a “nominee. Amend return ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. Amend return Both co-owners' funds used. Amend return   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Amend return Community property. Amend return   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Amend return If you file separate returns, each of you generally must report one-half of the bond interest. Amend return For more information about community property, see Publication 555. Amend return Table 7-1. Amend return   These rules are also shown in Table 7-1. Amend return Ownership transferred. Amend return   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Amend return But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Amend return   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Amend return Purchased jointly. Amend return   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Amend return The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Amend return This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Amend return   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Amend return But the new co-owner will report only his or her share of the interest earned after the transfer. Amend return   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Amend return    Table 7-1. Amend return Who Pays the Tax on U. Amend return S. Amend return Savings Bond Interest IF . Amend return . Amend return . Amend return THEN the interest must be reported by . Amend return . Amend return . Amend return you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Amend return you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Amend return you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Amend return you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Amend return If you file separate returns, both you and your spouse generally report one-half of the interest. Amend return Example 1. Amend return You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Amend return The bond was issued to you and your spouse as co-owners. Amend return You both postpone reporting interest on the bond. Amend return You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Amend return At that time neither you nor your spouse has to report the interest earned to the date of reissue. Amend return Example 2. Amend return You bought a $1,000 series EE savings bond entirely with your own funds. Amend return The bond was issued to you and your spouse as co-owners. Amend return You both postpone reporting interest on the bond. Amend return You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Amend return You must report half the interest earned to the date of reissue. Amend return Transfer to a trust. Amend return   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Amend return However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Amend return You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Amend return   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Amend return See Savings bonds traded , later. Amend return Decedents. Amend return   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Amend return This is explained in chapter 1 of Publication 550. Amend return Savings bonds traded. Amend return   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Amend return (You cannot trade series I bonds for series HH bonds. Amend return After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Amend return ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Amend return When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Amend return Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Amend return Example. Amend return You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Amend return You reported the $223 as taxable income on your tax return. Amend return At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Amend return You hold the series HH bonds until maturity, when you receive $2,500. Amend return You must report $300 as interest income in the year of maturity. Amend return This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Amend return (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Amend return ) Choice to report interest in year of trade. Amend return   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. Amend return If you made this choice, it is treated as a change from method 1. Amend return See Change from method 1 under Series EE and series I bonds, earlier. Amend return Form 1099-INT for U. Amend return S. Amend return savings bonds interest. Amend return   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Amend return Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Amend return However, your Form 1099-INT may show more interest than you have to include on your income tax return. Amend return For example, this may happen if any of the following are true. Amend return You chose to report the increase in the redemption value of the bond each year. Amend return The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Amend return You received the bond from a decedent. Amend return The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Amend return Ownership of the bond was transferred. Amend return The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Amend return You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Amend return The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Amend return (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Amend return ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Amend return The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Amend return (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Amend return , for the year of distribution. Amend return )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Amend return Publication 550 includes examples showing how to report these amounts. Amend return    Interest on U. Amend return S. Amend return savings bonds is exempt from state and local taxes. Amend return The Form 1099-INT you receive will indicate the amount that is for U. Amend return S. Amend return savings bond interest in box 3. Amend return Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Amend return S. Amend return savings bonds during the year if you pay qualified higher educational expenses during the same year. Amend return This exclusion is known as the Education Savings Bond Program. Amend return You do not qualify for this exclusion if your filing status is married filing separately. Amend return Form 8815. Amend return   Use Form 8815 to figure your exclusion. Amend return Attach the form to your Form 1040 or Form 1040A. Amend return Qualified U. Amend return S. Amend return savings bonds. Amend return   A qualified U. Amend return S. Amend return savings bond is a series EE bond issued after 1989 or a series I bond. Amend return The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Amend return You must be at least 24 years old before the bond's issue date. Amend return For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Amend return    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Amend return Beneficiary. Amend return   You can designate any individual (including a child) as a beneficiary of the bond. Amend return Verification by IRS. Amend return   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Amend return Qualified expenses. Amend return   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Amend return   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Amend return   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Amend return Eligible educational institutions. Amend return   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. Amend return S. Amend return Department of Education. Amend return Reduction for certain benefits. Amend return   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Amend return Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Amend return Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Amend return Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Amend return Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Amend return Any expense used in figuring the American Opportunity and lifetime learning credits. Amend return Amount excludable. Amend return   If the total proceeds (interest and principal) from the qualified U. Amend return S. Amend return savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Amend return If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Amend return   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Amend return The numerator of the fraction is the qualified higher educational expenses you paid during the year. Amend return The denominator of the fraction is the total proceeds you received during the year. Amend return Example. Amend return In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Amend return S. Amend return savings bond they bought in April 1997. Amend return They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Amend return In 2013, they paid $4,000 of their daughter's college tuition. Amend return They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Amend return They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Amend return They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Amend return Modified adjusted gross income limit. Amend return   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. Amend return You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. Amend return   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. Amend return   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Amend return If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. Amend return   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. Amend return Recordkeeping. Amend return If you claim the interest exclusion, you must keep a written record of the qualified U. Amend return S. Amend return savings bonds you redeem. Amend return Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Amend return You can use Form 8818 to record this information. Amend return You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Amend return U. Amend return S. Amend return Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Amend return S. Amend return Government. Amend return Taxation of interest. Amend return   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Amend return You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Amend return   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Amend return Treasury bills. Amend return   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Amend return They are generally issued at a discount in the amount of $100 and multiples of $100. Amend return The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Amend return Generally, you report this interest income when the bill is paid at maturity. Amend return If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. Amend return Treasury notes and bonds. Amend return   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Amend return Maturity periods for Treasury bonds are longer than 10 years. Amend return Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Amend return Generally, you report this interest for the year paid. Amend return For more information, see U. Amend return S. Amend return Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Amend return For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Amend return O. Amend return Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Amend return treasurydirect. Amend return gov/indiv/indiv. Amend return htm. Amend return For information on series EE, series I, and series HH savings bonds, see U. Amend return S. Amend return Savings Bonds , earlier. Amend return Treasury inflation-protected securities (TIPS). Amend return   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Amend return For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Amend return Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. Amend return You must report that part of the sales price as interest income for the year of sale. Amend return If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Amend return When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. Amend return See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Amend return Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Amend return But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Amend return For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Amend return Annuity. Amend return   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. Amend return See chapter 10 for information on pension and annuity income from nonqualified plans. Amend return State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. Amend return Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. Amend return Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. Amend return For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. Amend return Information reporting requirement. Amend return   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Amend return This is an information reporting requirement only. Amend return It does not change tax-exempt interest to taxable interest. Amend return Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Amend return You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. Amend return A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Amend return OID is the difference between the stated redemption price at maturity and the issue price. Amend return All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Amend return Zero coupon bonds are one example of these instruments. Amend return The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). Amend return See Discount on Short-Term Obligations in chapter 1 of Publication 550. Amend return De minimis OID. Amend return   You can treat the discount as zero if it is less than one-fourth of 1% (. Amend return 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Amend return This small discount is known as “de minimis” OID. Amend return Example 1. Amend return You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Amend return One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Amend return Because the $20 discount is less than $25, the OID is treated as zero. Amend return (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Amend return ) Example 2. Amend return The facts are the same as in Example 1, except that the bond was issued at $950. Amend return The OID is $50. Amend return Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. Amend return Debt instrument bought after original issue. Amend return   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Amend return If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Amend return See Market Discount Bonds in chapter 1 of Publication 550. Amend return Exceptions to reporting OID. Amend return   The OID rules discussed in this chapter do not apply to the following debt instruments. Amend return Tax-exempt obligations. Amend return (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Amend return U. Amend return S. Amend return savings bonds. Amend return Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Amend return Obligations issued by an individual before March 2, 1984. Amend return Loans between individuals if all the following are true. Amend return The lender is not in the business of lending money. Amend return The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Amend return Avoiding any federal tax is not one of the principal purposes of the loan. Amend return Form 1099-OID. Amend return   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. Amend return Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Amend return It also will show, in box 2, the stated interest you must include in your income. Amend return A copy of Form 1099-OID will be sent to the IRS. Amend return Do not file your copy with your return. Amend return Keep it for your records. Amend return   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Amend return But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Amend return Form 1099-OID not received. Amend return   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Amend return gov that list total OID on certain debt instruments and have information that will help you figure OID. Amend return For the latest OID tables, go to www. Amend return irs. Amend return gov and enter “OID tables” in the Search box. Amend return If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Amend return Nominee. Amend return   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. Amend return Refiguring OID shown on Form 1099-OID. Amend return   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Amend return You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Amend return The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Amend return For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. Amend return Refiguring periodic interest shown on Form 1099-OID. Amend return   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. Amend return Certificates of deposit (CDs). Amend return   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. Amend return   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Amend return , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Amend return Bearer CDs. Amend return   CDs issued after 1982 generally must be in registered form. Amend return Bearer CDs are CDs not in registered form. Amend return They are not issued in the depositor's name and are transferable from one individual to another. Amend return   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Amend return More information. Amend return   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Amend return When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. Amend return Cash method. Amend return   Most individual taxpayers use the cash method. Amend return If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Amend return However, there are special rules for reporting the discount on certain debt instruments. Amend return See U. Amend return S. Amend return Savings Bonds and Original Issue Discount (OID) , earlier. Amend return Example. Amend return On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Amend return You are not in the business of lending money. Amend return The note stated that principal and interest would be due on August 31, 2013. Amend return In 2013, you received $2,508. Amend return 80 ($2,000 principal and $508. Amend return 80 interest). Amend return If you use the cash method, you must include in income on your 2013 return the $508. Amend return 80 interest you received in that year. Amend return Constructive receipt. Amend return   You constructively receive income when it is credited to your account or made available to you. Amend return You do not need to have physical possession of it. Amend return For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. Amend return This is true even if they are not yet entered in your passbook. Amend return   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. Amend return Accrual method. Amend return   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Amend return Interest is earned over the term of the debt instrument. Amend return Example. Amend return If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Amend return You would report the interest as follows: 2011, $80; 2012, $249. Amend return 60; and 2013, $179. Amend return 20. Amend return Coupon bonds. Amend return   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Amend return It does not matter when you mail the coupon for payment. Amend return How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. Amend return You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Amend return Instead, you must use Form 1040A or Form 1040. Amend return Form 1040A. Amend return   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Amend return Your taxable interest income is more than $1,500. Amend return You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Amend return You received interest from a seller-financed mortgage, and the buyer used the property as a home. Amend return You received a Form 1099-INT for U. Amend return S. Amend return savings bond interest that includes amounts you reported before 2013. Amend return You received, as a nominee, interest that actually belongs to someone else. Amend return You received a Form 1099-INT for interest on frozen deposits. Amend return You are reporting OID in an amount less than the amount shown on Form 1099-OID. Amend return You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Amend return You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). Amend return List each payer's name and the amount of interest income received from each payer on line 1. Amend return If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Amend return   You cannot use Form 1040A if you must use Form 1040, as described next. Amend return Form 1040. Amend return   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. Amend return Schedule B (Form 1040A or 1040). Amend return   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Amend return Your taxable interest income is more than $1,500. Amend return You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Amend return You received interest from a seller-financed mortgage, and the buyer used the property as a home. Amend return You received a Form 1099-INT for U. Amend return S. Amend return savings bond interest that includes amounts you reported before 2013. Amend return You received, as a nominee, interest that actually belongs to someone else. Amend return You received a Form 1099-INT for interest on frozen deposits. Amend return You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Amend return You are reporting OID in an amount less than the amount shown on Form 1099-OID. Amend return Statement (2) in the preceding list under Form 1040 is true. Amend return In Part I, line 1, list each payer's name and the amount received from each. Amend return If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Amend return Reporting tax-exempt interest. Amend return   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. Amend return Add these amounts to any other tax-exempt interest you received. Amend return Report the total on line 8b of Form 1040A or 1040. Amend return   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Amend return Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Amend return   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. Amend return These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Amend return Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Amend return    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Amend return Form 1099-INT. Amend return   Your taxable interest income, except for interest from U. Amend return S. Amend return savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Amend return Add this amount to any other taxable interest income you received. Amend return You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Amend return Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Amend return Your identifying number may be truncated on any paper Form 1099-INT you receive. Amend return   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. Amend return See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Amend return   Box 3 of Form 1099-INT shows the interest income you received from U. Amend return S. Amend return savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Amend return Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. Amend return If part of the amount shown in box 3 was previously included in your interest income, see U. Amend return S. Amend return savings bond interest previously reported , later. Amend return   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Amend return Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). Amend return   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Amend return See chapter 28 for more information about investment expenses. Amend return   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Amend return You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). Amend return To take the credit, you may have to file Form 1116, Foreign Tax Credit. Amend return For more information, see Publication 514, Foreign Tax Credit for Individuals. Amend return U. Amend return S. Amend return savings bond interest previously reported. Amend return   If you received a Form 1099-INT for U. Amend return S. Amend return savings bond interest, the form may show interest you do not have to report. Amend return See Form 1099-INT for U. Amend return S. Amend return savings bonds interest , earlier, under U. Amend return S. Amend return Savings Bonds. Amend return   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Amend return Then follow these steps. Amend return Several lines above line 2, enter a subtotal of all interest listed on line 1. Amend return Below the subtotal enter “U. Amend return S. Amend return Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Amend return Subtract these amounts from the subtotal and enter the result on line 2. Amend return More information. Amend return   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Amend return Prev  Up  Next   Home   More Online Publications

The Amend Return

Amend return 21. Amend return   Medical and Dental Expenses Table of Contents What's New Introduction Useful Items - You may want to see: What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. Amend return How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Yourself Spouse Dependent Decedent What Medical Expenses Are Includible?Insurance Premiums Meals and Lodging Transportation Disabled Dependent Care Expenses How Do You Treat Reimbursements?Insurance Reimbursement Damages for Personal Injuries How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons What's New Medical and dental expenses. Amend return  Beginning January 1, 2013, you can deduct only the part of your medical and dental expenses that exceed 10% of your adjusted gross income (AGI) (7. Amend return 5% if either you or your spouse is age 65 or older). Amend return Standard mileage rate. Amend return  The standard mileage rate allowed for operating expenses for a car when you use it for medical reasons is 24 cents per mile. Amend return See Transportation under What Medical Expenses Are Includible. Amend return Introduction This chapter will help you determine the following. Amend return What medical expenses are. Amend return What expenses you can include this year. Amend return How much of the expenses you can deduct. Amend return Whose medical expenses you can include. Amend return What medical expenses are includible. Amend return How to treat reimbursements. Amend return How to report the deduction on your tax return. Amend return How to report impairment-related work expenses. Amend return How to report health insurance costs if you are self-employed. Amend return Useful Items - You may want to see: Publications 502 Medical and Dental Expenses 969 Health Savings Accounts and Other Tax-Favored Health Plans Form (and Instructions) Schedule A (Form 1040) Itemized Deductions What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Amend return These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. Amend return They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Amend return Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Amend return They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Amend return Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Amend return Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. Amend return What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Amend return If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Amend return If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Amend return If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Amend return Separate returns. Amend return   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Amend return Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Amend return Community property states. Amend return   If you and your spouse live in a community property state and file separate returns, or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. Amend return Each of you should include half the expenses. Amend return If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. Amend return If you live in a community property state, and are not filing a joint return, see Publication 555, Community Property. Amend return How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Amend return 5% of your AGI if either you or your spouse is age 65 or older)(Form 1040, line 38). Amend return Example. Amend return You are unmarried and under age 65 and your AGI is $40,000, 10% of which is $4,000. Amend return You paid medical expenses of $2,500. Amend return You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. Amend return Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. Amend return There are different rules for decedents and for individuals who are the subject of multiple support agreements. Amend return See Support claimed under a multiple support agreement , later. Amend return Yourself You can include medical expenses you paid for yourself. Amend return Spouse You can include medical expenses you paid for your spouse. Amend return To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. Amend return Example 1. Amend return Mary received medical treatment before she married Bill. Amend return Bill paid for the treatment after they married. Amend return Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. Amend return If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Amend return Mary would include the amounts she paid during the year in her separate return. Amend return If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. Amend return Example 2. Amend return This year, John paid medical expenses for his wife Louise, who died last year. Amend return John married Belle this year and they file a joint return. Amend return Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. Amend return Dependent You can include medical expenses you paid for your dependent. Amend return For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. Amend return A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. Amend return The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. Amend return S. Amend return citizen or national, or a resident of the United States, Canada, or Mexico. Amend return If your qualifying child was adopted, see Exception for adopted child , next. Amend return You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Amend return Exception for adopted child. Amend return   If you are a U. Amend return S. Amend return citizen or U. Amend return S. Amend return national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. Amend return S. Amend return citizen or national or a resident of the United States, Canada, or Mexico. Amend return Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, or, if he or she did, it was only to claim a refund. Amend return Adopted child. Amend return   A legally adopted child is treated as your own child. Amend return This includes a child lawfully placed with you for legal adoption. Amend return   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. Amend return   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. Amend return   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. Amend return    You may be able to take an adoption credit for other expenses related to an adoption. Amend return See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Amend return Child of divorced or separated parents. Amend return   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Amend return Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. Amend return This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). Amend return Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of either of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child earlier) of any other person for 2013, and For whom you provided over half of the support in 2013. Amend return But see Child of divorced or separated parents , earlier, and Support claimed under a multiple support agreement, next. Amend return Support claimed under a multiple support agreement. Amend return   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Amend return A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Amend return   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. Amend return However, you can include the entire unreimbursed amount you paid for medical expenses. Amend return Example. Amend return You and your three brothers each provide one-fourth of your mother's total support. Amend return Under a multiple support agreement, you treat your mother as your dependent. Amend return You paid all of her medical expenses. Amend return Your brothers reimbursed you for three-fourths of these expenses. Amend return In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Amend return Your brothers cannot include any part of the expenses. Amend return However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. Amend return Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. Amend return This includes expenses for the decedent's spouse and dependents as well as for the decedent. Amend return The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. Amend return The expenses must be paid within the 1-year period beginning with the day after the date of death. Amend return If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. Amend return Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. Amend return Amended returns and claims for refund are discussed in chapter 1. Amend return What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. Amend return The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. Amend return What Medical Expenses Are Includible? Use Table 21-1, later, as a guide to determine which medical and dental expenses you can include on Schedule A (Form 1040). Amend return This table does not include all possible medical expenses. Amend return To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. Amend return Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Amend return Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). Amend return See Qualified Long-Term Care Insurance Contracts in Publication 502. Amend return If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Amend return The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. Amend return Note. Amend return When figuring the amount of insurance premiums you can include in medical expenses on Schedule A, do not include any health coverage tax credit advance payments shown in box 1 of Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Amend return Also, do not include insurance premiums attributable to a nondependent child under age 27 if your premiums increased as a result of adding this child to your policy. Amend return Employer-sponsored health insurance plan. Amend return   Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included in box 1 of your Form W-2. Amend return Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included in box 1 of your Form W-2. Amend return Example. Amend return You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. Amend return Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. Amend return Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. Amend return Long-term care services. Amend return   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. Amend return This amount will be reported as wages in box 1 of your Form W-2. Amend return Health reimbursement arrangement (HRA). Amend return   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. Amend return This is because an HRA is funded solely by the employer. Amend return Retired public safety officers. Amend return   If you are a retired public safety officer, do not include as medical expenses any health or long-term care premiums that you elected to have paid with tax-free distributions from your retirement plan. Amend return This applies only to distributions that would otherwise be included in income. Amend return Medicare A. Amend return   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. Amend return The payroll tax paid for Medicare A is not a medical expense. Amend return   If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. Amend return In this situation you can include the premiums you paid for Medicare A as a medical expense. Amend return Medicare B. Amend return   Medicare B is supplemental medical insurance. Amend return Premiums you pay for Medicare B are a medical expense. Amend return Check the information you received from the Social Security Administration to find out your premium. Amend return Medicare D. Amend return    Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. Amend return You can include as a medical expense premiums you pay for Medicare D. Amend return Prepaid insurance premiums. Amend return   Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Amend return Unused sick leave used to pay premiums. Amend return   You must include in gross income cash payments you receive at the time of retirement for unused sick leave. Amend return You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. Amend return You can include this cost of continuing participation in the health plan as a medical expense. Amend return   If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. Amend return You cannot include this cost of continuing participation in that health plan as a medical expense. Amend return Table 21-1. Amend return Medical and Dental Expenses Checklist. Amend return See Publication 502 for more information about these and other expenses. Amend return You can include: You cannot include: Bandages Birth control pills prescribed by your doctor Body scan Braille books Breast pump and supplies Capital expenses for equipment or improvements to your home needed for medical care (see the worksheet in Publication 502) Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Fertility enhancement, certain procedures Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. Amend return ) Lead-based paint removal Legal abortion Legal operation to prevent having children such as a vasectomy or tubal ligation Long-term care contracts, qualified Meals and lodging provided by a hospital during medical treatment Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Medical and hospital insurance premiums Nursing services Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Physical examination Pregnancy test kit Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Wages for nursing services, below) Special items (artificial limbs, false teeth, eye-glasses, contact lenses, hearing aids, crutches, wheelchair, etc. Amend return ) Special education for mentally or physically disabled persons Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services Weight-loss, certain expenses for obesity Baby sitting and childcare Bottled water Contributions to Archer MSAs (see Publication 969) Diaper service Expenses for your general health (even if following your doctor's advice) such as— —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pre-tax basis) Funeral, burial, or cremation expenses Health savings account payments for medical expenses Illegal operation, treatment, or medicine Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. Amend return Maternity clothes Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases Nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. Amend return , unless recommended by a medical practitioner as a treatment for a specific medical condition diagnosed by a physician Surgery for purely cosmetic reasons Toothpaste, toiletries, cosmetics, etc. Amend return Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to get medical care. Amend return See Nursing home , later. Amend return You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. Amend return You can include the cost of such lodging while away from home if all of the following requirements are met. Amend return The lodging is primarily for and essential to medical care. Amend return The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Amend return The lodging is not lavish or extravagant under the circumstances. Amend return There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Amend return The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. Amend return You can include lodging for a person traveling with the person receiving the medical care. Amend return For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Amend return Meals are not included. Amend return Nursing home. Amend return   You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. Amend return This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Amend return   Do not include the cost of meals and lodging if the reason for being in the home is personal. Amend return You can, however, include in medical expenses the part of the cost that is for medical or nursing care. Amend return Transportation Include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Amend return You can include: Bus, taxi, train, or plane fares, or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. Amend return Car expenses. Amend return   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use your car for medical reasons. Amend return You cannot include depreciation, insurance, general repair, or maintenance expenses. Amend return   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents per mile. Amend return    You can also include parking fees and tolls. Amend return You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. Amend return Example. Amend return In 2013, Bill Jones drove 2,800 miles for medical reasons. Amend return He spent $500 for gas, $30 for oil, and $100 for tolls and parking. Amend return He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. Amend return He figures the actual expenses first. Amend return He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. Amend return He then figures the standard mileage amount. Amend return He multiplies 2,800 miles by 24 cents a mile for a total of $672. Amend return He then adds the $100 tolls and parking for a total of $772. Amend return Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. Amend return Transportation expenses you cannot include. Amend return   You cannot include in medical expenses the cost of transportation in the following situations. Amend return Going to and from work, even if your condition requires an unusual means of transportation. Amend return Travel for purely personal reasons to another city for an operation or other medical care. Amend return Travel that is merely for the general improvement of one's health. Amend return The costs of operating a specially equipped car for other than medical reasons. Amend return Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. Amend return (See chapter 32 and Publication 503, Child and Dependent Care Expenses. Amend return ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. Amend return How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the taxable year for which you received no insurance or other reimbursement. Amend return Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. Amend return This includes payments from Medicare. Amend return Even if a policy provides reimbursement for only certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. Amend return Example. Amend return You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. Amend return The insurance you receive for the hospital and doctors' bills is more than their charges. Amend return In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. Amend return Health reimbursement arrangement (HRA). Amend return   A health reimbursement arrangement is an employer-funded plan that reimburses employees for medical care expenses and allows unused amounts to be carried forward. Amend return An HRA is funded solely by the employer and the reimbursements for medical expenses, up to a maximum dollar amount for a coverage period, are not included in your income. Amend return Other reimbursements. Amend return   Generally, you do not reduce medical expenses by payments you receive for: Permanent loss or loss of use of a member or function of the body (loss of limb, sight, hearing, etc. Amend return ) or disfigurement to the extent the payment is based on the nature of the injury without regard to the amount of time lost from work, or Loss of earnings. Amend return   You must, however, reduce your medical expenses by any part of these payments that is designated for medical costs. Amend return See How Do You Figure and Report the Deduction on Your Tax Return , later. Amend return   For how to treat damages received for personal injury or sickness, see Damages for Personal Injuries , later. Amend return You do not have a medical deduction if you are reimbursed for all of your medical expenses for the year. Amend return Excess reimbursement. Amend return   If you are reimbursed more than your medical expenses, you may have to include the excess in income. Amend return You may want to use Figure 21-A to help you decide if any of your reimbursement is taxable. Amend return Premiums paid by you. Amend return   If you pay either the entire premium for your medical insurance or all of the costs of a plan similar to medical insurance and your insurance payments or other reimbursements are more than your total medical expenses for the year, you have an excess reimbursement. Amend return Generally, you do not include the excess reimbursement in your gross income. Amend return Premiums paid by you and your employer. Amend return   If both you and your employer contribute to your medical insurance plan and your employer's contributions are not included in your gross income, you must include in your gross income the part of your excess reimbursement that is from your employer's contribution. Amend return   See Publication 502 to figure the amount of the excess reimbursement you must include in gross income. Amend return Reimbursement in a later year. Amend return   If you are reimbursed in a later year for medical expenses you deducted in an earlier year, you generally must report the reimbursement as income up to the amount you previously deducted as medical expenses. Amend return   However, do not report as income the amount of reimbursement you received up to the amount of your medical deductions that did not reduce your tax for the earlier year. Amend return For more information about the recovery of an amount that you claimed as an itemized deduction in an earlier year, see Itemized Deduction Recoveries in chapter 12. Amend return Figure 21-A. Amend return Is Your Excess Medical Reimbursement Taxable? Please click here for the text description of the image. Amend return Figure 21-A. Amend return Is Your Excess Medical Reimbursement Taxable? Medical expenses not deducted. Amend return   If you did not deduct a medical expense in the year you paid it because your medical expenses were not more than 10% of your AGI (7. Amend return 5% of your AGI if either you or your spouse was age 65 or older), or because you did not itemize deductions, do not include the reimbursement up to the amount of the expense in income. Amend return However, if the reimbursement is more than the expense, see Excess reimbursement , earlier. Amend return Example. Amend return For 2013, you were unmarried and under age 65 and you had medical expenses of $500. Amend return You cannot deduct the $500 because it is less than 10% of your AGI. Amend return If, in a later year, you are reimbursed for any of the $500 in medical expenses, you do not include the amount reimbursed in your gross income. Amend return Damages for Personal Injuries If you receive an amount in settlement of a personal injury suit, part of that award may be for medical expenses that you deducted in an earlier year. Amend return If it is, you must include that part in your income in the year you receive it to the extent it reduced your taxable income in the earlier year. Amend return See Reimbursement in a Later Year , discussed under How Do You Treat Reimbursements, earlier. Amend return Future medical expenses. Amend return   If you receive an amount in settlement of a damage suit for personal injuries, part of that award may be for future medical expenses. Amend return If it is, you must reduce any future medical expenses for these injuries until the amount you received has been completely used. Amend return How Do You Figure and Report the Deduction on Your Tax Return? Once you have determined which medical expenses you can include, you figure and report the deduction on your tax return. Amend return What Tax Form Do You Use? You figure your medical expense deduction on Schedule A (Form 1040). Amend return You cannot claim medical expenses on Form 1040A or Form 1040EZ. Amend return If you need more information on itemized deductions or you are not sure if you can itemize, see chapter 20. Amend return Enter the amount you paid for medical and dental expenses on Schedule A (Form 1040). Amend return This should be your expenses that were not reimbursed by insurance or any other sources. Amend return Generally, you can deduct only the amount of your medical and dental expenses that is more than 10% of your AGI (7. Amend return 5% if either you or your spouse was age 65 or older) shown on line 38, Form 1040. Amend return Impairment-Related Work Expenses If you are a person with a disability, you can take a business deduction for expenses that are necessary for you to be able to work. Amend return If you take a business deduction for impairment-related work expenses, do not take a medical deduction for the same expenses. Amend return You have a disability if you have: A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed, or A physical or mental impairment (for example, a sight or hearing impairment) that substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, or working. Amend return Impairment-related expenses defined. Amend return   Impairment-related expenses are those ordinary and necessary business expenses that are: Necessary for you to do your work satisfactorily, For goods and services not required or used, other than incidentally, in your personal activities, and Not specifically covered under other income tax laws. Amend return Where to report. Amend return   If you are self-employed, deduct the business expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Amend return   If you are an employee, complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Amend return Enter on Schedule A (Form 1040), that part of the amount on Form 2106, or Form 2106-EZ, that is related to your impairment. Amend return Enter the amount that is unrelated to your impairment also on Schedule A (Form 1040). Amend return Your impairment-related work expenses are not subject to the 2%-of-adjusted-gross-income limit that applies to other employee business expenses. Amend return Example. Amend return You are blind. Amend return You must use a reader to do your work. Amend return You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Amend return The reader's services are only for your work. Amend return You can deduct your expenses for the reader as business expenses. Amend return Health Insurance Costs for Self-Employed Persons If you were self-employed and had a net profit for the year, you may be able to deduct, as an adjustment to income, amounts paid for medical and qualified long-term care insurance on behalf of yourself, your spouse, your dependents, and, your children who were under age 27 at the end of 2013. Amend return For this purpose, you were self-employed if you were a general partner (or a limited partner receiving guaranteed payments) or you received wages from an S corporation in which you were more than a 2% shareholder. Amend return The insurance plan must be established under your trade or business and the deduction cannot be more than your earned income from that trade or business. Amend return You cannot deduct payments for medical insurance for any month in which you were eligible to participate in a health plan subsidized by your employer, your spouse's employer, or, an employer of your dependent or your child under age 27 at the end of 2013. Amend return You cannot deduct payments for a qualified long-term care insurance contract for any month in which you were eligible to participate in a long-term care insurance plan subsidized by your employer or your spouse's employer. Amend return If you qualify to take the deduction, use the Self-Employed Health Insurance Deduction Worksheet in the Form 1040 instructions to figure the amount you can deduct. Amend return But if any of the following applies, do not use that worksheet. Amend return You had more than one source of income subject to self-employment tax. Amend return You file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Amend return You are using amounts paid for qualified long-term care insurance to figure the deduction. Amend return If you cannot use the worksheet in the Form 1040 instructions, use the worksheet in Publication 535, Business Expenses, to figure your deduction. Amend return Note. Amend return When figuring the amount you can deduct for insurance premiums, do not include any advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Amend return If you are claiming the health coverage tax credit, subtract the amount shown on Form 8885, from the total insurance premiums you paid. Amend return Do not include amounts paid for health insurance coverage with retirement plan distributions that were tax-free because you are a retired public safety officer. Amend return Where to report. Amend return    You take this deduction on Form 1040. Amend return If you itemize your deductions and do not claim 100% of your self-employed health insurance on Form 1040, you can generally include any remaining premiums with all other medical expenses on Schedule A (Form 1040), subject to the 10% limit (7. Amend return 5% if either you or your spouse was age 65 or older). Amend return See Self-Employed Health Insurance Deduction in chapter 6 of Publication 535, Business Expenses, and Medical and Dental Expenses in the Instructions for Schedule A (Form 1040), for more information. Amend return Prev  Up  Next   Home   More Online Publications