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Federal 1040ez Forms And Instructions 2013

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Federal 1040ez Forms And Instructions 2013

Federal 1040ez forms and instructions 2013 Publication 523 - Main Content Table of Contents Main HomeVacant land. Federal 1040ez forms and instructions 2013 Factors used to determine main home. Federal 1040ez forms and instructions 2013 Figuring Gain or LossSelling Price Amount Realized Adjusted Basis Amount of Gain or Loss Dispositions Other Than Sales Determining BasisCost As Basis Basis Other Than Cost Adjusted Basis Excluding the GainMaximum Exclusion Ownership and Use Tests Reduced Maximum Exclusion Nonqualified Use Business Use or Rental of HomeUnrecaptured section 1250 gain. Federal 1040ez forms and instructions 2013 Property Used Partly for Business or Rental Reporting the SaleSeller-financed mortgage. Federal 1040ez forms and instructions 2013 Individual taxpayer identification number (ITIN). Federal 1040ez forms and instructions 2013 More information. Federal 1040ez forms and instructions 2013 Comprehensive Examples Special SituationsException for sales to related persons. Federal 1040ez forms and instructions 2013 Deducting Taxes in the Year of SaleForm 1099-S. Federal 1040ez forms and instructions 2013 More information. Federal 1040ez forms and instructions 2013 Recapturing (Paying Back) a Federal Mortgage Subsidy Recapture of First-Time Homebuyer CreditExample. Federal 1040ez forms and instructions 2013 Worksheets How To Get Tax HelpLow Income Taxpayer Clinics Main Home This section explains the term “main home. Federal 1040ez forms and instructions 2013 ” Usually, the home you live in most of the time is your main home and can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Federal 1040ez forms and instructions 2013 To exclude gain under the rules in this publication, you in most cases must have owned and lived in the property as your main home for at least 2 years during the 5-year period ending on the date of sale. Federal 1040ez forms and instructions 2013 Land. Federal 1040ez forms and instructions 2013   If you sell the land on which your main home is located, but not the house itself, you cannot exclude any gain you have from the sale of the land. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 You buy a piece of land and move your main home to it. Federal 1040ez forms and instructions 2013 Then, you sell the land on which your main home was located. Federal 1040ez forms and instructions 2013 This sale is not considered a sale of your main home, and you cannot exclude any gain on the sale of the land. Federal 1040ez forms and instructions 2013 Vacant land. Federal 1040ez forms and instructions 2013   The sale of vacant land is not a sale of your main home unless: The vacant land is adjacent to land containing your home, You owned and used the vacant land as part of your main home, The separate sale of your home satisfies the requirements for exclusion and occurs within 2 years before or 2 years after the date of the sale of the vacant land, and The other requirements for excluding gain from the sale of a main home have been satisfied with respect to the vacant land. Federal 1040ez forms and instructions 2013 If these requirements are met, the sale of the home and the sale of the vacant land are treated as one sale and only one maximum exclusion can be applied to any gain. Federal 1040ez forms and instructions 2013 See Excluding the Gain , later. Federal 1040ez forms and instructions 2013 The destruction of your home is treated as a sale of your home. Federal 1040ez forms and instructions 2013 As a result, you may be able to meet these requirements if you sell vacant land used as a part of your main home within 2 years from the date of the destruction of your main home. Federal 1040ez forms and instructions 2013 For information, see Publication 547. Federal 1040ez forms and instructions 2013 More than one home. Federal 1040ez forms and instructions 2013   If you have more than one home, you can exclude gain only from the sale of your main home. Federal 1040ez forms and instructions 2013 You must include in income the gain from the sale of any other home. Federal 1040ez forms and instructions 2013 If you have two homes and live in each of them, your main home is ordinarily the one you live in most of the time during the year. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 You own two homes, one in New York and one in Florida. Federal 1040ez forms and instructions 2013 From 2009 through 2013, you live in the New York home for 7 months and in the Florida residence for 5 months of each year. Federal 1040ez forms and instructions 2013 In the absence of facts and circumstances indicating otherwise, the New York home is your main home. Federal 1040ez forms and instructions 2013 You would be eligible to exclude the gain from the sale of the New York home but not of the Florida home in 2013. Federal 1040ez forms and instructions 2013 Example 2. Federal 1040ez forms and instructions 2013 You own a house, but you live in another house that you rent. Federal 1040ez forms and instructions 2013 The rented house is your main home. Federal 1040ez forms and instructions 2013 Example 3. Federal 1040ez forms and instructions 2013 You own two homes, one in Virginia and one in New Hampshire. Federal 1040ez forms and instructions 2013 In 2009 and 2010, you lived in the Virginia home. Federal 1040ez forms and instructions 2013 In 2011 and 2012, you lived in the New Hampshire home. Federal 1040ez forms and instructions 2013 In 2013, you lived again in the Virginia home. Federal 1040ez forms and instructions 2013 Your main home in 2009, 2010, and 2013 is the Virginia home. Federal 1040ez forms and instructions 2013 Your main home in 2011 and 2012 is the New Hampshire home. Federal 1040ez forms and instructions 2013 You would be eligible to exclude gain from the sale of either home (but not both) in 2013. Federal 1040ez forms and instructions 2013 Factors used to determine main home. Federal 1040ez forms and instructions 2013   In addition to the amount of time you live in each home, other factors are relevant in determining which home is your main home. Federal 1040ez forms and instructions 2013 Those factors include the following. Federal 1040ez forms and instructions 2013 Your place of employment. Federal 1040ez forms and instructions 2013 The location of your family members' main home. Federal 1040ez forms and instructions 2013 Your mailing address for bills and correspondence. Federal 1040ez forms and instructions 2013 The address listed on your: Federal and state tax returns, Driver's license, Car registration, and Voter registration card. Federal 1040ez forms and instructions 2013 The location of the banks you use. Federal 1040ez forms and instructions 2013 The location of recreational clubs and religious organizations of which you are a member. Federal 1040ez forms and instructions 2013 Property used partly as your main home. Federal 1040ez forms and instructions 2013   If you use only part of the property as your main home, the rules discussed in this publication apply only to the gain or loss on the sale of that part of the property. Federal 1040ez forms and instructions 2013 For details, see Business Use or Rental of Home , later. Federal 1040ez forms and instructions 2013 Figuring Gain or Loss To figure the gain or loss on the sale of your main home, you must know the selling price, the amount realized, and the adjusted basis. Federal 1040ez forms and instructions 2013 Subtract the adjusted basis from the amount realized to get your gain or loss. Federal 1040ez forms and instructions 2013     Selling price     − Selling expenses       Amount realized     − Adjusted basis       Gain or loss   Gain. Federal 1040ez forms and instructions 2013   Gain is the excess of the amount realized over the adjusted basis of the property. Federal 1040ez forms and instructions 2013 Loss. Federal 1040ez forms and instructions 2013   Loss is the excess of the adjusted basis over the amount realized for the property. Federal 1040ez forms and instructions 2013 Selling Price The selling price is the total amount you receive for your home. Federal 1040ez forms and instructions 2013 It includes money and the fair market value of any other property or any other services you receive and all notes, mortgages or other debts assumed by the buyer as part of the sale. Federal 1040ez forms and instructions 2013 Personal property. Federal 1040ez forms and instructions 2013   The selling price of your home does not include amounts you received for personal property sold with your home. Federal 1040ez forms and instructions 2013 Personal property is property that is not a permanent part of the home. Federal 1040ez forms and instructions 2013 Examples are furniture, draperies, rugs, a washer and dryer, and lawn equipment. Federal 1040ez forms and instructions 2013 Separately stated amounts you received for these items should not be shown on Form 1099-S (discussed later). Federal 1040ez forms and instructions 2013 Any gains from sales of personal property must be included in your income, but not as part of the sale of your home. Federal 1040ez forms and instructions 2013 Payment by employer. Federal 1040ez forms and instructions 2013   You may have to sell your home because of a job transfer. Federal 1040ez forms and instructions 2013 If your employer pays you for a loss on the sale or for your selling expenses, do not include the payment as part of the selling price. Federal 1040ez forms and instructions 2013 Your employer will include it as wages in box 1 of your Form W-2 and you will include it in your income on Form 1040, line 7, or on Form 1040NR, line 8. Federal 1040ez forms and instructions 2013 Option to buy. Federal 1040ez forms and instructions 2013   If you grant an option to buy your home and the option is exercised, add the amount you receive for the option to the selling price of your home. Federal 1040ez forms and instructions 2013 If the option is not exercised, you must report the amount as ordinary income in the year the option expires. Federal 1040ez forms and instructions 2013 Report this amount on Form 1040, line 21, or on Form 1040NR, line 21. Federal 1040ez forms and instructions 2013 Form 1099-S. Federal 1040ez forms and instructions 2013   If you received Form 1099-S, box 2 (gross proceeds) should show the total amount you received for your home. Federal 1040ez forms and instructions 2013   However, box 2 will not include the fair market value of any services or property other than cash or notes you received or will receive. Federal 1040ez forms and instructions 2013 Instead, box 4 will be checked to indicate your receipt or expected receipt of these items. Federal 1040ez forms and instructions 2013 Amount Realized The amount realized is the selling price minus selling expenses. Federal 1040ez forms and instructions 2013 Selling expenses. Federal 1040ez forms and instructions 2013   Selling expenses include: Commissions, Advertising fees, Legal fees, and Loan charges paid by the seller, such as loan placement fees or “points. Federal 1040ez forms and instructions 2013 ” Adjusted Basis While you owned your home, you may have made adjustments (increases or decreases) to the basis. Federal 1040ez forms and instructions 2013 This adjusted basis must be determined before you can figure gain or loss on the sale of your home. Federal 1040ez forms and instructions 2013 For information on how to figure your home's adjusted basis, see Determining Basis , later. Federal 1040ez forms and instructions 2013 Amount of Gain or Loss To figure the amount of gain or loss, compare the amount realized to the adjusted basis. Federal 1040ez forms and instructions 2013 Gain on sale. Federal 1040ez forms and instructions 2013   If the amount realized is more than the adjusted basis, the difference is a gain and, except for any part you can exclude, generally is taxable. Federal 1040ez forms and instructions 2013 Loss on sale. Federal 1040ez forms and instructions 2013   If the amount realized is less than the adjusted basis, the difference is a loss. Federal 1040ez forms and instructions 2013 Generally, a loss on the sale of your main home cannot be deducted. Federal 1040ez forms and instructions 2013 Jointly owned home. Federal 1040ez forms and instructions 2013   If you and your spouse sell your jointly owned home and file a joint return, you figure your gain or loss as one taxpayer. Federal 1040ez forms and instructions 2013 Separate returns. Federal 1040ez forms and instructions 2013   If you file separate returns, each of you must figure your own gain or loss according to your ownership interest in the home. Federal 1040ez forms and instructions 2013 Your ownership interest is generally determined by state law. Federal 1040ez forms and instructions 2013 Joint owners not married. Federal 1040ez forms and instructions 2013   If you and a joint owner other than your spouse sell your jointly owned home, each of you must figure your own gain or loss according to your ownership interest in the home. Federal 1040ez forms and instructions 2013 Each of you applies the rules discussed in this publication on an individual basis. Federal 1040ez forms and instructions 2013 Dispositions Other Than Sales Some special rules apply to other dispositions of your main home. Federal 1040ez forms and instructions 2013 Foreclosure or repossession. Federal 1040ez forms and instructions 2013   If your home was foreclosed on or repossessed, you have a disposition. Federal 1040ez forms and instructions 2013 See Publication 4681 to determine if you have ordinary income, gain, or loss. Federal 1040ez forms and instructions 2013 More information. Federal 1040ez forms and instructions 2013   If part of a home is used for business or rental purposes, see Foreclosures and Repossessions in chapter 1 of Publication 544 for more information. Federal 1040ez forms and instructions 2013 Publication 544 has examples of how to figure gain or loss on a foreclosure or repossession. Federal 1040ez forms and instructions 2013 Abandonment. Federal 1040ez forms and instructions 2013   If you abandon your home, see Publication 4681 to determine if you have ordinary income, gain, or loss. Federal 1040ez forms and instructions 2013 Trading (exchanging) homes. Federal 1040ez forms and instructions 2013   If you trade your home for another home, treat the trade as a sale and a purchase. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 You owned and lived in a home with an adjusted basis of $41,000. Federal 1040ez forms and instructions 2013 A real estate dealer accepted your old home as a trade-in and allowed you $50,000 toward a new home priced at $80,000. Federal 1040ez forms and instructions 2013 This is treated as a sale of your old home for $50,000 with a gain of $9,000 ($50,000 − $41,000). Federal 1040ez forms and instructions 2013 If the dealer had allowed you $27,000 and assumed your unpaid mortgage of $23,000 on your old home, your sales price would still be $50,000 (the $27,000 trade-in allowed plus the $23,000 mortgage assumed). Federal 1040ez forms and instructions 2013 Transfer to spouse. Federal 1040ez forms and instructions 2013   If you transfer your home to your spouse or you transfer it to your former spouse incident to your divorce, you in most cases have no gain or loss (unless the Exception, discussed next, applies). Federal 1040ez forms and instructions 2013 This is true even if you receive cash or other consideration for the home. Federal 1040ez forms and instructions 2013 As a result, the rules explained in this publication do not apply. Federal 1040ez forms and instructions 2013   If you owned your home jointly with your spouse and transfer your interest in the home to your spouse, or to your former spouse incident to your divorce, the same rule applies. Federal 1040ez forms and instructions 2013 You have no gain or loss. Federal 1040ez forms and instructions 2013 Exception. Federal 1040ez forms and instructions 2013   These transfer rules do not apply if your spouse or former spouse is a nonresident alien. Federal 1040ez forms and instructions 2013 In that case, you generally will have a gain or loss. Federal 1040ez forms and instructions 2013 More information. Federal 1040ez forms and instructions 2013    See Property Settlements in Publication 504, Divorced or Separated Individuals, for more information. Federal 1040ez forms and instructions 2013 Involuntary conversion. Federal 1040ez forms and instructions 2013   You have a disposition when your home is destroyed or condemned and you receive other property or money in payment, such as insurance or a condemnation award. Federal 1040ez forms and instructions 2013 This is treated as a sale and you may be able to exclude all or part of any gain from the destruction or condemnation of your home, as explained later under Special Situations (see Home destroyed or condemned ). Federal 1040ez forms and instructions 2013 Determining Basis You need to know your basis in your home to figure any gain or loss when you sell it. Federal 1040ez forms and instructions 2013 Your basis in your home is determined by how you got the home. Federal 1040ez forms and instructions 2013 Generally, your basis is its cost if you bought it or built it. Federal 1040ez forms and instructions 2013 If you got it in some other way (inheritance, gift, etc. Federal 1040ez forms and instructions 2013 ), your basis is generally either its fair market value when you received it or the adjusted basis of the previous owner. Federal 1040ez forms and instructions 2013 While you owned your home, you may have made adjustments (increases or decreases) to your home's basis. Federal 1040ez forms and instructions 2013 The result of these adjustments is your home's adjusted basis, which is used to figure gain or loss on the sale of your home. Federal 1040ez forms and instructions 2013 To figure your adjusted basis, you can use Worksheet 1, near the end of this publication. Federal 1040ez forms and instructions 2013 Filled-in examples of that worksheet are included in the Comprehensive Examples , later. Federal 1040ez forms and instructions 2013 Cost As Basis The cost of property is the amount you paid for it in cash, debt obligations, other property, or services. Federal 1040ez forms and instructions 2013 Purchase. Federal 1040ez forms and instructions 2013   If you bought your home, your basis is its cost to you. Federal 1040ez forms and instructions 2013 This includes the purchase price and certain settlement or closing costs. Federal 1040ez forms and instructions 2013 In most cases, your purchase price includes your down payment and any debt, such as a first or second mortgage or notes you gave the seller in payment for the home. Federal 1040ez forms and instructions 2013 If you build, or contract to build, a new home, your purchase price can include costs of construction, as discussed later. Federal 1040ez forms and instructions 2013 Seller-paid points. Federal 1040ez forms and instructions 2013   If the person who sold you your home paid points on your loan, you may have to reduce your home's basis by the amount of the points, as shown in the following chart. Federal 1040ez forms and instructions 2013    IF you bought your home. Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 THEN reduce your home's basis by the seller-paid points. Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 after 1990 but before April 4, 1994 only if you deducted them as home mortgage interest in the year paid. Federal 1040ez forms and instructions 2013 after April 3, 1994 even if you did not deduct them. Federal 1040ez forms and instructions 2013 Settlement fees or closing costs. Federal 1040ez forms and instructions 2013   When you bought your home, you may have paid settlement fees or closing costs in addition to the contract price of the property. Federal 1040ez forms and instructions 2013 You can include in your basis some of the settlement fees and closing costs you paid for buying the home, but not the fees and costs for getting a mortgage loan. Federal 1040ez forms and instructions 2013 A fee paid for buying the home is any fee you would have had to pay even if you paid cash for the home (that is, without the need for financing). Federal 1040ez forms and instructions 2013   Settlement fees do not include amounts placed in escrow for the future payment of items such as taxes and insurance. Federal 1040ez forms and instructions 2013   Some of the settlement fees or closing costs that you can include in your basis are: Abstract fees (abstract of title fees), Charges for installing utility services, Legal fees (including fees for the title search and preparing the sales contract and deed), Recording fees, Survey fees, Transfer or stamp taxes, Owner's title insurance, and Any amounts the seller owes that you agree to pay, such as: Certain real estate taxes (discussed later), Back interest, Recording or mortgage fees, Charges for improvements or repairs, and Sales commissions. Federal 1040ez forms and instructions 2013   Some settlement fees and closing costs you cannot include in your basis are: Fire insurance premiums, Rent for occupancy of the house before closing, Charges for utilities or other services related to occupancy of the house before closing, Any fee or cost that you deducted as a moving expense (allowed for certain fees and costs before 1994), Charges connected with getting a mortgage loan, such as: Mortgage insurance premiums (including funding fees connected with loans guaranteed by the Department of Veterans Affairs), Loan assumption fees, Cost of a credit report, Fee for an appraisal required by a lender, and Fees for refinancing a mortgage. Federal 1040ez forms and instructions 2013 Real estate taxes. Federal 1040ez forms and instructions 2013   Real estate taxes for the year you bought your home may affect your basis, as shown in the following chart. Federal 1040ez forms and instructions 2013    IF. Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 AND. Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 THEN the taxes. Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 you pay taxes that the seller owed on the home up to the date of sale the seller does not reimburse you are added to the basis of your home. Federal 1040ez forms and instructions 2013 the seller reimburses you do not affect the basis of your home. Federal 1040ez forms and instructions 2013 the seller pays taxes for you (taxes owed beginning on the date of sale) you do not reimburse the seller are subtracted from the basis of your home. Federal 1040ez forms and instructions 2013 you reimburse the seller do not affect the basis of your home. Federal 1040ez forms and instructions 2013 Construction. Federal 1040ez forms and instructions 2013   If you contracted to have your house built on land you own, your basis is: The cost of the land, plus The amount it cost you to complete the house, including: The cost of labor and materials, Any amounts paid to a contractor, Any architect's fees, Building permit charges, Utility meter and connection charges, and Legal fees directly connected with building the house. Federal 1040ez forms and instructions 2013   Your cost includes your down payment and any debt such as a first or second mortgage or notes you gave the seller or builder. Federal 1040ez forms and instructions 2013 It also includes certain settlement or closing costs. Federal 1040ez forms and instructions 2013 You may have to reduce your basis by points the seller paid for you. Federal 1040ez forms and instructions 2013 For more information, see Seller-paid points and Settlement fees or closing costs , earlier. Federal 1040ez forms and instructions 2013 Built by you. Federal 1040ez forms and instructions 2013   If you built all or part of your house yourself, its basis is the total amount it cost you to complete it. Federal 1040ez forms and instructions 2013 Do not include in the cost of the house: The value of your own labor, or The value of any other labor you did not pay for. Federal 1040ez forms and instructions 2013 Temporary housing. Federal 1040ez forms and instructions 2013   If a builder gave you temporary housing while your home was being finished, you must reduce your basis by the part of the contract price that was for the temporary housing. Federal 1040ez forms and instructions 2013 To figure the amount of the reduction, multiply the contract price by a fraction. Federal 1040ez forms and instructions 2013 The numerator is the value of the temporary housing, and the denominator is the sum of the value of the temporary housing plus the value of the new home. Federal 1040ez forms and instructions 2013 Cooperative apartment. Federal 1040ez forms and instructions 2013   If you are a tenant-stockholder in a cooperative housing corporation, your basis in the cooperative apartment used as your home is usually the cost of your stock in the corporation. Federal 1040ez forms and instructions 2013 This may include your share of a mortgage on the apartment building. Federal 1040ez forms and instructions 2013 Condominium. Federal 1040ez forms and instructions 2013   To determine your basis in a condominium apartment used as your home, use the same rules as for any other home. Federal 1040ez forms and instructions 2013 Basis Other Than Cost You must use a basis other than cost, such as adjusted basis or fair market value, if you received your home as a gift, inheritance, a trade, or from your spouse. Federal 1040ez forms and instructions 2013 These situations are discussed in the following pages. Federal 1040ez forms and instructions 2013 Also, the instructions for Worksheet 1 (near the end of the publication) address each of these issues. Federal 1040ez forms and instructions 2013 Other special rules may apply in certain situations. Federal 1040ez forms and instructions 2013 If you converted the property, or some part of it, to business or rental use, see Property Changed to Business or Rental Use, in Publication 551. Federal 1040ez forms and instructions 2013 Home received as gift. Federal 1040ez forms and instructions 2013   Use the following chart to find the basis of a home you received as a gift. Federal 1040ez forms and instructions 2013 IF the donor's adjusted basis at the time of the gift was. Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 THEN your basis is. Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 . Federal 1040ez forms and instructions 2013 more than the fair market value of the home at that time the same as the donor's adjusted basis at the time of the gift. Federal 1040ez forms and instructions 2013   Exception: If using the donor's adjusted basis results in a loss when you sell the home, you must use the fair market value of the home at the time of the gift as your basis. Federal 1040ez forms and instructions 2013 If using the fair market value results in a gain, you have neither gain nor loss. Federal 1040ez forms and instructions 2013 equal to or less than the fair market value at that time, and you received the gift before 1977 the smaller of the: • donor's adjusted basis, plus  any federal gift tax paid on  the gift, or • the home's fair market value  at the time of the gift. Federal 1040ez forms and instructions 2013 equal to or less than the fair market value at that time, and you received the gift after 1976 the same as the donor's adjusted basis, plus the part of any federal gift tax paid that is due to the net increase in value of the home (explained next). Federal 1040ez forms and instructions 2013 Fair market value. Federal 1040ez forms and instructions 2013   The fair market value of property at the time of the gift is the value of the property as appraised for purposes of the federal gift tax. Federal 1040ez forms and instructions 2013 If the gift was not subject to the federal gift tax, the fair market value is the value as appraised for the purposes of a state gift tax. Federal 1040ez forms and instructions 2013 Part of federal gift tax due to net increase in value. Federal 1040ez forms and instructions 2013   Figure the part of the federal gift tax paid that is due to the net increase in value of the home by multiplying the total federal gift tax paid by a fraction. Federal 1040ez forms and instructions 2013 The numerator of the fraction is the net increase in the value of the home, and the denominator is the value of the home for gift tax purposes after reduction by any annual exclusion and marital or charitable deduction that applies to the gift. Federal 1040ez forms and instructions 2013 The net increase in the value of the home is its fair market value minus the donor's adjusted basis immediately before the gift. Federal 1040ez forms and instructions 2013 Home acquired from a decedent who died before or after 2010. Federal 1040ez forms and instructions 2013   If you inherited your home from a decedent who died before or after 2010, your basis is the fair market value of the property on the date of the decedent's death (or the later alternate valuation date chosen by the personal representative of the estate). Federal 1040ez forms and instructions 2013 If an estate tax return was filed or required to be filed, the value of the property listed on the estate tax return is your basis. Federal 1040ez forms and instructions 2013 If a federal estate tax return did not have to be filed, your basis in the home is the same as its appraised value at the date of death, for purposes of state inheritance or transmission taxes. Federal 1040ez forms and instructions 2013 Surviving spouse. Federal 1040ez forms and instructions 2013   If you are a surviving spouse and you owned your home jointly, your basis in the home will change. Federal 1040ez forms and instructions 2013 The new basis for the interest your spouse owned will be its fair market value on the date of death (or alternate valuation date). Federal 1040ez forms and instructions 2013 The basis in your interest will remain the same. Federal 1040ez forms and instructions 2013 Your new basis in the home is the total of these two amounts. Federal 1040ez forms and instructions 2013   If you and your spouse owned the home either as tenants by the entirety or as joint tenants with right of survivorship, you will each be considered to have owned one-half of the home. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 Your jointly owned home (owned as joint tenants with right of survivorship) had an adjusted basis of $50,000 on the date of your spouse's death, and the fair market value on that date was $100,000. Federal 1040ez forms and instructions 2013 Your new basis in the home is $75,000 ($25,000 for one-half of the adjusted basis plus $50,000 for one-half of the fair market value). Federal 1040ez forms and instructions 2013 Community property. Federal 1040ez forms and instructions 2013   In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), each spouse is usually considered to own half of the community property. Federal 1040ez forms and instructions 2013 When either spouse dies, the total fair market value of the community property becomes the basis of the entire property, including the part belonging to the surviving spouse. Federal 1040ez forms and instructions 2013 For this to apply, at least half the value of the community property interest must be includible in the decedent's gross estate, whether or not the estate must file a return. Federal 1040ez forms and instructions 2013   For more information about community property, see Publication 555, Community Property. Federal 1040ez forms and instructions 2013    If you are selling a home in which you acquired an interest from a decedent who died in 2010, see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your basis. Federal 1040ez forms and instructions 2013 Home received as trade. Federal 1040ez forms and instructions 2013   If you acquired your home as a trade for other property, in most cases, the basis of your home is the fair market value (at the time of the trade) of the property you gave up. Federal 1040ez forms and instructions 2013 If you traded one home for another, you have made a sale and purchase. Federal 1040ez forms and instructions 2013 In that case, you may have a gain. Federal 1040ez forms and instructions 2013 See Trading (exchanging) homes under Dispositions Other Than Sales, earlier, for an example of figuring the gain. Federal 1040ez forms and instructions 2013 Home received from spouse. Federal 1040ez forms and instructions 2013   If you received your home from your spouse or from your former spouse incident to your divorce, your basis in the home depends on the date of the transfer. Federal 1040ez forms and instructions 2013 Transfers after July 18, 1984. Federal 1040ez forms and instructions 2013   If you received the home after July 18, 1984, there was no gain or loss on the transfer. Federal 1040ez forms and instructions 2013 In most cases, your basis in this home is the same as your spouse's (or former spouse's) adjusted basis just before you received it. Federal 1040ez forms and instructions 2013 This rule applies even if you received the home in exchange for cash, the release of marital rights, the assumption of liabilities, or other considerations. Federal 1040ez forms and instructions 2013   If you owned a home jointly with your spouse and your spouse transferred his or her interest in the home to you, in most cases, your basis in the half interest received from your spouse is the same as your spouse's adjusted basis just before the transfer. Federal 1040ez forms and instructions 2013 This also applies if your former spouse transferred his or her interest in the home to you incident to your divorce. Federal 1040ez forms and instructions 2013 Your basis in the half interest you already owned does not change. Federal 1040ez forms and instructions 2013 Your new basis in the home is the total of these two amounts. Federal 1040ez forms and instructions 2013 Transfers before July 19, 1984. Federal 1040ez forms and instructions 2013   If you received your home before July 19, 1984, in exchange for your release of marital rights, in most cases, your basis in the home is generally its fair market value at the time you received it. Federal 1040ez forms and instructions 2013 More information. Federal 1040ez forms and instructions 2013   For more information on property received from a spouse or former spouse, see Property Settlements in Publication 504. Federal 1040ez forms and instructions 2013 Involuntary conversion. Federal 1040ez forms and instructions 2013   If your home is destroyed or condemned, you may receive insurance proceeds or a condemnation award. Federal 1040ez forms and instructions 2013 If you acquired a replacement home with these proceeds, the basis is its cost decreased by any gain not recognized on the conversion under the rules explained in: Publication 547, in the case of a home that was destroyed, or Chapter 1 of Publication 544, in the case of a home that was condemned. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 A fire destroyed your home that you owned and used for only 6 months. Federal 1040ez forms and instructions 2013 The home had an adjusted basis of $80,000 and the insurance company paid you $130,000 for the loss. Federal 1040ez forms and instructions 2013 Your gain is $50,000 ($130,000 − $80,000). Federal 1040ez forms and instructions 2013 You bought a replacement home for $100,000. Federal 1040ez forms and instructions 2013 The part of your gain that is taxable is $30,000 ($130,000 − $100,000), the unspent part of the payment from the insurance company. Federal 1040ez forms and instructions 2013 The rest of the gain ($20,000) is not taxable, so that amount reduces your basis in the new home. Federal 1040ez forms and instructions 2013 The basis of the new home is figured as follows. Federal 1040ez forms and instructions 2013 Cost of replacement home $100,000 Minus: Gain not recognized 20,000 Basis of the replacement home $80,000 More information. Federal 1040ez forms and instructions 2013   For more information about basis, see Publication 551. Federal 1040ez forms and instructions 2013 Adjusted Basis Adjusted basis is your cost or other basis increased or decreased by certain amounts. Federal 1040ez forms and instructions 2013 To figure your adjusted basis, you can use Worksheet 1, found toward the end of this publication. Federal 1040ez forms and instructions 2013 Filled-in examples of that worksheet are included in Comprehensive Examples , later. Federal 1040ez forms and instructions 2013 Recordkeeping. Federal 1040ez forms and instructions 2013 You should keep records to prove your home's adjusted basis. Federal 1040ez forms and instructions 2013 Ordinarily, you must keep records for 3 years after the due date for filing your return for the tax year in which you sold your home. Federal 1040ez forms and instructions 2013 But if you sold a home before May 7, 1997, and postponed tax on any gain, the basis of that home affects the basis of the new home you bought. Federal 1040ez forms and instructions 2013 Keep records proving the basis of both homes as long as they are needed for tax purposes. Federal 1040ez forms and instructions 2013 The records you should keep include: Proof of the home's purchase price and purchase expenses; Receipts and other records for all improvements, additions, and other items that affect the home's adjusted basis; Any worksheets or other computations you used to figure the adjusted basis of the home you sold, the gain or loss on the sale, the exclusion, and the taxable gain; Any Form 982 you filed to exclude any discharge of qualified principal residence indebtedness; Any Form 2119, Sale of Your Home, you filed to postpone gain from the sale of a previous home before May 7, 1997; and Any worksheets you used to prepare Form 2119, such as the Adjusted Basis of Home Sold Worksheet or the Capital Improvements Worksheet from the Form 2119 instructions, or other source of computations. Federal 1040ez forms and instructions 2013 Increases to Basis These include the following. Federal 1040ez forms and instructions 2013 Additions and other improvements that have a useful life of more than 1 year. Federal 1040ez forms and instructions 2013 Special assessments for local improvements. Federal 1040ez forms and instructions 2013 Amounts you spent after a casualty to restore damaged property. Federal 1040ez forms and instructions 2013 Improvements. Federal 1040ez forms and instructions 2013   These add to the value of your home, prolong its useful life, or adapt it to new uses. Federal 1040ez forms and instructions 2013 You add the cost of additions and other improvements to the basis of your property. Federal 1040ez forms and instructions 2013   The following chart lists some other examples of improvements. Federal 1040ez forms and instructions 2013 Examples of Improvements That Increase Basis Additions Bedroom Bathroom Deck Garage Porch Patio Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration system Lawn & Grounds Landscaping Driveway Walkway Fence  Retaining wall Sprinkler system Swimming pool  Miscellaneous Storm windows, doors New roof Central vacuum Wiring upgrades Satellite dish Security system  Plumbing Septic system Water heater Soft water system Filtration system  Interior Improvements Built-in appliances  Kitchen modernization  Flooring Wall-to-wall carpeting  Insulation Attic Walls Floors Pipes and duct work Improvements no longer part of home. Federal 1040ez forms and instructions 2013   Your home's adjusted basis does not include the cost of any improvements that are replaced and are no longer part of the home. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 You put wall-to-wall carpeting in your home 15 years ago. Federal 1040ez forms and instructions 2013 Later, you replaced that carpeting with new wall-to-wall carpeting. Federal 1040ez forms and instructions 2013 The cost of the old carpeting you replaced is no longer part of your home's adjusted basis. Federal 1040ez forms and instructions 2013 Repairs. Federal 1040ez forms and instructions 2013   These maintain your home in good condition but do not add to its value or prolong its life. Federal 1040ez forms and instructions 2013 You do not add their cost to the basis of your property. Federal 1040ez forms and instructions 2013 Examples. Federal 1040ez forms and instructions 2013 Repainting your house inside or outside, fixing your gutters or floors, repairing leaks or plastering, and replacing broken window panes are examples of repairs. Federal 1040ez forms and instructions 2013 Exception. Federal 1040ez forms and instructions 2013   The entire job is considered an improvement if items that would otherwise be considered repairs are done as part of an extensive remodeling or restoration of your home. Federal 1040ez forms and instructions 2013 For example, if you have a casualty and your home is damaged, increase your basis by the amount you spend on repairs that restore the property to its pre-casualty condition. Federal 1040ez forms and instructions 2013 Decreases to Basis These include the following. Federal 1040ez forms and instructions 2013 Discharge of qualified principal residence indebtedness that was excluded from income (but not below zero). Federal 1040ez forms and instructions 2013 For details, see Publication 4681. Federal 1040ez forms and instructions 2013 Some or all of the cancellation of debt income that was excluded due to your bankruptcy or insolvency. Federal 1040ez forms and instructions 2013 For details, see Publication 4681. Federal 1040ez forms and instructions 2013 Gain you postponed from the sale of a previous home before May 7, 1997. Federal 1040ez forms and instructions 2013 Deductible casualty losses. Federal 1040ez forms and instructions 2013 Insurance payments you received or expect to receive for casualty losses. Federal 1040ez forms and instructions 2013 Payments you received for granting an easement or right-of-way. Federal 1040ez forms and instructions 2013 Depreciation allowed or allowable if you used your home for business or rental purposes. Federal 1040ez forms and instructions 2013 Energy-related credits allowed for expenditures made on the residence. Federal 1040ez forms and instructions 2013 (Reduce the increase in basis otherwise allowable for expenditures on the residence by the amount of credit allowed for those expenditures. Federal 1040ez forms and instructions 2013 ) Adoption credit you claimed for improvements added to the basis of your home. Federal 1040ez forms and instructions 2013 Nontaxable payments from an adoption assistance program of your employer you used for improvements you added to the basis of your home. Federal 1040ez forms and instructions 2013 Energy conservation subsidy excluded from your gross income because you received it (directly or indirectly) from a public utility after 1992 to buy or install any energy conservation measure. Federal 1040ez forms and instructions 2013 An energy conservation measure is an installation or modification primarily designed either to reduce consumption of electricity or natural gas or to improve the management of energy demand for a home. Federal 1040ez forms and instructions 2013 District of Columbia first-time homebuyer credit allowed on the purchase of a principal residence in the District of Columbia. Federal 1040ez forms and instructions 2013 General sales taxes claimed as an itemized deduction on Schedule A (Form 1040) that were imposed on the purchase of personal property, such as a houseboat used as your home or a mobile home. Federal 1040ez forms and instructions 2013 Discharges of qualified principal residence indebtedness. Federal 1040ez forms and instructions 2013   You may be able to exclude from gross income a discharge of qualified principal residence indebtedness. Federal 1040ez forms and instructions 2013 This exclusion applies to discharges made after 2006 and before 2014. Federal 1040ez forms and instructions 2013 If you choose to exclude this income, you must reduce (but not below zero) the basis of your principal residence by the amount excluded from gross income. Federal 1040ez forms and instructions 2013   File Form 982 with your tax return. Federal 1040ez forms and instructions 2013 See the form's instructions for detailed information. Federal 1040ez forms and instructions 2013    A decrease in basis due to a discharge of qualified principal residence indebtedness that is excluded from income occurs only if you retain ownership of the principal residence after a discharge. Federal 1040ez forms and instructions 2013 In most cases, this would occur in a refinancing or a restructuring of the mortgage. Federal 1040ez forms and instructions 2013 Excluding the Gain You may qualify to exclude from your income all or part of any gain from the sale of your main home. Federal 1040ez forms and instructions 2013 This means that, if you qualify, you will not have to pay tax on the gain up to the limit described under Maximum Exclusion , next. Federal 1040ez forms and instructions 2013 To qualify, you must meet the ownership and use tests described later. Federal 1040ez forms and instructions 2013 You can choose not to take the exclusion by including the gain from the sale in your gross income on your tax return for the year of the sale. Federal 1040ez forms and instructions 2013 This choice can be made (or revoked) at any time before the expiration of a 3-year period beginning on the due date of your return (not including extensions) for the year of the sale. Federal 1040ez forms and instructions 2013 You can use Worksheet 2 (near the end of this publication) to figure the amount of your exclusion and your taxable gain, if any. Federal 1040ez forms and instructions 2013 If you have any taxable gain from the sale of your home, you may have to increase your withholding or make estimated tax payments. Federal 1040ez forms and instructions 2013 See Publication 505, Tax Withholding and Estimated Tax. Federal 1040ez forms and instructions 2013 Maximum Exclusion You can exclude up to $250,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if all of the following are true. Federal 1040ez forms and instructions 2013 You meet the ownership test. Federal 1040ez forms and instructions 2013 You meet the use test. Federal 1040ez forms and instructions 2013 During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home. Federal 1040ez forms and instructions 2013 For details on gain allocated to periods of nonqualified use, see Nonqualified Use , later. Federal 1040ez forms and instructions 2013 If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions just listed. Federal 1040ez forms and instructions 2013 You may be able to exclude up to $500,000 of the gain (other than gain allocated to periods of nonqualified use) on the sale of your main home if you are married and file a joint return and meet the requirements listed in the discussion of the special rules for joint returns, later, under Married Persons . Federal 1040ez forms and instructions 2013 Ownership and Use Tests To claim the exclusion, you must meet the ownership and use tests. Federal 1040ez forms and instructions 2013 This means that during the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and Lived in the home as your main home for at least 2 years (the use test). Federal 1040ez forms and instructions 2013 Exception. Federal 1040ez forms and instructions 2013   If you owned and lived in the property as your main home for less than 2 years, you can still claim an exclusion in some cases. Federal 1040ez forms and instructions 2013 However, the maximum amount you may be able to exclude will be reduced. Federal 1040ez forms and instructions 2013 See Reduced Maximum Exclusion , later. Federal 1040ez forms and instructions 2013 Example 1—home owned and occupied for at least 2 years. Federal 1040ez forms and instructions 2013 Mya bought and moved into her main home in September 2011. Federal 1040ez forms and instructions 2013 She sold the home at a gain in October 2013. Federal 1040ez forms and instructions 2013 During the 5-year period ending on the date of sale in October 2013, she owned and lived in the home for more than 2 years. Federal 1040ez forms and instructions 2013 She meets the ownership and use tests. Federal 1040ez forms and instructions 2013 Example 2—ownership test met but use test not met. Federal 1040ez forms and instructions 2013 Ayden bought a home, lived in it for 6 months, moved out, and never occupied the home again. Federal 1040ez forms and instructions 2013 He later sold the home for a gain in June 2013. Federal 1040ez forms and instructions 2013 He owned the home during the entire 5-year period ending on the date of sale. Federal 1040ez forms and instructions 2013 He meets the ownership test but not the use test. Federal 1040ez forms and instructions 2013 He cannot exclude any part of his gain on the sale unless he qualified for a reduced maximum exclusion (explained later). Federal 1040ez forms and instructions 2013 Period of Ownership and Use The required 2 years of ownership and use during the 5-year period ending on the date of the sale do not have to be continuous nor do they both have to occur at the same time. Federal 1040ez forms and instructions 2013 You meet the tests if you can show that you owned and lived in the property as your main home for either 24 full months or 730 days (365 × 2) during the 5-year period ending on the date of sale. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 Naomi bought and moved into a house in July 2009. Federal 1040ez forms and instructions 2013 She lived there for 13 months and then moved in with a friend. Federal 1040ez forms and instructions 2013 She later moved back into her house and lived there for 12 months until she sold it in August 2013. Federal 1040ez forms and instructions 2013 Naomi meets the ownership and use tests because, during the 5-year period ending on the date of sale, she owned the house for more than 2 years and lived in it for a total of 25 (13 + 12) months. Federal 1040ez forms and instructions 2013 Temporary absence. Federal 1040ez forms and instructions 2013   Short temporary absences for vacations or other seasonal absences, even if you rent out the property during the absences, are counted as periods of use. Federal 1040ez forms and instructions 2013 The following examples assume that the reduced maximum exclusion (discussed later) does not apply to the sales. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 David Johnson, who is single, bought and moved into his home on February 1, 2011. Federal 1040ez forms and instructions 2013 Each year during 2011 and 2012, David left his home for a 2-month summer vacation. Federal 1040ez forms and instructions 2013 David sold the house on March 1, 2013. Federal 1040ez forms and instructions 2013 Although the total time David lived in his home is less than 2 years (21 months), he meets the use requirement and may exclude gain. Federal 1040ez forms and instructions 2013 The 2-month vacations are short temporary absences and are counted as periods of use in determining whether David used the home for the required 2 years. Federal 1040ez forms and instructions 2013 Example 2. Federal 1040ez forms and instructions 2013 Professor Paul Beard, who is single, bought and moved into a house in December 2010, went abroad for a 1-year sabbatical leave in January 2012, returned to the house in January 2013, and sold it at a gain in February 2013. Federal 1040ez forms and instructions 2013 Because his leave was not a short temporary absence, he cannot include the period of leave to meet the 2-year use test. Federal 1040ez forms and instructions 2013 He cannot exclude any part of his gain because he did not use the residence for the required 2 years. Federal 1040ez forms and instructions 2013 Ownership and use tests met at different times. Federal 1040ez forms and instructions 2013   You can meet the ownership and use tests during different 2-year periods. Federal 1040ez forms and instructions 2013 However, you must meet both tests during the 5-year period ending on the date of the sale. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 Beginning in 2002, Helen Jones lived in a rented apartment. Federal 1040ez forms and instructions 2013 The apartment building was later converted to condominiums, and she bought her same apartment on December 3, 2010. Federal 1040ez forms and instructions 2013 In 2011, Helen became ill and on April 14 of that year she moved to her daughter's home. Federal 1040ez forms and instructions 2013 On July 12, 2013, while still living in her daughter's home, she sold her condominium. Federal 1040ez forms and instructions 2013 Helen can exclude gain on the sale of her condominium because she met the ownership and use tests during the 5-year period from July 13, 2008, to July 12, 2013, the date she sold the condominium. Federal 1040ez forms and instructions 2013 She owned her condominium from December 3, 2010, to July 12, 2013 (more than 2 years). Federal 1040ez forms and instructions 2013 She lived in the property from July 13, 2008 (the beginning of the 5-year period), to April 14, 2011 (more than 2 years). Federal 1040ez forms and instructions 2013 The time Helen lived in her daughter's home during the 5-year period can be counted toward her period of ownership, and the time she lived in her rented apartment during the 5-year period can be counted toward her period of use. Federal 1040ez forms and instructions 2013 Cooperative apartment. Federal 1040ez forms and instructions 2013   If you sold stock as a tenant-shareholder in a cooperative housing corporation, the ownership and use tests are met if, during the 5-year period ending on the date of sale, you: Owned the stock for at least 2 years, and Lived in the house or apartment that the stock entitled you to occupy as your main home for at least 2 years. Federal 1040ez forms and instructions 2013 Exceptions to Ownership and Use Tests The following sections contain exceptions to the ownership and use tests for certain taxpayers. Federal 1040ez forms and instructions 2013 Exception for individuals with a disability. Federal 1040ez forms and instructions 2013   There is an exception to the use test if: You become physically or mentally unable to care for yourself, and You owned and lived in your home as your main home for a total of at least 1 year during the 5-year period before the sale of your home. Federal 1040ez forms and instructions 2013 Under this exception, you are considered to live in your home during any time within the 5-year period that you own the home and live in a facility (including a nursing home) licensed by a state or political subdivision to care for persons in your condition. Federal 1040ez forms and instructions 2013   If you meet this exception to the use test, you still have to meet the 2-out-of-5-year ownership test to claim the exclusion. Federal 1040ez forms and instructions 2013 Previous home destroyed or condemned. Federal 1040ez forms and instructions 2013   For the ownership and use tests, you add the time you owned and lived in a previous home that was destroyed or condemned to the time you owned and lived in the replacement home on whose sale you wish to exclude gain. Federal 1040ez forms and instructions 2013 This rule applies if any part of the basis of the home you sold depended on the basis of the destroyed or condemned home (see Involuntary Conversions in Publication 551). Federal 1040ez forms and instructions 2013 Otherwise, you must have owned and lived in the same home for 2 of the 5 years before the sale to qualify for the exclusion. Federal 1040ez forms and instructions 2013 Members of the uniformed services or Foreign Service, employees of the intelligence community, or employees or volunteers of the Peace Corps. Federal 1040ez forms and instructions 2013   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty (defined later) as a member of the uniformed services or Foreign Service of the United States, or as an employee of the intelligence community. Federal 1040ez forms and instructions 2013 You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve outside the United States either as an employee of the Peace Corps on qualified official extended duty (defined later) or as an enrolled volunteer or volunteer leader of the Peace Corps. Federal 1040ez forms and instructions 2013 This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Federal 1040ez forms and instructions 2013   If this helps you qualify to exclude gain, you can choose to have the 5-year test period suspended by filing a return for the year of sale that does not include the gain. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 John bought and moved into a home in 2005. Federal 1040ez forms and instructions 2013 He lived in it as his main home for 2½ years. Federal 1040ez forms and instructions 2013 For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Federal 1040ez forms and instructions 2013 He then sold the home at a gain in 2013. Federal 1040ez forms and instructions 2013 To meet the use test, John chooses to suspend the 5-year test period for the 6 years he was on qualified official extended duty. Federal 1040ez forms and instructions 2013 This means he can disregard those 6 years. Federal 1040ez forms and instructions 2013 Therefore, John's 5-year test period consists of the 5 years before he went on qualified official extended duty. Federal 1040ez forms and instructions 2013 He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Federal 1040ez forms and instructions 2013 Period of suspension. Federal 1040ez forms and instructions 2013   The period of suspension cannot last more than 10 years. Federal 1040ez forms and instructions 2013 Together, the 10-year suspension period and the 5-year test period can be as long as, but no more than, 15 years. Federal 1040ez forms and instructions 2013 You cannot suspend the 5-year period for more than one property at a time. Federal 1040ez forms and instructions 2013 You can revoke your choice to suspend the 5-year period at any time. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 Mary bought a home on April 1, 1997. Federal 1040ez forms and instructions 2013 She used it as her main home until August 31, 2000. Federal 1040ez forms and instructions 2013 On September 1, 2000, she went on qualified official extended duty with the Navy. Federal 1040ez forms and instructions 2013 She did not live in the house again before selling it on July 31, 2013. Federal 1040ez forms and instructions 2013 Mary chooses to use the entire 10-year suspension period. Federal 1040ez forms and instructions 2013 Therefore, the suspension period would extend back from July 31, 2013, to August 1, 2003, and the 5-year test period would extend back to August 1, 1998. Federal 1040ez forms and instructions 2013 During that period, Mary owned the house all 5 years and lived in it as her main home from August 1, 1998, until August 31, 2000, a period of more than 24 months. Federal 1040ez forms and instructions 2013 She meets the ownership and use tests because she owned and lived in the home for at least 2 years during this test period. Federal 1040ez forms and instructions 2013 Uniformed services. Federal 1040ez forms and instructions 2013   The uniformed services are: The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard), The commissioned corps of the National Oceanic and Atmospheric Administration, and The commissioned corps of the Public Health Service. Federal 1040ez forms and instructions 2013 Foreign Service member. Federal 1040ez forms and instructions 2013   For purposes of the choice to suspend the 5-year test period for ownership and use, you are a member of the Foreign Service if you are any of the following. Federal 1040ez forms and instructions 2013 A Chief of mission. Federal 1040ez forms and instructions 2013 An Ambassador at large. Federal 1040ez forms and instructions 2013 A member of the Senior Foreign Service. Federal 1040ez forms and instructions 2013 A Foreign Service officer. Federal 1040ez forms and instructions 2013 Part of the Foreign Service personnel. Federal 1040ez forms and instructions 2013 Employee of the intelligence community. Federal 1040ez forms and instructions 2013   For purposes of the choice to suspend the 5-year test period for ownership and use, you are an employee of the intelligence community if you are an employee of any of the following. Federal 1040ez forms and instructions 2013 The Office of the Director of National Intelligence. Federal 1040ez forms and instructions 2013 The Central Intelligence Agency. Federal 1040ez forms and instructions 2013 The National Security Agency. Federal 1040ez forms and instructions 2013 The Defense Intelligence Agency. Federal 1040ez forms and instructions 2013 The National Geospatial-Intelligence Agency. Federal 1040ez forms and instructions 2013 The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs. Federal 1040ez forms and instructions 2013 Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard. Federal 1040ez forms and instructions 2013 The Bureau of Intelligence and Research of the Department of State. Federal 1040ez forms and instructions 2013 Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information. Federal 1040ez forms and instructions 2013 Qualified official extended duty. Federal 1040ez forms and instructions 2013   You are on qualified official extended duty if you are on extended duty while: Serving at a duty station at least 50 miles from your main home, or Living in Government quarters under Government orders. Federal 1040ez forms and instructions 2013   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Federal 1040ez forms and instructions 2013 Married Persons If you and your spouse file a joint return for the year of sale and one spouse meets the ownership and use tests, you can exclude up to $250,000 of the gain. Federal 1040ez forms and instructions 2013 (But see Special rules for joint returns, next. Federal 1040ez forms and instructions 2013 ) Special rules for joint returns. Federal 1040ez forms and instructions 2013   You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true. Federal 1040ez forms and instructions 2013 You are married and file a joint return for the year. Federal 1040ez forms and instructions 2013 Either you or your spouse meets the ownership test. Federal 1040ez forms and instructions 2013 Both you and your spouse meet the use test. Federal 1040ez forms and instructions 2013 During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home. Federal 1040ez forms and instructions 2013 If either spouse does not satisfy all these requirements, the maximum exclusion that can be claimed by the couple is the total of the maximum exclusions that each spouse would qualify for if not married and the amounts were figured separately. Federal 1040ez forms and instructions 2013 For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property. Federal 1040ez forms and instructions 2013 Example 1—one spouse sells a home. Federal 1040ez forms and instructions 2013 Emily sells her home in June 2013 for a gain of $300,000. Federal 1040ez forms and instructions 2013 She marries Jamie later in the year. Federal 1040ez forms and instructions 2013 She meets the ownership and use tests, but Jamie does not. Federal 1040ez forms and instructions 2013 Emily can exclude up to $250,000 of gain on a separate or joint return for 2013. Federal 1040ez forms and instructions 2013 The $500,000 maximum exclusion for certain joint returns does not apply because Jamie does not meet the use test. Federal 1040ez forms and instructions 2013 Example 2—each spouse sells a home. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that Jamie also sells a home in 2013 for a gain of $200,000 before he marries Emily. Federal 1040ez forms and instructions 2013 He meets the ownership and use tests on his home, but Emily does not. Federal 1040ez forms and instructions 2013 Emily can exclude $250,000 of gain and Jamie can exclude $200,000 of gain on the respective sales of their individual homes. Federal 1040ez forms and instructions 2013 However, Emily cannot use Jamie's unused exclusion to exclude more than $250,000 of gain. Federal 1040ez forms and instructions 2013 Therefore, Emily and Jamie must recognize $50,000 of gain on the sale of Emily's home. Federal 1040ez forms and instructions 2013 The $500,000 maximum exclusion for certain joint returns does not apply because Emily and Jamie do not both meet the use test for the same home. Federal 1040ez forms and instructions 2013 Sale of main home by surviving spouse. Federal 1040ez forms and instructions 2013   If your spouse died and you did not remarry before the date of sale, you are considered to have owned and lived in the property as your main home during any period of time when your spouse owned and lived in it as a main home. Federal 1040ez forms and instructions 2013   If you meet all of the following requirements, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Federal 1040ez forms and instructions 2013 The sale or exchange took place after 2008. Federal 1040ez forms and instructions 2013 The sale or exchange took place no more than 2 years after the date of death of your spouse. Federal 1040ez forms and instructions 2013 You have not remarried. Federal 1040ez forms and instructions 2013 You and your spouse met the use test at the time of your spouse's death. Federal 1040ez forms and instructions 2013 You or your spouse met the ownership test at the time of your spouse's death. Federal 1040ez forms and instructions 2013 Neither you nor your spouse excluded gain from the sale of another home during the last 2 years before the date of death. Federal 1040ez forms and instructions 2013 The ownership and use tests were described earlier. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 Harry owned and used a house as his main home since 2009. Federal 1040ez forms and instructions 2013 Harry and Wilma married on July 1, 2013, and from that date they used Harry's house as their main home. Federal 1040ez forms and instructions 2013 Harry died on August 15, 2013, and Wilma inherited the property. Federal 1040ez forms and instructions 2013 Wilma sold the property on September 1, 2013, at which time she had not remarried. Federal 1040ez forms and instructions 2013 Although Wilma owned and used the house for less than 2 years, Wilma is considered to have satisfied the ownership and use tests because her period of ownership and use includes the period that Harry owned and used the property before death. Federal 1040ez forms and instructions 2013 Home transferred from spouse. Federal 1040ez forms and instructions 2013   If your home was transferred to you by your spouse (or former spouse if the transfer was incident to divorce), you are considered to have owned it during any period of time when your spouse owned it. Federal 1040ez forms and instructions 2013 Use of home after divorce. Federal 1040ez forms and instructions 2013   You are considered to have used property as your main home during any period when: You owned it, and Your spouse or former spouse is allowed to live in it under a divorce or separation instrument and uses it as his or her main home. Federal 1040ez forms and instructions 2013 Reduced Maximum Exclusion If you fail to meet the requirements to qualify for the $250,000 or $500,000 exclusion, you may still qualify for a reduced exclusion. Federal 1040ez forms and instructions 2013 This applies to those who: Fail to meet the ownership and use tests, or Have used the exclusion within 2 years of selling their current home. Federal 1040ez forms and instructions 2013 In both cases, to qualify for a reduced exclusion, the sale of your main home must be due to one of the following reasons. Federal 1040ez forms and instructions 2013 A change in place of employment. Federal 1040ez forms and instructions 2013 Health. Federal 1040ez forms and instructions 2013 Unforeseen circumstances. Federal 1040ez forms and instructions 2013 Qualified individual. Federal 1040ez forms and instructions 2013   For purposes of the reduced maximum exclusion, a qualified individual is any of the following. Federal 1040ez forms and instructions 2013 You. Federal 1040ez forms and instructions 2013 Your spouse. Federal 1040ez forms and instructions 2013 A co-owner of the home. Federal 1040ez forms and instructions 2013 A person whose main home is the same as yours. Federal 1040ez forms and instructions 2013 Primary reason for sale. Federal 1040ez forms and instructions 2013   One of the three reasons above will be considered to be the primary reason you sold your home if either (1) or (2) is true. Federal 1040ez forms and instructions 2013 You qualify under a “safe harbor. Federal 1040ez forms and instructions 2013 ” This is a specific set of facts and circumstances that, if applicable, qualifies you to claim a reduced maximum exclusion. Federal 1040ez forms and instructions 2013 Safe harbors corresponding to the reasons listed above are described later. Federal 1040ez forms and instructions 2013 A safe harbor does not apply, but you can establish, based on facts and circumstances, that the primary reason for the sale is a change in place of employment, health, or unforeseen circumstances. Federal 1040ez forms and instructions 2013  Factors that may be relevant in determining your primary reason for sale include whether: Your sale and the circumstances causing it were close in time, The circumstances causing your sale occurred during the time you owned and used the property as your main home, The circumstances causing your sale were not reasonably foreseeable when you began using the property as your main home, Your financial ability to maintain the property became materially impaired, The suitability of the property as your main home materially changed, and During the time you owned the property, you used it as your home. Federal 1040ez forms and instructions 2013 Change in Place of Employment You may qualify for a reduced exclusion if the primary reason for the sale of your main home is a change in the location of employment of a qualified individual. Federal 1040ez forms and instructions 2013 Employment. Federal 1040ez forms and instructions 2013   For this purpose, employment includes the start of work with a new employer or continuation of work with the same employer. Federal 1040ez forms and instructions 2013 It also includes the start or continuation of self-employment. Federal 1040ez forms and instructions 2013 Distance safe harbor. Federal 1040ez forms and instructions 2013   A change in place of employment is considered to be the reason you sold your home if: The change occurred during the period you owned and used the property as your main home, and The new place of employment is at least 50 miles farther from the home you sold than was the former place of employment (or, if there was no former place of employment, the distance between your new place of employment and the home sold is at least 50 miles). Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 Justin was unemployed and living in a townhouse in Florida he had owned and used as his main home since 2012. Federal 1040ez forms and instructions 2013 He got a job in North Carolina and sold his townhouse in 2013. Federal 1040ez forms and instructions 2013 Because the distance between Justin's new place of employment and the home he sold is at least 50 miles, the sale satisfies the conditions of the distance safe harbor. Federal 1040ez forms and instructions 2013 Justin's sale of his home is considered to be because of a change in place of employment, and he is entitled to claim a reduced maximum exclusion of gain from the sale. Federal 1040ez forms and instructions 2013 Health The sale of your main home is because of health if your primary reason for the sale is: To obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual, or To obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. Federal 1040ez forms and instructions 2013 The sale of your home is not because of health if the sale merely benefits a qualified individual's general health or well-being. Federal 1040ez forms and instructions 2013 For purposes of this reason, a qualified individual includes, in addition to the individuals listed earlier under Qualified individual , any of the following family members of these individuals. Federal 1040ez forms and instructions 2013 Parent, grandparent, stepmother, stepfather. Federal 1040ez forms and instructions 2013 Child, grandchild, stepchild, adopted child, eligible foster child. Federal 1040ez forms and instructions 2013 Brother, sister, stepbrother, stepsister, half-brother, half-sister. Federal 1040ez forms and instructions 2013 Mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law, or daughter-in-law. Federal 1040ez forms and instructions 2013 Uncle, aunt, nephew, niece, or cousin. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 In 2012, Chase and Lauren, spouses, bought a house that they used as their main home. Federal 1040ez forms and instructions 2013 Lauren's father has a chronic disease and is unable to care for himself. Federal 1040ez forms and instructions 2013 In 2013, Chase and Lauren sold their home in order to move into Lauren's father's house to provide care for him. Federal 1040ez forms and instructions 2013 Because the primary reason for the sale of their home was to provide care for Lauren's father, Chase and Lauren are entitled to a reduced maximum exclusion. Federal 1040ez forms and instructions 2013 Doctor's recommendation safe harbor. Federal 1040ez forms and instructions 2013   Health is considered to be the reason you sold your home if, for one or more of the reasons listed at the beginning of this discussion, a doctor recommends a change of residence. Federal 1040ez forms and instructions 2013 Unforeseen Circumstances The sale of your main home is because of an unforeseen circumstance if your primary reason for the sale is the occurrence of an event that you could not reasonably have anticipated before buying and occupying that home. Federal 1040ez forms and instructions 2013 You are not considered to have an unforeseen circumstance if the primary reason you sold your home was that you preferred to get a different home or because your finances improved. Federal 1040ez forms and instructions 2013 Specific event safe harbors. Federal 1040ez forms and instructions 2013   Unforeseen circumstances are considered to be the reason for selling your home if any of the following events occurred while you owned and used the property as your main home. Federal 1040ez forms and instructions 2013 An involuntary conversion of your home, such as when your home is destroyed or condemned. Federal 1040ez forms and instructions 2013 Natural or man-made disasters or acts of war or terrorism resulting in a casualty to your home, whether or not your loss is deductible. Federal 1040ez forms and instructions 2013 In the case of qualified individuals (listed earlier under Qualified individual ): Death, Unemployment (if the individual is eligible for unemployment compensation), A change in employment or self-employment status that results in the individual's inability to pay reasonable basic living expenses (listed under Reasonable basic living expenses , later) for his or her household, Divorce or legal separation under a decree of divorce or separate maintenance, or Multiple births resulting from the same pregnancy. Federal 1040ez forms and instructions 2013 An event the IRS determined to be an unforeseen circumstance in published guidance of general applicability. Federal 1040ez forms and instructions 2013 For example, the IRS determined the September 11, 2001, terrorist attacks to be an unforeseen circumstance. Federal 1040ez forms and instructions 2013 Reasonable basic living expenses. Federal 1040ez forms and instructions 2013   Reasonable basic living expenses for your household include the following. Federal 1040ez forms and instructions 2013 Amounts spent for food. Federal 1040ez forms and instructions 2013 Amounts spent for clothing. Federal 1040ez forms and instructions 2013 Housing and related expenses. Federal 1040ez forms and instructions 2013 Medical expenses. Federal 1040ez forms and instructions 2013 Transportation expenses. Federal 1040ez forms and instructions 2013 Tax payments. Federal 1040ez forms and instructions 2013 Court-ordered payments. Federal 1040ez forms and instructions 2013 Expenses reasonably necessary to produce income. Federal 1040ez forms and instructions 2013   Any of these amounts spent to maintain an affluent or luxurious standard of living are not reasonable basic living expenses. Federal 1040ez forms and instructions 2013 Nonqualified Use Gain from the sale or exchange of the main home is not excludable from income if it is allocable to periods of nonqualified use. Federal 1040ez forms and instructions 2013 Nonqualified use means any period after 2008 where neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions (see next). Federal 1040ez forms and instructions 2013 Exceptions. Federal 1040ez forms and instructions 2013   A period of nonqualified use does not include: Any portion of the 5-year period ending on the date of the sale or exchange after the last date you (or your spouse) use the property as a main home; Any period (not to exceed an aggregate period of 10 years) during which you (or your spouse) are serving on qualified official extended duty: As a member of the uniformed services; As a member of the Foreign Service of the United States; or As an employee of the intelligence community; and Any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the IRS. Federal 1040ez forms and instructions 2013 Calculation. Federal 1040ez forms and instructions 2013   To figure the portion of the gain allocated to the period of nonqualified use, multiply the gain (net of any depreciation allowed or allowable on the property for periods after May 6, 1997) by the following fraction:   Total nonqualified use during the period of ownership after 2008     Total period of ownership     This calculation can be found in Worksheet 2, line 10, later in this publication. Federal 1040ez forms and instructions 2013   For examples of this calculation, see Business Use or Rental of Home , next. Federal 1040ez forms and instructions 2013 Business Use or Rental of Home You may be able to exclude gain from the sale of a home you have used for business or to produce rental income if you meet the ownership and use tests. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 On May 23, 2007, Amy, who is unmarried for all years in this example, bought a house. Federal 1040ez forms and instructions 2013 She moved in on that date and lived in it until May 31, 2009, when she moved out of the house and put it up for rent. Federal 1040ez forms and instructions 2013 The house was rented from June 1, 2009, to March 31, 2011. Federal 1040ez forms and instructions 2013 Amy claimed depreciation deductions in 2009 through 2011 totaling $10,000. Federal 1040ez forms and instructions 2013 Amy moved back into the house on April 1, 2011, and lived there until she sold it on January 31, 2013, for a gain of $200,000. Federal 1040ez forms and instructions 2013 During the 5-year period ending on the date of the sale (January 31, 2008–January 31, 2013), Amy owned and lived in the house for more than 2 years as shown in the following table. Federal 1040ez forms and instructions 2013 Five-Year Period Used as Home Used as Rental 1/31/08 – 5/31/09 16 months   6/01/09 – 3/31/11   22 months 4/01/11 – 1/31/13 22 months     38 months 22 months       During the period Amy owned the house (2,080 days), her period of nonqualified use was 668 days. Federal 1040ez forms and instructions 2013 Because the gain attributable to periods of nonqualified use is $60,990, Amy can exclude $129,010 of her gain, as shown on Worksheet 2. Federal 1040ez forms and instructions 2013 Example 2. Federal 1040ez forms and instructions 2013 William owned and used a house as his main home from 2007 through 2010. Federal 1040ez forms and instructions 2013 On January 1, 2011, he moved to another state. Federal 1040ez forms and instructions 2013 He rented his house from that date until April 30, 2013, when he sold it. Federal 1040ez forms and instructions 2013 During the 5-year period ending on the date of sale (May 1, 2008-April 30, 2013), William owned and lived in the house for more than 2 years. Federal 1040ez forms and instructions 2013 Because it was rental property at the time of the sale, he must report the sale on Form 4797. Federal 1040ez forms and instructions 2013 Because the period of nonqualified use does not include any part of the 5-year period after the last date William lived in the house, he has no period of nonqualified use. Federal 1040ez forms and instructions 2013 Because he met the ownership and use tests, he can exclude gain up to $250,000. Federal 1040ez forms and instructions 2013 However, he cannot exclude the part of the gain equal to the depreciation he claimed or could have claimed for renting the house, as explained next. Federal 1040ez forms and instructions 2013 Depreciation after May 6, 1997. Federal 1040ez forms and instructions 2013   If you were entitled to take depreciation deductions because you used your home for business purposes or as rental property, you cannot exclude the part of your gain equal to any depreciation allowed or allowable as a deduction for periods after May 6, 1997. Federal 1040ez forms and instructions 2013 If you can show by adequate records or other evidence that the depreciation allowed was less than the amount allowable, then you may limit the amount of gain recognized to the depreciation allowed. Federal 1040ez forms and instructions 2013 Unrecaptured section 1250 gain. Federal 1040ez forms and instructions 2013   This is the part of any long-term capital gain from the sale of your home that is due to depreciation and cannot be excluded. Federal 1040ez forms and instructions 2013 To figure the amount of unrecaptured section 1250 gain to be reported on Schedule D (Form 1040), you must also take into account certain gains or losses from the sale of property other than your home. Federal 1040ez forms and instructions 2013 Use the Unrecaptured Section 1250 Gain Worksheet in the Schedule D instructions for this purpose. Federal 1040ez forms and instructions 2013 Worksheet 2. Federal 1040ez forms and instructions 2013 Taxable Gain on Sale of Home—Completed Example 1 for Amy Part 1. Federal 1040ez forms and instructions 2013 Gain or (Loss) on Sale       1. Federal 1040ez forms and instructions 2013   Selling price of home 1. Federal 1040ez forms and instructions 2013     2. Federal 1040ez forms and instructions 2013   Selling expenses (including commissions, advertising and legal fees, and seller-paid loan charges) 2. Federal 1040ez forms and instructions 2013     3. Federal 1040ez forms and instructions 2013   Subtract line 2 from line 1. Federal 1040ez forms and instructions 2013 This is the amount realized 3. Federal 1040ez forms and instructions 2013     4. Federal 1040ez forms and instructions 2013   Adjusted basis of home sold (from Worksheet 1, line 13) 4. Federal 1040ez forms and instructions 2013     5. Federal 1040ez forms and instructions 2013   Gain or (loss) on the sale. Federal 1040ez forms and instructions 2013 Subtract line 4 from line 3. Federal 1040ez forms and instructions 2013 If this is a loss, stop here 5. Federal 1040ez forms and instructions 2013 200,000   Part 2. Federal 1040ez forms and instructions 2013 Exclusion and Taxable Gain       6. Federal 1040ez forms and instructions 2013   Enter any depreciation allowed or allowable on the property for periods after May 6, 1997. Federal 1040ez forms and instructions 2013 If none, enter -0- 6. Federal 1040ez forms and instructions 2013 10,000   7. Federal 1040ez forms and instructions 2013   Subtract line 6 from line 5. Federal 1040ez forms and instructions 2013 If the result is less than zero, enter -0- 7. Federal 1040ez forms and instructions 2013 190,000   8. Federal 1040ez forms and instructions 2013   Aggregate number of days of nonqualified use after 2008. Federal 1040ez forms and instructions 2013 If none, enter -0-. Federal 1040ez forms and instructions 2013  If line 8 is equal to zero, skip to line 12 and enter the amount from line 7 on line 12 8. Federal 1040ez forms and instructions 2013 668   9. Federal 1040ez forms and instructions 2013   Number of days taxpayer owned the property 9. Federal 1040ez forms and instructions 2013 2,080   10. Federal 1040ez forms and instructions 2013   Divide the amount on line 8 by the amount on line 9. Federal 1040ez forms and instructions 2013 Enter the result as a decimal (rounded to at least 3 places). Federal 1040ez forms and instructions 2013 But do not enter an amount greater than 1. Federal 1040ez forms and instructions 2013 00 10. Federal 1040ez forms and instructions 2013 0. Federal 1040ez forms and instructions 2013 321   11. Federal 1040ez forms and instructions 2013   Gain allocated to nonqualified use. Federal 1040ez forms and instructions 2013 (Line 7 multiplied by line 10) 11. Federal 1040ez forms and instructions 2013 60,990   12. Federal 1040ez forms and instructions 2013   Gain eligible for exclusion. Federal 1040ez forms and instructions 2013 Subtract line 11 from line 7 12. Federal 1040ez forms and instructions 2013 129,010   13. Federal 1040ez forms and instructions 2013   If you qualify to exclude gain on the sale, enter your maximum exclusion (see Maximum Exclusion ). Federal 1040ez forms and instructions 2013  If you qualify for a reduced maximum exclusion, enter the amount from Worksheet 3, line 7. Federal 1040ez forms and instructions 2013 If you do  not qualify to exclude gain, enter -0- 13. Federal 1040ez forms and instructions 2013 250,000   14. Federal 1040ez forms and instructions 2013   Exclusion. Federal 1040ez forms and instructions 2013 Enter the smaller of line 12 or line 13 14. Federal 1040ez forms and instructions 2013 129,010   15. Federal 1040ez forms and instructions 2013   Taxable gain. Federal 1040ez forms and instructions 2013 Subtract line 14 from line 5. Federal 1040ez forms and instructions 2013 Report your taxable gain as described under Reporting the Sale . Federal 1040ez forms and instructions 2013 If the amount on line 6 is more than zero, complete line 16 15. Federal 1040ez forms and instructions 2013 70,990   16. Federal 1040ez forms and instructions 2013   Enter the smaller of line 6 or line 15. Federal 1040ez forms and instructions 2013 Enter this amount on line 12 of the Unrecaptured Section 1250 Gain  Worksheet in the instructions for Schedule D (Form 1040) 16. Federal 1040ez forms and instructions 2013 10,000 Property Used Partly for Business or Rental If you use property partly as a home and partly for business or to produce rental income, the treatment of any gain on the sale depends partly on whether the business or rental part of the property is part of your home or separate from it. Federal 1040ez forms and instructions 2013 Part of Home Used for Business or Rental If the part of your property used for business or to produce rental income is within your home, such as a room used as a home office for a business, you do not need to allocate gain on the sale of the property between the business part of the property and the part used as a home. Federal 1040ez forms and instructions 2013 In addition, you do not need to report the sale of the business or rental part on Form 4797. Federal 1040ez forms and instructions 2013 This is true whether or not you were entitled to claim any depreciation. Federal 1040ez forms and instructions 2013 However, you cannot exclude the part of any gain equal to any depreciation allowed or allowable after May 6, 1997. Federal 1040ez forms and instructions 2013 See Depreciation after May 6, 1997, earlier. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 Ray sold his main home in 2013 at a $30,000 gain. Federal 1040ez forms and instructions 2013 He has no gains or losses from the sale of property other than the gain from the sale of his home. Federal 1040ez forms and instructions 2013 He meets the ownership and use tests to exclude the gain from his income. Federal 1040ez forms and instructions 2013 However, he used part of the home as a business office in 2012 and claimed $500 depreciation. Federal 1040ez forms and instructions 2013 Because the business office was part of his home (not separate from it), he does not have to allocate the gain on the sale between the business part of the property and the part used as a home. Federal 1040ez forms and instructions 2013 In addition, he does not have to report any part of the gain on Form 4797. Federal 1040ez forms and instructions 2013 Because Ray was entitled to take a depreciation deduction, he must recognize $500 of the gain as unrecaptured section 1250 gain. Federal 1040ez forms and instructions 2013 He reports his gain, exclusion, and the taxable gain of $500 on Form 8949 and Schedule D (Form 1040). Federal 1040ez forms and instructions 2013 Example 2. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that Ray was not entitled to claim depreciation for the business use of his home. Federal 1040ez forms and instructions 2013 Since Ray did not claim any depreciation, he can exclude the entire $30,000 gain. Federal 1040ez forms and instructions 2013 Separate Part of Property Used for Business or Rental You may have used part of your property as your home and a separate part of it for business or to produce rental income. Federal 1040ez forms and instructions 2013 Examples are: A working farm on which your house was located, A duplex in w
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The Federal 1040ez Forms And Instructions 2013

Federal 1040ez forms and instructions 2013 36. Federal 1040ez forms and instructions 2013   Earned Income Credit (EIC) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Do You Qualify for the Credit?If Improper Claim Made in Prior Year Part A. Federal 1040ez forms and instructions 2013 Rules for EveryoneRule 1. Federal 1040ez forms and instructions 2013 Your AGI Must Be Less Than: Rule 2. Federal 1040ez forms and instructions 2013 You Must Have a Valid Social Security Number (SSN) Rule 3. Federal 1040ez forms and instructions 2013 Your Filing Status Cannot Be Married Filing Separately Rule 4. Federal 1040ez forms and instructions 2013 You Must Be a U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 Citizen or Resident Alien All Year Rule 5. Federal 1040ez forms and instructions 2013 You Cannot File Form 2555 or Form 2555-EZ Rule 6. Federal 1040ez forms and instructions 2013 Your Investment Income Must Be $3,300 or Less Rule 7. Federal 1040ez forms and instructions 2013 You Must Have Earned Income Part B. Federal 1040ez forms and instructions 2013 Rules If You Have a Qualifying ChildRule 8. Federal 1040ez forms and instructions 2013 Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9. Federal 1040ez forms and instructions 2013 Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Rule 10. Federal 1040ez forms and instructions 2013 You Cannot Be a Qualifying Child of Another Taxpayer Part C. Federal 1040ez forms and instructions 2013 Rules If You Do Not Have a Qualifying ChildRule 11. Federal 1040ez forms and instructions 2013 You Must Be at Least Age 25 but Under Age 65 Rule 12. Federal 1040ez forms and instructions 2013 You Cannot Be the Dependent of Another Person Rule 13. Federal 1040ez forms and instructions 2013 You Cannot Be a Qualifying Child of Another Taxpayer Rule 14. Federal 1040ez forms and instructions 2013 You Must Have Lived in the United States More Than Half of the Year Part D. Federal 1040ez forms and instructions 2013 Figuring and Claiming the EICRule 15. Federal 1040ez forms and instructions 2013 Your Earned Income Must Be Less Than: IRS Will Figure the EIC for You How To Figure the EIC Yourself ExamplesExample 1. Federal 1040ez forms and instructions 2013 John and Janet Smith (Form 1040A) Example 2. Federal 1040ez forms and instructions 2013 Kelly Green (Form 1040EZ) What's New Earned income amount is more. Federal 1040ez forms and instructions 2013  The maximum amount of income you can earn and still get the credit has increased. Federal 1040ez forms and instructions 2013 You may be able to take the credit if: You have three or more qualifying children and you earned less than $46,227 ($51,567 if married filing jointly), You have two qualifying children and you earned less than $43,038 ($48,378 if married filing jointly), You have one qualifying child and you earned less than $37,870 ($43,210 if married filing jointly), or You do not have a qualifying child and you earned less than $14,340 ($19,680 if married filing jointly). Federal 1040ez forms and instructions 2013 Your adjusted gross income also must be less than the amount in the above list that applies to you. Federal 1040ez forms and instructions 2013 For details, see Rules 1 and 15. Federal 1040ez forms and instructions 2013 Investment income amount is more. Federal 1040ez forms and instructions 2013  The maximum amount of investment income you can have and still get the credit has increased to $3,300. Federal 1040ez forms and instructions 2013 See Rule 6. Federal 1040ez forms and instructions 2013 Reminders Increased EIC on certain joint returns. Federal 1040ez forms and instructions 2013  A married person filing a joint return may get more EIC than someone with the same income but a different filing status. Federal 1040ez forms and instructions 2013 As a result, the EIC table has different columns for married persons filing jointly than for everyone else. Federal 1040ez forms and instructions 2013 When you look up your EIC in the EIC Table, be sure to use the correct column for your filing status and the number of children you have. Federal 1040ez forms and instructions 2013 Online help. Federal 1040ez forms and instructions 2013  You can use the EITC Assistant at www. Federal 1040ez forms and instructions 2013 irs. Federal 1040ez forms and instructions 2013 gov/eitc to find out if you are eligible for the credit. Federal 1040ez forms and instructions 2013 The EITC Assistant is available in English and Spanish. Federal 1040ez forms and instructions 2013 EIC questioned by IRS. Federal 1040ez forms and instructions 2013  The IRS may ask you to provide documents to prove you are entitled to claim the EIC. Federal 1040ez forms and instructions 2013 We will tell you what documents to send us. Federal 1040ez forms and instructions 2013 These may include: birth certificates, school records, medical records, etc. Federal 1040ez forms and instructions 2013 The process of establishing your eligibility will delay your refund. Federal 1040ez forms and instructions 2013 Introduction The earned income credit (EIC) is a tax credit for certain people who work and have less than $51,567 of earned income. Federal 1040ez forms and instructions 2013 A tax credit usually means more money in your pocket. Federal 1040ez forms and instructions 2013 It reduces the amount of tax you owe. Federal 1040ez forms and instructions 2013 The EIC may also give you a refund. Federal 1040ez forms and instructions 2013 How do you get the earned income credit?   To claim the EIC, you must: Qualify by meeting certain rules, and File a tax return, even if you: Do not owe any tax, Did not earn enough money to file a return, or Did not have income taxes withheld from your pay. Federal 1040ez forms and instructions 2013 When you complete your return, you can figure your EIC by using a worksheet in the instructions for Form 1040, Form 1040A, or Form 1040EZ. Federal 1040ez forms and instructions 2013 Or, if you prefer, you can let the IRS figure the credit for you. Federal 1040ez forms and instructions 2013 How will this chapter help you?   This chapter will explain the following. Federal 1040ez forms and instructions 2013 The rules you must meet to qualify for the EIC. Federal 1040ez forms and instructions 2013 How to figure the EIC. Federal 1040ez forms and instructions 2013 Useful Items - You may want to see: Publication 596 Earned Income Credit (EIC) Form (and Instructions) Schedule EIC Earned Income Credit (Qualifying Child Information) 8862 Information To Claim Earned Income Credit After Disallowance Do You Qualify for the Credit? To qualify to claim the EIC, you must first meet all of the rules explained in Part A, Rules for Everyone . Federal 1040ez forms and instructions 2013 Then you must meet the rules in Part B, Rules If You Have a Qualifying Child , or Part C, Rules If You Do Not Have a Qualifying Child . Federal 1040ez forms and instructions 2013 There is one final rule you must meet in Part D, Figuring and Claiming the EIC . Federal 1040ez forms and instructions 2013 You qualify for the credit if you meet all the rules in each part that applies to you. Federal 1040ez forms and instructions 2013 If you have a qualifying child, the rules in Parts A, B, and D apply to you. Federal 1040ez forms and instructions 2013 If you do not have a qualifying child, the rules in Parts A, C, and D apply to you. Federal 1040ez forms and instructions 2013 Table 36-1, Earned Income Credit in a Nutshell. Federal 1040ez forms and instructions 2013   Use Table 36–1 as a guide to Parts A, B, C, and D. Federal 1040ez forms and instructions 2013 The table is a summary of all the rules in each part. Federal 1040ez forms and instructions 2013 Do you have a qualifying child?   You have a qualifying child only if you have a child who meets the four tests described in Rule 8 and illustrated in Figure 36–1. Federal 1040ez forms and instructions 2013 If Improper Claim Made in Prior Year If your EIC for any year after 1996 was denied or reduced for any reason other than a math or clerical error, you must attach a completed Form 8862 to your next tax return to claim the EIC. Federal 1040ez forms and instructions 2013 You must also qualify to claim the EIC by meeting all the rules described in this chapter. Federal 1040ez forms and instructions 2013 However, if your EIC was denied or reduced as a result of a math or clerical error, do not attach Form 8862 to your next tax return. Federal 1040ez forms and instructions 2013 For example, if your arithmetic is incorrect, the IRS can correct it. Federal 1040ez forms and instructions 2013 If you do not provide a correct social security number, the IRS can deny the EIC. Federal 1040ez forms and instructions 2013 These kinds of errors are called math or clerical errors. Federal 1040ez forms and instructions 2013 If your EIC for any year after 1996 was denied and it was determined that your error was due to reckless or intentional disregard of the EIC rules, then you cannot claim the EIC for the next 2 years. Federal 1040ez forms and instructions 2013 If your error was due to fraud, then you cannot claim the EIC for the next 10 years. Federal 1040ez forms and instructions 2013 More information. Federal 1040ez forms and instructions 2013   See chapter 5 in Publication 596 for more detailed information about the disallowance period and Form 8862. Federal 1040ez forms and instructions 2013 Part A. Federal 1040ez forms and instructions 2013 Rules for Everyone This part of the chapter discusses Rules 1 through 7. Federal 1040ez forms and instructions 2013 You must meet all seven rules to qualify for the earned income credit. Federal 1040ez forms and instructions 2013 If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the chapter. Federal 1040ez forms and instructions 2013 If you meet all seven rules in this part, then read either Part B or Part C (whichever applies) for more rules you must meet. Federal 1040ez forms and instructions 2013 Rule 1. Federal 1040ez forms and instructions 2013 Your AGI Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Federal 1040ez forms and instructions 2013 Adjusted gross income (AGI). Federal 1040ez forms and instructions 2013   AGI is the amount on line 38 (Form 1040), line 22 (Form 1040A), or line 4 (Form 1040EZ). Federal 1040ez forms and instructions 2013 If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 Your AGI is $38,550, you are single, and you have one qualifying child. Federal 1040ez forms and instructions 2013 You cannot claim the EIC because your AGI is not less than $37,870. Federal 1040ez forms and instructions 2013 However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. Federal 1040ez forms and instructions 2013 Community property. Federal 1040ez forms and instructions 2013   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. Federal 1040ez forms and instructions 2013 This is different from the community property rules that apply under Rule 7 . Federal 1040ez forms and instructions 2013 Rule 2. Federal 1040ez forms and instructions 2013 You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). Federal 1040ez forms and instructions 2013 Any qualifying child listed on Schedule EIC also must have a valid SSN. Federal 1040ez forms and instructions 2013 (See Rule 8 if you have a qualifying child. Federal 1040ez forms and instructions 2013 ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. Federal 1040ez forms and instructions 2013 An example of a federally funded benefit is Medicaid. Federal 1040ez forms and instructions 2013 If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 citizen or permanent resident, ask the SSA for a new social security card without the legend. Federal 1040ez forms and instructions 2013 U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 citizen. Federal 1040ez forms and instructions 2013   If you were a U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 citizen when you received your SSN, you have a valid SSN. Federal 1040ez forms and instructions 2013 Valid for work only with INS or DHS authorization. Federal 1040ez forms and instructions 2013   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. Federal 1040ez forms and instructions 2013 SSN missing or incorrect. Federal 1040ez forms and instructions 2013   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. Federal 1040ez forms and instructions 2013 Other taxpayer identification number. Federal 1040ez forms and instructions 2013   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). Federal 1040ez forms and instructions 2013 ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. Federal 1040ez forms and instructions 2013 No SSN. Federal 1040ez forms and instructions 2013   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Federal 1040ez forms and instructions 2013 You cannot claim the EIC. Federal 1040ez forms and instructions 2013 Getting an SSN. Federal 1040ez forms and instructions 2013   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5, Application for a Social Security Card, with the SSA. Federal 1040ez forms and instructions 2013 You can get Form SS-5 online at www. Federal 1040ez forms and instructions 2013 socialsecurity. Federal 1040ez forms and instructions 2013 gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. Federal 1040ez forms and instructions 2013 Filing deadline approaching and still no SSN. Federal 1040ez forms and instructions 2013   If the filing deadline is approaching and you still do not have an SSN, you have two choices. Federal 1040ez forms and instructions 2013 Request an automatic 6-month extension of time to file your return. Federal 1040ez forms and instructions 2013 You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 Individual Income Tax Return. Federal 1040ez forms and instructions 2013 For more information, see chapter 1 . Federal 1040ez forms and instructions 2013 File the return on time without claiming the EIC. Federal 1040ez forms and instructions 2013 After receiving the SSN, file an amended return (Form 1040X, Amended U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 Individual Income Tax Return) claiming the EIC. Federal 1040ez forms and instructions 2013 Attach a filled-in Schedule EIC if you have a qualifying child. Federal 1040ez forms and instructions 2013 Table 36-1. Federal 1040ez forms and instructions 2013 Earned Income Credit in a Nutshell First, you must meet all the rules in this column. Federal 1040ez forms and instructions 2013 Second, you must meet all the rules in one of these columns, whichever applies. Federal 1040ez forms and instructions 2013 Third, you must meet the rule in this column. Federal 1040ez forms and instructions 2013 Part A. Federal 1040ez forms and instructions 2013  Rules for Everyone Part B. Federal 1040ez forms and instructions 2013  Rules If You Have a Qualifying Child Part C. Federal 1040ez forms and instructions 2013  Rules If You Do Not Have a Qualifying Child Part D. Federal 1040ez forms and instructions 2013  Figuring and Claiming the EIC 1. Federal 1040ez forms and instructions 2013 Your adjusted gross income (AGI) must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Federal 1040ez forms and instructions 2013 2. Federal 1040ez forms and instructions 2013 You must have a valid social security number. Federal 1040ez forms and instructions 2013  3. Federal 1040ez forms and instructions 2013 Your filing status cannot be “Married filing separately. Federal 1040ez forms and instructions 2013 ” 4. Federal 1040ez forms and instructions 2013 You must be a U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 citizen or resident alien all year. Federal 1040ez forms and instructions 2013  5. Federal 1040ez forms and instructions 2013 You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). Federal 1040ez forms and instructions 2013  6. Federal 1040ez forms and instructions 2013 Your investment income must be $3,300 or less. Federal 1040ez forms and instructions 2013  7. Federal 1040ez forms and instructions 2013 You must have earned income. Federal 1040ez forms and instructions 2013 8. Federal 1040ez forms and instructions 2013 Your child must meet the relationship, age, residency, and joint return tests. Federal 1040ez forms and instructions 2013  9. Federal 1040ez forms and instructions 2013 Your qualifying child cannot be used by more than one person to claim the EIC. Federal 1040ez forms and instructions 2013  10. Federal 1040ez forms and instructions 2013 You cannot be a qualifying child of another person. Federal 1040ez forms and instructions 2013 11. Federal 1040ez forms and instructions 2013 You must be at least age 25 but under age 65. Federal 1040ez forms and instructions 2013  12. Federal 1040ez forms and instructions 2013 You cannot be the dependent of another person. Federal 1040ez forms and instructions 2013  13. Federal 1040ez forms and instructions 2013 You cannot be a qualifying child of another person. Federal 1040ez forms and instructions 2013  14. Federal 1040ez forms and instructions 2013 You must have lived in the United States more than half of the year. Federal 1040ez forms and instructions 2013 15. Federal 1040ez forms and instructions 2013 Your earned income must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Federal 1040ez forms and instructions 2013 Rule 3. Federal 1040ez forms and instructions 2013 Your Filing Status Cannot Be Married Filing Separately If you are married, you usually must file a joint return to claim the EIC. Federal 1040ez forms and instructions 2013 Your filing status cannot be “Married filing separately. Federal 1040ez forms and instructions 2013 ” Spouse did not live with you. Federal 1040ez forms and instructions 2013   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. Federal 1040ez forms and instructions 2013 In that case, you may be able to claim the EIC. Federal 1040ez forms and instructions 2013 For detailed information about filing as head of household, see chapter 2 . Federal 1040ez forms and instructions 2013 Rule 4. Federal 1040ez forms and instructions 2013 You Must Be a U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. Federal 1040ez forms and instructions 2013 You can use that filing status only if one spouse is a U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 citizen or resident alien and you choose to treat the nonresident spouse as a U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 resident. Federal 1040ez forms and instructions 2013 If you make this choice, you and your spouse are taxed on your worldwide income. Federal 1040ez forms and instructions 2013 If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). Federal 1040ez forms and instructions 2013 If you need more information on making this choice, get Publication 519, U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 Tax Guide for Aliens. Federal 1040ez forms and instructions 2013 Rule 5. Federal 1040ez forms and instructions 2013 You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Federal 1040ez forms and instructions 2013 You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. Federal 1040ez forms and instructions 2013 U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 possessions are not foreign countries. Federal 1040ez forms and instructions 2013 See Publication 54, Tax Guide for U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 Citizens and Resident Aliens Abroad, for more detailed information. Federal 1040ez forms and instructions 2013 Rule 6. Federal 1040ez forms and instructions 2013 Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. Federal 1040ez forms and instructions 2013 If your investment income is more than $3,300, you cannot claim the credit. Federal 1040ez forms and instructions 2013 For most people, investment income is the total of the following amounts. Federal 1040ez forms and instructions 2013 Taxable interest (line 8a of Form 1040 or 1040A). Federal 1040ez forms and instructions 2013 Tax-exempt interest (line 8b of Form 1040 or 1040A). Federal 1040ez forms and instructions 2013 Dividend income (line 9a of Form 1040 or 1040A). Federal 1040ez forms and instructions 2013 Capital gain net income (line 13 of Form 1040, if more than zero, or line 10 of Form 1040A). Federal 1040ez forms and instructions 2013 If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. Federal 1040ez forms and instructions 2013 However, see Rule 6 in chapter 1 of Publication 596 if: You are filing Schedule E (Form 1040), Form 4797, or Form 8814, or You are reporting income from the rental of personal property on Form 1040, line 21. Federal 1040ez forms and instructions 2013 Rule 7. Federal 1040ez forms and instructions 2013 You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. Federal 1040ez forms and instructions 2013 If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. Federal 1040ez forms and instructions 2013 If you are an employee, earned income includes all the taxable income you get from your employer. Federal 1040ez forms and instructions 2013 If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the instructions for Form 1040. Federal 1040ez forms and instructions 2013 Earned Income Earned income includes all of the following types of income. Federal 1040ez forms and instructions 2013 Wages, salaries, tips, and other taxable employee pay. Federal 1040ez forms and instructions 2013 Employee pay is earned income only if it is taxable. Federal 1040ez forms and instructions 2013 Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Federal 1040ez forms and instructions 2013 But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained below. Federal 1040ez forms and instructions 2013 Net earnings from self-employment. Federal 1040ez forms and instructions 2013 Gross income received as a statutory employee. Federal 1040ez forms and instructions 2013 Wages, salaries, and tips. Federal 1040ez forms and instructions 2013   Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. Federal 1040ez forms and instructions 2013 You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). Federal 1040ez forms and instructions 2013 Nontaxable combat pay election. Federal 1040ez forms and instructions 2013   You can elect to include your nontaxable combat pay in earned income for the earned income credit. Federal 1040ez forms and instructions 2013 Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. Federal 1040ez forms and instructions 2013 Figure the credit with and without your nontaxable combat pay before making the election. Federal 1040ez forms and instructions 2013   If you make the election, you must include in earned income all nontaxable combat pay you received. Federal 1040ez forms and instructions 2013 If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. Federal 1040ez forms and instructions 2013 In other words, if one of you makes the election, the other one can also make it but does not have to. Federal 1040ez forms and instructions 2013   The amount of your nontaxable combat pay should be shown in box 12 of your Form W-2 with code “Q. Federal 1040ez forms and instructions 2013 ” Self-employed persons and statutory employees. Federal 1040ez forms and instructions 2013   If you are self-employed or received income as a statutory employee, you must use the Form 1040 instructions to see if you qualify to get the EIC. Federal 1040ez forms and instructions 2013 Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. Federal 1040ez forms and instructions 2013 Each approved form exempts certain income from social security taxes. Federal 1040ez forms and instructions 2013 Each form is discussed here in terms of what is or is not earned income for the EIC. Federal 1040ez forms and instructions 2013 Form 4361. Federal 1040ez forms and instructions 2013   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. Federal 1040ez forms and instructions 2013 This includes wages, salaries, tips, and other taxable employee compensation. Federal 1040ez forms and instructions 2013 A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. Federal 1040ez forms and instructions 2013 Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. Federal 1040ez forms and instructions 2013 Examples include fees for performing marriages and honoraria for delivering speeches. Federal 1040ez forms and instructions 2013 Form 4029. Federal 1040ez forms and instructions 2013   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. Federal 1040ez forms and instructions 2013 However, amounts you received as a self-employed individual do not count as earned income. Federal 1040ez forms and instructions 2013 Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. Federal 1040ez forms and instructions 2013 Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Federal 1040ez forms and instructions 2013 Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Federal 1040ez forms and instructions 2013 You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. Federal 1040ez forms and instructions 2013 Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Federal 1040ez forms and instructions 2013 Report taxable pension payments on Form 1040, lines 16a and 16b (or Form 1040A, lines 12a and 12b). Federal 1040ez forms and instructions 2013 Disability insurance payments. Federal 1040ez forms and instructions 2013   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. Federal 1040ez forms and instructions 2013 It does not matter whether you have reached minimum retirement age. Federal 1040ez forms and instructions 2013 If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. Federal 1040ez forms and instructions 2013 ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Federal 1040ez forms and instructions 2013 Do not include any of these items in your earned income. Federal 1040ez forms and instructions 2013 Earnings while an inmate. Federal 1040ez forms and instructions 2013   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. Federal 1040ez forms and instructions 2013 This includes amounts for work performed while in a work release program or while in a halfway house. Federal 1040ez forms and instructions 2013 Workfare payments. Federal 1040ez forms and instructions 2013   Nontaxable workfare payments are not earned income for the EIC. Federal 1040ez forms and instructions 2013 These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if private sector employment is not available, or (2) community service program activities. Federal 1040ez forms and instructions 2013 Community property. Federal 1040ez forms and instructions 2013   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. Federal 1040ez forms and instructions 2013 That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. Federal 1040ez forms and instructions 2013 Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. Federal 1040ez forms and instructions 2013 Nevada, Washington, and California domestic partners. Federal 1040ez forms and instructions 2013   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. Federal 1040ez forms and instructions 2013 Your earned income for the EIC does not include any amount earned by your partner. Federal 1040ez forms and instructions 2013 Your earned income includes the entire amount you earned. Federal 1040ez forms and instructions 2013 For details, see Publication 555. Federal 1040ez forms and instructions 2013 Conservation Reserve Program (CRP) payments. Federal 1040ez forms and instructions 2013   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. Federal 1040ez forms and instructions 2013 Nontaxable military pay. Federal 1040ez forms and instructions 2013   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. Federal 1040ez forms and instructions 2013 Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). Federal 1040ez forms and instructions 2013 See Publication 3, Armed Forces' Tax Guide, for more information. Federal 1040ez forms and instructions 2013    Combat pay. Federal 1040ez forms and instructions 2013 You can elect to include your nontaxable combat pay in earned income for the EIC. Federal 1040ez forms and instructions 2013 See Nontaxable combat pay election, earlier. Federal 1040ez forms and instructions 2013 Part B. Federal 1040ez forms and instructions 2013 Rules If You Have a Qualifying Child If you have met all of the rules in Part A , read Part B to see if you have a qualifying child. Federal 1040ez forms and instructions 2013 Part B discusses Rules 8 through 10. Federal 1040ez forms and instructions 2013 You must meet all three of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit with a qualifying child. Federal 1040ez forms and instructions 2013 You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. Federal 1040ez forms and instructions 2013 (You cannot file Form 1040EZ. Federal 1040ez forms and instructions 2013 ) You also must complete Schedule EIC and attach it to your return. Federal 1040ez forms and instructions 2013 If you meet all the rules in Part A and this part, read Part D to find out what to do next. Federal 1040ez forms and instructions 2013 If you do not meet Rule 8, you do not have a qualifying child. Federal 1040ez forms and instructions 2013 Read Part C to find out if you can get the earned income credit without a qualifying child. Federal 1040ez forms and instructions 2013 Rule 8. Federal 1040ez forms and instructions 2013 Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. Federal 1040ez forms and instructions 2013 The four tests are: Relationship, Age, Residency, and Joint return. Federal 1040ez forms and instructions 2013 The four tests are illustrated in Figure 36–1. Federal 1040ez forms and instructions 2013 The paragraphs that follow contain more information about each test. Federal 1040ez forms and instructions 2013 Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). Federal 1040ez forms and instructions 2013 The following definitions clarify the relationship test. Federal 1040ez forms and instructions 2013 Adopted child. Federal 1040ez forms and instructions 2013   An adopted child is always treated as your own child. Federal 1040ez forms and instructions 2013 The term “adopted child” includes a child who was lawfully placed with you for legal adoption. Federal 1040ez forms and instructions 2013 Foster child. Federal 1040ez forms and instructions 2013   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgement, decree, or other order of any court of competent jurisdiction. Federal 1040ez forms and instructions 2013 An authorized placement agency includes a state or local government agency. Federal 1040ez forms and instructions 2013 It also includes a tax-exempt organization licensed by a state. Federal 1040ez forms and instructions 2013 In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. Federal 1040ez forms and instructions 2013 Debbie is your foster child. Federal 1040ez forms and instructions 2013 Age Test Your child must be: 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 student, and younger than you (or your spouse, if filing jointly), or Permanently and totally disabled at any time during 2013, regardless of age. Federal 1040ez forms and instructions 2013    The following examples and definitions clarify the age test. Federal 1040ez forms and instructions 2013 Example 1—child not under age 19. Federal 1040ez forms and instructions 2013 Your son turned 19 on December 10. Federal 1040ez forms and instructions 2013 Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. Federal 1040ez forms and instructions 2013 Example 2—child not younger than you or your spouse. Federal 1040ez forms and instructions 2013 Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. Federal 1040ez forms and instructions 2013 He is not disabled. Federal 1040ez forms and instructions 2013 Both you and your spouse are 21 years old and you file a joint return. Federal 1040ez forms and instructions 2013 Your brother is not your qualifying child because he is not younger than you or your spouse. Federal 1040ez forms and instructions 2013 Example 3—child younger than your spouse but not younger than you. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 2 except that your spouse is 25 years old. Federal 1040ez forms and instructions 2013 Because your brother is younger than your spouse, he is your qualifying child even though he is not younger than you. Federal 1040ez forms and instructions 2013 Student defined. Federal 1040ez forms and instructions 2013   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. Federal 1040ez forms and instructions 2013 The 5 calendar months need not be consecutive. Federal 1040ez forms and instructions 2013   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. Federal 1040ez forms and instructions 2013 School defined. Federal 1040ez forms and instructions 2013   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. Federal 1040ez forms and instructions 2013 However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. Federal 1040ez forms and instructions 2013 Vocational high school students. Federal 1040ez forms and instructions 2013   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. Federal 1040ez forms and instructions 2013 Permanently and totally disabled. Federal 1040ez forms and instructions 2013   Your child is permanently and totally disabled if both of the following apply. Federal 1040ez forms and instructions 2013 He or she cannot engage in any substantial gainful activity because of a physical or mental condition. Federal 1040ez forms and instructions 2013 A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. Federal 1040ez forms and instructions 2013 Residency Test Your child must have lived with you in the United States for more than half of 2013. Federal 1040ez forms and instructions 2013 The following definitions clarify the residency test. Federal 1040ez forms and instructions 2013 United States. Federal 1040ez forms and instructions 2013   This means the 50 states and the District of Columbia. Federal 1040ez forms and instructions 2013 It does not include Puerto Rico or U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 possessions such as Guam. Federal 1040ez forms and instructions 2013 Homeless shelter. Federal 1040ez forms and instructions 2013   Your home can be any location where you regularly live. Federal 1040ez forms and instructions 2013 You do not need a traditional home. Federal 1040ez forms and instructions 2013 For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. Federal 1040ez forms and instructions 2013 Military personnel stationed outside the United States. Federal 1040ez forms and instructions 2013    U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Federal 1040ez forms and instructions 2013 Figure 36-1. Federal 1040ez forms and instructions 2013 Tests for Qualifying Child Please click here for the text description of the image. Federal 1040ez forms and instructions 2013 Qualifying child Extended active duty. Federal 1040ez forms and instructions 2013   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Federal 1040ez forms and instructions 2013 Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Federal 1040ez forms and instructions 2013 Birth or death of a child. Federal 1040ez forms and instructions 2013   A child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. Federal 1040ez forms and instructions 2013 Temporary absences. Federal 1040ez forms and instructions 2013   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. Federal 1040ez forms and instructions 2013 Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. Federal 1040ez forms and instructions 2013 Kidnapped child. Federal 1040ez forms and instructions 2013    A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. Federal 1040ez forms and instructions 2013 The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or your child's family. Federal 1040ez forms and instructions 2013 This treatment applies for all years until the child is returned. Federal 1040ez forms and instructions 2013 However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. Federal 1040ez forms and instructions 2013   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. Federal 1040ez forms and instructions 2013 Joint Return Test To meet this test, the child cannot file a joint return for the year. Federal 1040ez forms and instructions 2013 Exception. Federal 1040ez forms and instructions 2013   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. Federal 1040ez forms and instructions 2013 Example 1—child files joint return. Federal 1040ez forms and instructions 2013 You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. Federal 1040ez forms and instructions 2013 He earned $25,000 for the year. Federal 1040ez forms and instructions 2013 The couple files a joint return. Federal 1040ez forms and instructions 2013 Because your daughter and her husband filed a joint return, she is not your qualifying child. Federal 1040ez forms and instructions 2013 Example 2—child files joint return only to claim a refund of withheld tax. Federal 1040ez forms and instructions 2013 Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. Federal 1040ez forms and instructions 2013 They do not have a child. Federal 1040ez forms and instructions 2013 Neither is required to file a tax return. Federal 1040ez forms and instructions 2013 Taxes were taken out of their pay, so they filed a joint return only to get a refund of the withheld taxes. Federal 1040ez forms and instructions 2013 The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. Federal 1040ez forms and instructions 2013 Example 3—child files joint return to claim American opportunity credit. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 2 except no taxes were taken out of your son's pay. Federal 1040ez forms and instructions 2013 He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. Federal 1040ez forms and instructions 2013 Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. Federal 1040ez forms and instructions 2013 The exception to the joint return test does not apply, so your son is not your qualifying child. Federal 1040ez forms and instructions 2013 Married child. Federal 1040ez forms and instructions 2013   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) , described later. Federal 1040ez forms and instructions 2013 Social security number. Federal 1040ez forms and instructions 2013   The qualifying child must have a valid social security number (SSN) unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. Federal 1040ez forms and instructions 2013 You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), which is issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. Federal 1040ez forms and instructions 2013   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. Federal 1040ez forms and instructions 2013 For more information about SSNs, see Rule 2 . Federal 1040ez forms and instructions 2013 Rule 9. Federal 1040ez forms and instructions 2013 Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. Federal 1040ez forms and instructions 2013 However, only one of these persons can actually treat the child as a qualifying child. Federal 1040ez forms and instructions 2013 Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Federal 1040ez forms and instructions 2013 The exemption for the child. Federal 1040ez forms and instructions 2013 The child tax credit. Federal 1040ez forms and instructions 2013 Head of household filing status. Federal 1040ez forms and instructions 2013 The credit for child and dependent care expenses. Federal 1040ez forms and instructions 2013 The exclusion for dependent care benefits. Federal 1040ez forms and instructions 2013 The EIC. Federal 1040ez forms and instructions 2013 The other person cannot take any of these benefits based on this qualifying child. Federal 1040ez forms and instructions 2013 In other words, you and the other person cannot agree to divide these tax benefits between you. Federal 1040ez forms and instructions 2013 The other person cannot take any of these tax benefits unless he or she has a different qualifying child. Federal 1040ez forms and instructions 2013 The tiebreaker rules explained next explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. Federal 1040ez forms and instructions 2013 However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. Federal 1040ez forms and instructions 2013 Tiebreaker rules. Federal 1040ez forms and instructions 2013   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. Federal 1040ez forms and instructions 2013 If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Federal 1040ez forms and instructions 2013 If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. Federal 1040ez forms and instructions 2013 If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Federal 1040ez forms and instructions 2013 If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Federal 1040ez forms and instructions 2013 If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Federal 1040ez forms and instructions 2013 If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Federal 1040ez forms and instructions 2013 If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. Federal 1040ez forms and instructions 2013 See Example 8 . Federal 1040ez forms and instructions 2013   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Federal 1040ez forms and instructions 2013 See Examples 1 through 13 . Federal 1040ez forms and instructions 2013   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in Part C for people who do not have a qualifying child. Federal 1040ez forms and instructions 2013 If the other person cannot claim the EIC. Federal 1040ez forms and instructions 2013   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. Federal 1040ez forms and instructions 2013 See Examples 6 and 7 . Federal 1040ez forms and instructions 2013 But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier. Federal 1040ez forms and instructions 2013 Examples. Federal 1040ez forms and instructions 2013 The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 You and your 2-year-old son Jimmy lived with your mother all year. Federal 1040ez forms and instructions 2013 You are 25 years old, unmarried, and your AGI is $9,000. Federal 1040ez forms and instructions 2013 Your only income was $9,000 from a part-time job. Federal 1040ez forms and instructions 2013 Your mother's only income was $20,000 from her job, and her AGI is $20,000. Federal 1040ez forms and instructions 2013 Jimmy's father did not live with you or Jimmy. Federal 1040ez forms and instructions 2013 The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. Federal 1040ez forms and instructions 2013 Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. Federal 1040ez forms and instructions 2013 However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier for which that person qualifies). Federal 1040ez forms and instructions 2013 He is not a qualifying child of anyone else, including his father. Federal 1040ez forms and instructions 2013 If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). Federal 1040ez forms and instructions 2013 Example 2. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except your AGI is $25,000. Federal 1040ez forms and instructions 2013 Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. Federal 1040ez forms and instructions 2013 Only you can claim him. Federal 1040ez forms and instructions 2013 Example 3. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. Federal 1040ez forms and instructions 2013 In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. Federal 1040ez forms and instructions 2013 The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. Federal 1040ez forms and instructions 2013 Example 4. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. Federal 1040ez forms and instructions 2013 Only one of you can claim each child. Federal 1040ez forms and instructions 2013 However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. Federal 1040ez forms and instructions 2013 For example, if you claim one child, your mother can claim the other two. Federal 1040ez forms and instructions 2013 Example 5. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that you are only 18 years old. Federal 1040ez forms and instructions 2013 This means you are a qualifying child of your mother. Federal 1040ez forms and instructions 2013 Because of Rule 10 , discussed next, you cannot claim the EIC and cannot claim Jimmy as a qualifying child. Federal 1040ez forms and instructions 2013 Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. Federal 1040ez forms and instructions 2013 If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. Federal 1040ez forms and instructions 2013 Example 6. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that your mother earned $50,000 from her job. Federal 1040ez forms and instructions 2013 Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. Federal 1040ez forms and instructions 2013 Example 7. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. Federal 1040ez forms and instructions 2013 Your earned income is too high for you to claim the EIC. Federal 1040ez forms and instructions 2013 But your mother cannot claim the EIC either, because her AGI is not higher than yours. Federal 1040ez forms and instructions 2013 Example 8. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have an AGI of $30,000 on a joint return. Federal 1040ez forms and instructions 2013 If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. Federal 1040ez forms and instructions 2013 Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. Federal 1040ez forms and instructions 2013 In other words, each parent's AGI can be treated as $15,000. Federal 1040ez forms and instructions 2013 Example 9. Federal 1040ez forms and instructions 2013 You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. Federal 1040ez forms and instructions 2013 In August and September, Joey lived with you. Federal 1040ez forms and instructions 2013 For the rest of the year, Joey lived with your husband, who is Joey's father. Federal 1040ez forms and instructions 2013 Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. Federal 1040ez forms and instructions 2013 At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. Federal 1040ez forms and instructions 2013 You and your husband will file separate returns. Federal 1040ez forms and instructions 2013 Your husband agrees to let you treat Joey as a qualifying child. Federal 1040ez forms and instructions 2013 This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. Federal 1040ez forms and instructions 2013 However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. Federal 1040ez forms and instructions 2013 See Rule 3 . Federal 1040ez forms and instructions 2013 Example 10. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. Federal 1040ez forms and instructions 2013 In this case, only your husband will be allowed to treat Joey as a qualifying child. Federal 1040ez forms and instructions 2013 This is because, during 2013, the boy lived with him longer than with you. Federal 1040ez forms and instructions 2013 You cannot claim the EIC (either with or without a qualifying child). Federal 1040ez forms and instructions 2013 However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. Federal 1040ez forms and instructions 2013 See Rule 3 . Federal 1040ez forms and instructions 2013 Example 11. Federal 1040ez forms and instructions 2013 You, your 5-year-old son and your son's father lived together all year. Federal 1040ez forms and instructions 2013 You and your son's father are not married. Federal 1040ez forms and instructions 2013 Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. Federal 1040ez forms and instructions 2013 Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. Federal 1040ez forms and instructions 2013 Neither of you had any other income. Federal 1040ez forms and instructions 2013 Your son's father agrees to let you treat the child as a qualifying child. Federal 1040ez forms and instructions 2013 This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. Federal 1040ez forms and instructions 2013 Example 12. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. Federal 1040ez forms and instructions 2013 In this case, only your son's father will be allowed to treat your son as a qualifying child. Federal 1040ez forms and instructions 2013 This is because his AGI, $14,000, is more than your AGI, $12,000. Federal 1040ez forms and instructions 2013 You cannot claim the EIC (either with or without a qualifying child). Federal 1040ez forms and instructions 2013 Example 13. Federal 1040ez forms and instructions 2013 You and your 7-year-old niece, your sister's child, lived with your mother all year. Federal 1040ez forms and instructions 2013 You are 25 years old, and your AGI is $9,300. Federal 1040ez forms and instructions 2013 Your only income was from a part-time job. Federal 1040ez forms and instructions 2013 Your mother's AGI is $15,000. Federal 1040ez forms and instructions 2013 Her only income was from her job. Federal 1040ez forms and instructions 2013 Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. Federal 1040ez forms and instructions 2013 Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. Federal 1040ez forms and instructions 2013 However, only your mother can treat her as a qualifying child. Federal 1040ez forms and instructions 2013 This is because your mother's AGI, $15,000, is more than your AGI, $9,300. Federal 1040ez forms and instructions 2013 Special rule for divorced or separated parents (or parents who live apart). Federal 1040ez forms and instructions 2013   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. Federal 1040ez forms and instructions 2013 The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of 2013, whether or not they are or were married. Federal 1040ez forms and instructions 2013 The child received over half of his or her support for the year from the parents. Federal 1040ez forms and instructions 2013 The child is in the custody of one or both parents for more than half of 2013. Federal 1040ez forms and instructions 2013 Either of the following statements is true. Federal 1040ez forms and instructions 2013 The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. Federal 1040ez forms and instructions 2013 If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Federal 1040ez forms and instructions 2013 A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. Federal 1040ez forms and instructions 2013  For details, see chapter 3. Federal 1040ez forms and instructions 2013 Also see Applying Rule 9 to divorced or separated parents (or parents who live apart) , next. Federal 1040ez forms and instructions 2013 Applying Rule 9 to divorced or separated parents (or parents who live apart). Federal 1040ez forms and instructions 2013   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. Federal 1040ez forms and instructions 2013 However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. Federal 1040ez forms and instructions 2013 If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Federal 1040ez forms and instructions 2013 Your AGI is $10,000. Federal 1040ez forms and instructions 2013 Your mother’s AGI is $25,000. Federal 1040ez forms and instructions 2013 Your son's father did not live with you or your son. Federal 1040ez forms and instructions 2013 Under the special rule for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. Federal 1040ez forms and instructions 2013 However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. Federal 1040ez forms and instructions 2013 You and your mother did not have any child care expenses or dependent care benefits. Federal 1040ez forms and instructions 2013 If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. Federal 1040ez forms and instructions 2013 Example 2. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. Federal 1040ez forms and instructions 2013 Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Federal 1040ez forms and instructions 2013 Example 3. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. Federal 1040ez forms and instructions 2013 Your mother also claims him as a qualifying child for head of household filing status. Federal 1040ez forms and instructions 2013 You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. Federal 1040ez forms and instructions 2013 The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. Federal 1040ez forms and instructions 2013 Rule 10. Federal 1040ez forms and instructions 2013 You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. Federal 1040ez forms and instructions 2013 ) if all of the following statements are true. Federal 1040ez forms and instructions 2013 You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. Federal 1040ez forms and instructions 2013 Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). Federal 1040ez forms and instructions 2013 You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. Federal 1040ez forms and instructions 2013 You lived with that person in the United States for more than half of the year. Federal 1040ez forms and instructions 2013 You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). Federal 1040ez forms and instructions 2013 For more details about the tests to be a qualifying child, see Rule 8 . Federal 1040ez forms and instructions 2013 If you are a qualifying child of another taxpayer, you cannot claim the EIC. Federal 1040ez forms and instructions 2013 This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Federal 1040ez forms and instructions 2013 Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 You and your daughter lived with your mother all year. Federal 1040ez forms and instructions 2013 You are 22 years old, unmarried, and attended a trade school full time. Federal 1040ez forms and instructions 2013 You had a part-time job and earned $5,700. Federal 1040ez forms and instructions 2013 You had no other income. Federal 1040ez forms and instructions 2013 Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. Federal 1040ez forms and instructions 2013 She can claim the EIC if she meets all the other requirements. Federal 1040ez forms and instructions 2013 Because you are your mother's qualifying child, you cannot claim the EIC. Federal 1040ez forms and instructions 2013 This is so even if your mother cannot or does not claim the EIC. Federal 1040ez forms and instructions 2013 Child of person not required to file a return. Federal 1040ez forms and instructions 2013   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Federal 1040ez forms and instructions 2013 As a result, you are not your mother's qualifying child. Federal 1040ez forms and instructions 2013 You can claim the EIC if you meet all the other requirements to do so. Federal 1040ez forms and instructions 2013   See Rule 10 in Publication 596 for additional examples. Federal 1040ez forms and instructions 2013 Part C. Federal 1040ez forms and instructions 2013 Rules If You Do Not Have a Qualifying Child Read this part if you: Do not have a qualifying child, and Have met all the rules in Part A . Federal 1040ez forms and instructions 2013  Part C discusses Rules 11 through 14. Federal 1040ez forms and instructions 2013 You must meet all four of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit without a qualifying child. Federal 1040ez forms and instructions 2013 If you have a qualifying child, the rules in this part do not apply to you. Federal 1040ez forms and instructions 2013 You can claim the credit only if you meet all the rules in Parts A, B, and D. Federal 1040ez forms and instructions 2013 See Rule 8 to find out if you have a qualifying child. Federal 1040ez forms and instructions 2013 Rule 11. Federal 1040ez forms and instructions 2013 You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. Federal 1040ez forms and instructions 2013 If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. Federal 1040ez forms and instructions 2013 It does not matter which spouse meets the age test, as long as one of the spouses does. Federal 1040ez forms and instructions 2013 You meet the age test if you were born after December 31, 1948, and before January 2, 1989. Federal 1040ez forms and instructions 2013 If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. Federal 1040ez forms and instructions 2013 If neither you nor your spouse meets the age test, you cannot claim the EIC. Federal 1040ez forms and instructions 2013 Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Federal 1040ez forms and instructions 2013 Death of spouse. Federal 1040ez forms and instructions 2013   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 You are age 28 and unmarried. Federal 1040ez forms and instructions 2013 You meet the age test. Federal 1040ez forms and instructions 2013 Example 2—spouse meets age test. Federal 1040ez forms and instructions 2013 You are married and filing a joint return. Federal 1040ez forms and instructions 2013 You are age 23 and your spouse is age 27. Federal 1040ez forms and instructions 2013 You meet the age test because your spouse is at least age 25 but under age 65. Federal 1040ez forms and instructions 2013 Example 3—spouse dies in 2013. Federal 1040ez forms and instructions 2013 You are married and filing a joint return with your spouse who died in August 2013. Federal 1040ez forms and instructions 2013 You are age 67. Federal 1040ez forms and instructions 2013 Your spouse would have become age 65 in November 2013. Federal 1040ez forms and instructions 2013 Because your spouse was under age 65 when she died, you meet the age test. Federal 1040ez forms and instructions 2013 Rule 12. Federal 1040ez forms and instructions 2013 You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. Federal 1040ez forms and instructions 2013 If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. Federal 1040ez forms and instructions 2013 If you are not sure whether someone else can claim you (or your spouse, if filing a joint return) as a dependent, read the rules for claiming a dependent in chapter 3. Federal 1040ez forms and instructions 2013 If someone else can claim you (or your spouse, if filing a joint return) as a dependent on his or her return, but does not, you still cannot claim the credit. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 In 2013, you were age 25, single, and living at home with your parents. Federal 1040ez forms and instructions 2013 You worked and were not a student. Federal 1040ez forms and instructions 2013 You earned $7,500. Federal 1040ez forms and instructions 2013 Your parents cannot claim you as a dependent. Federal 1040ez forms and instructions 2013 When you file your return, you claim an exemption for yourself by not checking the “You” box on line 5 of your Form 1040EZ and by entering $10,000 on that line. Federal 1040ez forms and instructions 2013 You meet this rule. Federal 1040ez forms and instructions 2013 You can claim the EIC if you meet all the other requirements. Federal 1040ez forms and instructions 2013 Example 2. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 , except that you earned $2,000. Federal 1040ez forms and instructions 2013 Your parents can claim you as a dependent but decide not to. Federal 1040ez forms and instructions 2013 You do not meet this rule. Federal 1040ez forms and instructions 2013 You cannot claim the credit because your parents could have claimed you as a dependent. Federal 1040ez forms and instructions 2013 Joint returns. Federal 1040ez forms and instructions 2013   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. Federal 1040ez forms and instructions 2013   However, another person may be able to claim you as a dependent if you and your spouse file a joint return only to get a refund of income tax withheld or estimated tax paid. Federal 1040ez forms and instructions 2013 But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. Federal 1040ez forms and instructions 2013 Example 1. Federal 1040ez forms and instructions 2013 You are 26 years old. Federal 1040ez forms and instructions 2013 You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. Federal 1040ez forms and instructions 2013 Neither you nor your wife is required to file a tax return. Federal 1040ez forms and instructions 2013 You do not have a child. Federal 1040ez forms and instructions 2013 Taxes were taken out of your pay, so you file a joint return only to get a refund of the withheld taxes. Federal 1040ez forms and instructions 2013 Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. Federal 1040ez forms and instructions 2013 They can claim exemptions for you and your wife if all the other tests to do so are met. Federal 1040ez forms and instructions 2013 Example 2. Federal 1040ez forms and instructions 2013 The facts are the same as in Example 1 except no taxes were taken out of your pay. Federal 1040ez forms and instructions 2013 Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. Federal 1040ez forms and instructions 2013 Because claiming the EIC is your reason for filing the return, you are not filing it only to get a refund of income tax withheld or estimated tax paid. Federal 1040ez forms and instructions 2013 Your parents cannot claim an exemption for either you or your wife. Federal 1040ez forms and instructions 2013 Rule 13. Federal 1040ez forms and instructions 2013 You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. Federal 1040ez forms and instructions 2013 ) if all of the following statements are true. Federal 1040ez forms and instructions 2013 You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. Federal 1040ez forms and instructions 2013 Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). Federal 1040ez forms and instructions 2013 You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student (as defined in Rule 8 ), and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. Federal 1040ez forms and instructions 2013 You lived with that person in the United States for more than half of the year. Federal 1040ez forms and instructions 2013 You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). Federal 1040ez forms and instructions 2013 For more details about the tests to be a qualifying child, see Rule 8 . Federal 1040ez forms and instructions 2013 If you are a qualifying child of another taxpayer, you cannot claim the EIC. Federal 1040ez forms and instructions 2013 This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Federal 1040ez forms and instructions 2013 Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 You lived with your mother all year. Federal 1040ez forms and instructions 2013 You are age 26, unmarried, and permanently and totally disabled. Federal 1040ez forms and instructions 2013 Your only income was from a community center where you went three days a week to answer telephones. Federal 1040ez forms and instructions 2013 You earned $5,000 for the year and provided more than half of your own support. Federal 1040ez forms and instructions 2013 Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. Federal 1040ez forms and instructions 2013 She can claim the EIC if she meets all the other requirements. Federal 1040ez forms and instructions 2013 Because you are a qualifying child of your mother, you cannot claim the EIC. Federal 1040ez forms and instructions 2013 This is so even if your mother cannot or does not claim the EIC. Federal 1040ez forms and instructions 2013 Joint returns. Federal 1040ez forms and instructions 2013   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. Federal 1040ez forms and instructions 2013   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return for the year only to get a refund of income tax withheld or estimated tax paid. Federal 1040ez forms and instructions 2013 But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. Federal 1040ez forms and instructions 2013 Child of person not required to file a return. Federal 1040ez forms and instructions 2013   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Federal 1040ez forms and instructions 2013 Example. Federal 1040ez forms and instructions 2013 You lived all year with your father. Federal 1040ez forms and instructions 2013 You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. Federal 1040ez forms and instructions 2013 You have no other income, no children, and provided more than half of your own support. Federal 1040ez forms and instructions 2013 Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Federal 1040ez forms and instructions 2013 As a result, you are not your father's qualifying child. Federal 1040ez forms and instructions 2013 You can claim the EIC if you meet all the other requirements to do so. Federal 1040ez forms and instructions 2013   See Rule 13 in Publication 596 for additional examples. Federal 1040ez forms and instructions 2013 Rule 14. Federal 1040ez forms and instructions 2013 You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. Federal 1040ez forms and instructions 2013 If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Federal 1040ez forms and instructions 2013 United States. Federal 1040ez forms and instructions 2013   This means the 50 states and the District of Columbia. Federal 1040ez forms and instructions 2013 It does not include Puerto Rico or U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 possessions such as Guam. Federal 1040ez forms and instructions 2013 Homeless shelter. Federal 1040ez forms and instructions 2013   Your home can be any location where you regularly live. Federal 1040ez forms and instructions 2013 You do not need a traditional home. Federal 1040ez forms and instructions 2013 If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. Federal 1040ez forms and instructions 2013 Military personnel stationed outside the United States. Federal 1040ez forms and instructions 2013   U. Federal 1040ez forms and instructions 2013 S. Federal 1040ez forms and instructions 2013 military personnel stationed outside the United States on extended active duty (defined in Rule 8 ) are considered to live in the United States during that duty period for purposes of the EIC. Federal 1040ez forms and instructions 2013 Part D. Federal 1040ez forms and instructions 2013 Figuring and Claiming the EIC Read this part if you have met all the rules in Parts A and B, or all the rules in Parts A and C. Federal 1040ez forms and instructions 2013 Part D discusses Rule 15 . Federal 1040ez forms and instructions 2013 You must meet this rule, in addition to the rules in Parts A and B , or Parts A and C , to qualify for the earned income credit. Federal 1040ez forms and instructions 2013 This part of the chapter also explains how to figure the amount of your credit. Federal 1040ez forms and instructions 2013 You have two choices. Federal 1040ez forms and instructions 2013 Have the IRS figure the EIC for you. Federal 1040ez forms and instructions 2013 If you want to do this, see IRS Will Figure the EIC for You . Federal 1040ez forms and instructions 2013 Figure the EIC yourself. Federal 1040ez forms and instructions 2013 If you want to do this, see How To Figure the EIC Yourself . Federal 1040ez forms and instructions 2013 Rule 15. Federal 1040ez forms and instructions 2013 Your Earned Income Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Federal 1040ez forms and instructions 2013 Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. Federal 1040ez forms and instructions 2013 Employee pay is earned income only if it is taxable. Federal 1040ez forms and instructions 2013 Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Federal 1040ez forms and instructions 2013 But there is an exception for nontaxable combat pay, which you can choose to include in earned income. Federal 1040ez forms and instructions 2013 Earned income is explained in detail in Rule 7 . Federal 1040ez forms and instructions 2013 Figuring earned income. Federal 1040ez forms and instructions 2013   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. Federal 1040ez forms and instructions 2013   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. Federal 1040ez forms and instructions 2013   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). Federal 1040ez forms and instructions 2013 You will then reduce that amount by any amount included on that line and described in the following list: Scholarship or fellowship grants not reported on a Form W-2, Inmate's income, and Pension or annuity from deferred compensation plans. Federal 1040ez forms and instructions 2013 Scholarship or fellowship grants not reported on a Form W-2. Federal 1040ez forms and instructions 2013   A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. Federal 1040ez forms and instructions 2013 Inmate's income. Federal 1040ez forms and instructions 2013   Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. Federal 1040ez forms and instructions 2013 This includes amounts received for work performed while in a work release program or while in a halfway house. Federal 1040ez forms and instructions 2013 If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). Federal 1040ez forms and instructions 2013 Pension or annuity from deferred compensation plans. Federal 1040ez forms and instructions 2013   A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. Federal 1040ez forms and instructions 2013 If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). Federal 1040ez forms and instructions 2013 This amount may be reported in box 11 of your Form W-2. Federal 1040ez forms and instructions 2013 If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity. Federal 1040ez forms and instructions 2013 Clergy. Federal 1040ez forms and instructions 2013   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also reported on line 7 (Form 1040), subtract that amount from the amount on line 7 (Form 1040) and enter the result in the first space of the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b. Federal 1040ez forms and instructions 2013 Put “Clergy” on the dotted line next to line 64a (Form 1040). Federal 1040ez forms and instructions 2013 Church employees. Federal 1040ez forms and instructions 2013    A church employee means an employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. Federal 1040ez forms and instructions 2013 If you received wages as a