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Federal Tax Forms 2012

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Federal Tax Forms 2012

Federal tax forms 2012 Publication 502 - Main Content Table of Contents What Are Medical Expenses? What Expenses Can You Include This Year?Community property states. Federal tax forms 2012 How Much of the Expenses Can You Deduct? Whose Medical Expenses Can You Include?Spouse Dependent Decedent What Medical Expenses Are Includible?Abortion Acupuncture Alcoholism Ambulance Annual Physical Examination Artificial Limb Artificial Teeth Bandages Birth Control Pills Body Scan Braille Books and Magazines Breast Pumps and Supplies Breast Reconstruction Surgery Capital Expenses Car Chiropractor Christian Science Practitioner Contact Lenses Crutches Dental Treatment Diagnostic Devices Disabled Dependent Care Expenses Drug Addiction Drugs Eye Exam Eyeglasses Eye Surgery Fertility Enhancement Founder's Fee Guide Dog or Other Service Animal Health Institute Health Maintenance Organization (HMO) Hearing Aids Home Care Home Improvements Hospital Services Insurance Premiums Intellectually and Developmentally Disabled, Special Home for Laboratory Fees Lactation Expenses Lead-Based Paint Removal Learning Disability Legal Fees Lifetime Care—Advance Payments Lodging Long-Term Care Meals Medical Conferences Medical Information Plan Medicines Nursing Home Nursing Services Operations Optometrist Organ Donors Osteopath Oxygen Physical Examination Pregnancy Test Kit Prosthesis Psychiatric Care Psychoanalysis Psychologist Special Education Sterilization Stop-Smoking Programs Surgery Telephone Television Therapy Transplants Transportation Trips Tuition Vasectomy Vision Correction Surgery Weight-Loss Program Wheelchair Wig X-ray What Expenses Are Not Includible?Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby Controlled Substances Cosmetic Surgery Dancing Lessons Diaper Service Electrolysis or Hair Removal Flexible Spending Account Funeral Expenses Future Medical Care Hair Transplant Health Club Dues Health Coverage Tax Credit Health Savings Accounts Household Help Illegal Operations and Treatments Insurance Premiums Maternity Clothes Medical Savings Account (MSA) Medicines and Drugs From Other Countries Nonprescription Drugs and Medicines Nutritional Supplements Personal Use Items Swimming Lessons Teeth Whitening Veterinary Fees Weight-Loss Program How Do You Treat Reimbursements?Insurance Reimbursement How Do You Figure and Report the Deduction on Your Tax Return?What Tax Form Do You Use? Sale of Medical Equipment or Property Damages for Personal Injuries Impairment-Related Work Expenses Health Insurance Costs for Self-Employed Persons COBRA Premium Assistance Health Coverage Tax CreditWho Can Take This Credit? Qualifying Family Member Qualified Health Insurance Nonqualified Health Insurance Eligible Coverage Month How To Take the Credit How To Get Tax HelpLow Income Taxpayer Clinics What Are Medical Expenses? Medical expenses are the costs of diagnosis, cure, mitigation, treatment, or prevention of disease, and the costs for treatments affecting any part or function of the body. Federal tax forms 2012 These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. Federal tax forms 2012 They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. Federal tax forms 2012 Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. Federal tax forms 2012 They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation. Federal tax forms 2012 Medical expenses include the premiums you pay for insurance that covers the expenses of medical care, and the amounts you pay for transportation to get medical care. Federal tax forms 2012 Medical expenses also include amounts paid for qualified long-term care services and limited amounts paid for any qualified long-term care insurance contract. Federal tax forms 2012 What Expenses Can You Include This Year? You can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Federal tax forms 2012 (But see Decedent under Whose Medical Expenses Can You Include, for an exception. Federal tax forms 2012 ) If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Federal tax forms 2012 If you use a “pay-by-phone” or “online” account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Federal tax forms 2012 If you use a credit card, include medical expenses you charge to your credit card in the year the charge is made, not when you actually pay the amount charged. Federal tax forms 2012 If you did not claim a medical or dental expense that would have been deductible in an earlier year, you can file Form 1040X, Amended U. Federal tax forms 2012 S. Federal tax forms 2012 Individual Income Tax Return, for the year in which you overlooked the expense. Federal tax forms 2012 Do not claim the expense on this year's return. Federal tax forms 2012 Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Federal tax forms 2012 You cannot include medical expenses that were paid by insurance companies or other sources. Federal tax forms 2012 This is true whether the payments were made directly to you, to the patient, or to the provider of the medical services. Federal tax forms 2012 Separate returns. Federal tax forms 2012   If you and your spouse live in a noncommunity property state and file separate returns, each of you can include only the medical expenses each actually paid. Federal tax forms 2012 Any medical expenses paid out of a joint checking account in which you and your spouse have the same interest are considered to have been paid equally by each of you, unless you can show otherwise. Federal tax forms 2012 Community property states. Federal tax forms 2012   If you and your spouse live in a community property state and file separate returns or are registered domestic partners in Nevada, Washington, or California, any medical expenses paid out of community funds are divided equally. Federal tax forms 2012 Generally, each of you should include half the expenses. Federal tax forms 2012 If medical expenses are paid out of the separate funds of one individual, only the individual who paid the medical expenses can include them. Federal tax forms 2012 If you live in a community property state and are not filing a joint return, see Publication 555, Community Property. Federal tax forms 2012 How Much of the Expenses Can You Deduct? Generally, you can deduct on Schedule A (Form 1040) only the amount of your medical and dental expenses that is more than 10% of your AGI. Federal tax forms 2012 But if either you or your spouse was born before January 2, 1949, you can deduct the amount of your medical and dental expenses that is more than 7. Federal tax forms 2012 5% of your AGI. Federal tax forms 2012 Example. Federal tax forms 2012 You are unmarried and were born after January 2, 1949, and your AGI is $40,000, 10% of which is $4,000. Federal tax forms 2012 You paid medical expenses of $2,500. Federal tax forms 2012 You cannot deduct any of your medical expenses because they are not more than 10% of your AGI. Federal tax forms 2012 Whose Medical Expenses Can You Include? You can generally include medical expenses you pay for yourself, as well as those you pay for someone who was your spouse or your dependent either when the services were provided or when you paid for them. Federal tax forms 2012 There are different rules for decedents and for individuals who are the subject of multiple support agreements. Federal tax forms 2012 See Support claimed under a multiple support agreement , later under Qualifying Relative. Federal tax forms 2012 Spouse You can include medical expenses you paid for your spouse. Federal tax forms 2012 To include these expenses, you must have been married either at the time your spouse received the medical services or at the time you paid the medical expenses. Federal tax forms 2012 Example 1. Federal tax forms 2012 Mary received medical treatment before she married Bill. Federal tax forms 2012 Bill paid for the treatment after they married. Federal tax forms 2012 Bill can include these expenses in figuring his medical expense deduction even if Bill and Mary file separate returns. Federal tax forms 2012 If Mary had paid the expenses, Bill could not include Mary's expenses in his separate return. Federal tax forms 2012 Mary would include the amounts she paid during the year in her separate return. Federal tax forms 2012 If they filed a joint return, the medical expenses both paid during the year would be used to figure their medical expense deduction. Federal tax forms 2012 Example 2. Federal tax forms 2012 This year, John paid medical expenses for his wife Louise, who died last year. Federal tax forms 2012 John married Belle this year and they file a joint return. Federal tax forms 2012 Because John was married to Louise when she received the medical services, he can include those expenses in figuring his medical expense deduction for this year. Federal tax forms 2012 Dependent You can include medical expenses you paid for your dependent. Federal tax forms 2012 For you to include these expenses, the person must have been your dependent either at the time the medical services were provided or at the time you paid the expenses. Federal tax forms 2012 A person generally qualifies as your dependent for purposes of the medical expense deduction if both of the following requirements are met. Federal tax forms 2012 The person was a qualifying child (defined later) or a qualifying relative (defined later), and The person was a U. Federal tax forms 2012 S. Federal tax forms 2012 citizen or national or a resident of the United States, Canada, or Mexico. Federal tax forms 2012 If your qualifying child was adopted, see Exception for adopted child , later. Federal tax forms 2012 You can include medical expenses you paid for an individual that would have been your dependent except that: He or she received gross income of $3,900 or more in 2013, He or she filed a joint return for 2013, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. Federal tax forms 2012 Exception for adopted child. Federal tax forms 2012   If you are a U. Federal tax forms 2012 S. Federal tax forms 2012 citizen or national and your adopted child lived with you as a member of your household for 2013, that child does not have to be a U. Federal tax forms 2012 S. Federal tax forms 2012 citizen or national, or a resident of the United States, Canada, or Mexico. Federal tax forms 2012 Qualifying Child A qualifying child is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a full-time student, and younger than you (or your spouse, if filing jointly), or Any age and permanently and totally disabled, Lived with you for more than half of 2013, Did not provide over half of his or her own support for 2013, and Did not file a joint return, other than to claim a refund. Federal tax forms 2012 Adopted child. Federal tax forms 2012   A legally adopted child is treated as your own child. Federal tax forms 2012 This child includes a child lawfully placed with you for legal adoption. Federal tax forms 2012   You can include medical expenses that you paid for a child before adoption if the child qualified as your dependent when the medical services were provided or when the expenses were paid. Federal tax forms 2012   If you pay back an adoption agency or other persons for medical expenses they paid under an agreement with you, you are treated as having paid those expenses provided you clearly substantiate that the payment is directly attributable to the medical care of the child. Federal tax forms 2012   But if you pay the agency or other person for medical care that was provided and paid for before adoption negotiations began, you cannot include them as medical expenses. Federal tax forms 2012    You may be able to take a credit for other expenses related to an adoption. Federal tax forms 2012 See the Instructions for Form 8839, Qualified Adoption Expenses, for more information. Federal tax forms 2012 Child of divorced or separated parents. Federal tax forms 2012   For purposes of the medical and dental expenses deduction, a child of divorced or separated parents can be treated as a dependent of both parents. Federal tax forms 2012 Each parent can include the medical expenses he or she pays for the child, even if the other parent claims the child's dependency exemption, if: The child is in the custody of one or both parents for more than half the year, The child receives over half of his or her support during the year from his or her parents, and The child's parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Live apart at all times during the last 6 months of the year. Federal tax forms 2012 This does not apply if the child's exemption is being claimed under a multiple support agreement (discussed later). Federal tax forms 2012 Qualifying Relative A qualifying relative is a person: Who is your: Son, daughter, stepchild, or foster child, or a descendant of any of them (for example, your grandchild), Brother, sister, half brother, half sister, or a son or daughter of any of them, Father, mother, or an ancestor or sibling of either of them (for example, your grandmother, grandfather, aunt, or uncle), Stepbrother, stepsister, stepfather, stepmother, son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law, or Any other person (other than your spouse) who lived with you all year as a member of your household if your relationship did not violate local law, Who was not a qualifying child (see Qualifying Child, earlier) of any taxpayer for 2013, and For whom you provided over half of the support in 2013. Federal tax forms 2012 But see Child of divorced or separated parents , earlier, Support claimed under a multiple support agreement, next, and Kidnapped child under Qualifying Relative in Publication 501. Federal tax forms 2012 Support claimed under a multiple support agreement. Federal tax forms 2012   If you are considered to have provided more than half of a qualifying relative's support under a multiple support agreement, you can include medical expenses you pay for that person. Federal tax forms 2012 A multiple support agreement is used when two or more people provide more than half of a person's support, but no one alone provides more than half. Federal tax forms 2012   Any medical expenses paid by others who joined you in the agreement cannot be included as medical expenses by anyone. Federal tax forms 2012 However, you can include the entire unreimbursed amount you paid for medical expenses. Federal tax forms 2012 Example. Federal tax forms 2012 You and your three brothers each provide one-fourth of your mother's total support. Federal tax forms 2012 Under a multiple support agreement, you treat your mother as your dependent. Federal tax forms 2012 You paid all of her medical expenses. Federal tax forms 2012 Your brothers repaid you for three-fourths of these expenses. Federal tax forms 2012 In figuring your medical expense deduction, you can include only one-fourth of your mother's medical expenses. Federal tax forms 2012 Your brothers cannot include any part of the expenses. Federal tax forms 2012 However, if you and your brothers share the nonmedical support items and you separately pay all of your mother's medical expenses, you can include the unreimbursed amount you paid for her medical expenses in your medical expenses. Federal tax forms 2012 Decedent Medical expenses paid before death by the decedent are included in figuring any deduction for medical and dental expenses on the decedent's final income tax return. Federal tax forms 2012 This includes expenses for the decedent's spouse and dependents as well as for the decedent. Federal tax forms 2012 The survivor or personal representative of a decedent can choose to treat certain expenses paid by the decedent's estate for the decedent's medical care as paid by the decedent at the time the medical services were provided. Federal tax forms 2012 The expenses must be paid within the 1-year period beginning with the day after the date of death. Federal tax forms 2012 If you are the survivor or personal representative making this choice, you must attach a statement to the decedent's Form 1040 (or the decedent's amended return, Form 1040X) saying that the expenses have not been and will not be claimed on the estate tax return. Federal tax forms 2012 Qualified medical expenses paid before death by the decedent are not deductible if paid with a tax-free distribution from any Archer MSA, Medicare Advantage MSA, or health savings account. Federal tax forms 2012 What if the decedent's return had been filed and the medical expenses were not included?   Form 1040X can be filed for the year or years the expenses are treated as paid, unless the period for filing an amended return for that year has passed. Federal tax forms 2012 Generally, an amended return must be filed within 3 years of the date the original return was filed, or within 2 years from the time the tax was paid, whichever date is later. Federal tax forms 2012 Example. Federal tax forms 2012 John properly filed his 2012 income tax return. Federal tax forms 2012 He died in 2013 with unpaid medical expenses of $1,500 from 2012 and $1,800 in 2013. Federal tax forms 2012 If the expenses are paid within the 1-year period, his survivor or personal representative can file an amended return for 2012 claiming a deduction based on the $1,500 medical expenses. Federal tax forms 2012 The $1,800 of medical expenses from 2013 can be included on the decedent's final return for 2013. Federal tax forms 2012 What if you pay medical expenses of a deceased spouse or dependent?   If you paid medical expenses for your deceased spouse or dependent, include them as medical expenses on your Form 1040 in the year paid, whether they are paid before or after the decedent's death. Federal tax forms 2012 The expenses can be included if the person was your spouse or dependent either at the time the medical services were provided or at the time you paid the expenses. Federal tax forms 2012 What Medical Expenses Are Includible? Following is a list of items that you can include in figuring your medical expense deduction. Federal tax forms 2012 The items are listed in alphabetical order. Federal tax forms 2012 This list does not include all possible medical expenses. Federal tax forms 2012 To determine if an expense not listed can be included in figuring your medical expense deduction, see What Are Medical Expenses , earlier. Federal tax forms 2012 Abortion You can include in medical expenses the amount you pay for a legal abortion. Federal tax forms 2012 Acupuncture You can include in medical expenses the amount you pay for acupuncture. Federal tax forms 2012 Alcoholism You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for alcohol addiction. Federal tax forms 2012 This includes meals and lodging provided by the center during treatment. Federal tax forms 2012 You can also include in medical expenses amounts you pay for transportation to and from Alcoholics Anonymous meetings in your community if the attendance is pursuant to medical advice that membership in Alcoholics Anonymous is necessary for the treatment of a disease involving the excessive use of alcoholic liquors. Federal tax forms 2012 Ambulance You can include in medical expenses amounts you pay for ambulance service. Federal tax forms 2012 Annual Physical Examination See Physical Examination , later. Federal tax forms 2012 Artificial Limb You can include in medical expenses the amount you pay for an artificial limb. Federal tax forms 2012 Artificial Teeth You can include in medical expenses the amount you pay for artificial teeth. Federal tax forms 2012 Bandages You can include in medical expenses the cost of medical supplies such as bandages. Federal tax forms 2012 Birth Control Pills You can include in medical expenses the amount you pay for birth control pills prescribed by a doctor. Federal tax forms 2012 Body Scan You can include in medical expenses the cost of an electronic body scan. Federal tax forms 2012 Braille Books and Magazines You can include in medical expenses the part of the cost of Braille books and magazines for use by a visually impaired person that is more than the cost of regular printed editions. Federal tax forms 2012 Breast Pumps and Supplies You can include in medical expenses the cost of breast pumps and supplies that assist lactation. Federal tax forms 2012 Breast Reconstruction Surgery You can include in medical expenses the amounts you pay for breast reconstruction surgery, as well as breast prosthesis, following a mastectomy for cancer. Federal tax forms 2012 See Cosmetic Surgery , later. Federal tax forms 2012 Capital Expenses You can include in medical expenses amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent. Federal tax forms 2012 The cost of permanent improvements that increase the value of your property may be partly included as a medical expense. Federal tax forms 2012 The cost of the improvement is reduced by the increase in the value of your property. Federal tax forms 2012 The difference is a medical expense. Federal tax forms 2012 If the value of your property is not increased by the improvement, the entire cost is included as a medical expense. Federal tax forms 2012 Certain improvements made to accommodate a home to your disabled condition, or that of your spouse or your dependents who live with you, do not usually increase the value of the home and the cost can be included in full as medical expenses. Federal tax forms 2012 These improvements include, but are not limited to, the following items. Federal tax forms 2012 Constructing entrance or exit ramps for your home. Federal tax forms 2012 Widening doorways at entrances or exits to your home. Federal tax forms 2012 Widening or otherwise modifying hallways and interior doorways. Federal tax forms 2012 Installing railings, support bars, or other modifications to bathrooms. Federal tax forms 2012 Lowering or modifying kitchen cabinets and equipment. Federal tax forms 2012 Moving or modifying electrical outlets and fixtures. Federal tax forms 2012 Installing porch lifts and other forms of lifts (but elevators generally add value to the house). Federal tax forms 2012 Modifying fire alarms, smoke detectors, and other warning systems. Federal tax forms 2012 Modifying stairways. Federal tax forms 2012 Adding handrails or grab bars anywhere (whether or not in bathrooms). Federal tax forms 2012 Modifying hardware on doors. Federal tax forms 2012 Modifying areas in front of entrance and exit doorways. Federal tax forms 2012 Grading the ground to provide access to the residence. Federal tax forms 2012 Only reasonable costs to accommodate a home to a disabled condition are considered medical care. Federal tax forms 2012 Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. Federal tax forms 2012 Capital expense worksheet. Federal tax forms 2012   Use Worksheet A to figure the amount of your capital expense to include in your medical expenses. Federal tax forms 2012 Worksheet A. Federal tax forms 2012 Capital Expense Worksheet Instructions: Use this worksheet to figure the amount, if any, of your medical expenses due to a home improvement. Federal tax forms 2012 1. Federal tax forms 2012 Enter the amount you paid for the home improvement 1. Federal tax forms 2012   2. Federal tax forms 2012 Enter the value of your home immediately after the improvement 2. Federal tax forms 2012       3. Federal tax forms 2012 Enter the value of your home immediately before the improvement 3. Federal tax forms 2012       4. Federal tax forms 2012 Subtract line 3 from line 2. Federal tax forms 2012 This is the increase in the value of your home due to the improvement 4. Federal tax forms 2012     • If line 4 is more than or equal to line 1, you have no medical expenses due to the home improvement; stop here. Federal tax forms 2012       • If line 4 is less than line 1, go to line 5. Federal tax forms 2012     5. Federal tax forms 2012 Subtract line 4 from line 1. Federal tax forms 2012 These are your medical expenses due to the home improvement 5. Federal tax forms 2012   Operation and upkeep. Federal tax forms 2012   Amounts you pay for operation and upkeep of a capital asset qualify as medical expenses, as long as the main reason for them is medical care. Federal tax forms 2012 This rule applies even if none or only part of the original cost of the capital asset qualified as a medical care expense. Federal tax forms 2012 Improvements to property rented by a person with a disability. Federal tax forms 2012   Amounts paid to buy and install special plumbing fixtures for a person with a disability, mainly for medical reasons, in a rented house are medical expenses. Federal tax forms 2012 Example. Federal tax forms 2012 John has arthritis and a heart condition. Federal tax forms 2012 He cannot climb stairs or get into a bathtub. Federal tax forms 2012 On his doctor's advice, he installs a bathroom with a shower stall on the first floor of his two-story rented house. Federal tax forms 2012 The landlord did not pay any of the cost of buying and installing the special plumbing and did not lower the rent. Federal tax forms 2012 John can include in medical expenses the entire amount he paid. Federal tax forms 2012 Car You can include in medical expenses the cost of special hand controls and other special equipment installed in a car for the use of a person with a disability. Federal tax forms 2012 Special design. Federal tax forms 2012   You can include in medical expenses the difference between the cost of a regular car and a car specially designed to hold a wheelchair. Federal tax forms 2012 Cost of operation. Federal tax forms 2012   The includible costs of using a car for medical reasons are explained under Transportation , later. Federal tax forms 2012 Chiropractor You can include in medical expenses fees you pay to a chiropractor for medical care. Federal tax forms 2012 Christian Science Practitioner You can include in medical expenses fees you pay to Christian Science practitioners for medical care. Federal tax forms 2012 Contact Lenses You can include in medical expenses amounts you pay for contact lenses needed for medical reasons. Federal tax forms 2012 You can also include the cost of equipment and materials required for using contact lenses, such as saline solution and enzyme cleaner. Federal tax forms 2012 See Eyeglasses and Eye Surgery , later. Federal tax forms 2012 Crutches You can include in medical expenses the amount you pay to buy or rent crutches. Federal tax forms 2012 Dental Treatment You can include in medical expenses the amounts you pay for the prevention and alleviation of dental disease. Federal tax forms 2012 Preventive treatment includes the services of a dental hygienist or dentist for such procedures as teeth cleaning, the application of sealants, and fluoride treatments to prevent tooth decay. Federal tax forms 2012 Treatment to alleviate dental disease include services of a dentist for procedures such as X-rays, fillings, braces, extractions, dentures, and other dental ailments. Federal tax forms 2012 But see Teeth Whitening under What Expenses Are Not Includible, later. Federal tax forms 2012 Diagnostic Devices You can include in medical expenses the cost of devices used in diagnosing and treating illness and disease. Federal tax forms 2012 Example. Federal tax forms 2012 You have diabetes and use a blood sugar test kit to monitor your blood sugar level. Federal tax forms 2012 You can include the cost of the blood sugar test kit in your medical expenses. Federal tax forms 2012 Disabled Dependent Care Expenses Some disabled dependent care expenses may qualify as either: Medical expenses, or Work-related expenses for purposes of taking a credit for dependent care. Federal tax forms 2012 (See Publication 503, Child and Dependent Care Expenses. Federal tax forms 2012 ) You can choose to apply them either way as long as you do not use the same expenses to claim both a credit and a medical expense deduction. Federal tax forms 2012 Drug Addiction You can include in medical expenses amounts you pay for an inpatient's treatment at a therapeutic center for drug addiction. Federal tax forms 2012 This includes meals and lodging at the center during treatment. Federal tax forms 2012 Drugs See Medicines , later. Federal tax forms 2012 Eye Exam You can include in medical expenses the amount you pay for eye examinations. Federal tax forms 2012 Eyeglasses You can include in medical expenses amounts you pay for eyeglasses and contact lenses needed for medical reasons. Federal tax forms 2012 See Contact Lenses , earlier, for more information. Federal tax forms 2012 Eye Surgery You can include in medical expenses the amount you pay for eye surgery to treat defective vision, such as laser eye surgery or radial keratotomy. Federal tax forms 2012 Fertility Enhancement You can include in medical expenses the cost of the following procedures to overcome an inability to have children. Federal tax forms 2012 Procedures such as in vitro fertilization (including temporary storage of eggs or sperm). Federal tax forms 2012 Surgery, including an operation to reverse prior surgery that prevented the person operated on from having children. Federal tax forms 2012 Founder's Fee See Lifetime Care—Advance Payments , later. Federal tax forms 2012 Guide Dog or Other Service Animal You can include in medical expenses the costs of buying, training, and maintaining a guide dog or other service animal to assist a visually impaired or hearing disabled person, or a person with other physical disabilities. Federal tax forms 2012 In general, this includes any costs, such as food, grooming, and veterinary care, incurred in maintaining the health and vitality of the service animal so that it may perform its duties. Federal tax forms 2012 Health Institute You can include in medical expenses fees you pay for treatment at a health institute only if the treatment is prescribed by a physician and the physician issues a statement that the treatment is necessary to alleviate a physical or mental defect or illness of the individual receiving the treatment. Federal tax forms 2012 Health Maintenance Organization (HMO) You can include in medical expenses amounts you pay to entitle you, your spouse, or a dependent to receive medical care from an HMO. Federal tax forms 2012 These amounts are treated as medical insurance premiums. Federal tax forms 2012 See Insurance Premiums , later. Federal tax forms 2012 Hearing Aids You can include in medical expenses the cost of a hearing aid and batteries, repairs, and maintenance needed to operate it. Federal tax forms 2012 Home Care See Nursing Services , later. Federal tax forms 2012 Home Improvements See Capital Expenses , earlier. Federal tax forms 2012 Hospital Services You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. Federal tax forms 2012 This includes amounts paid for meals and lodging. Federal tax forms 2012 Also see Lodging , later. Federal tax forms 2012 Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Federal tax forms 2012 Medical care policies can provide payment for treatment that includes: Hospitalization, surgical services, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Long-term care (subject to additional limitations). Federal tax forms 2012 See Qualified Long-Term Care Insurance Contracts under Long-Term Care, later. Federal tax forms 2012 If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Federal tax forms 2012 The cost of the medical part must be separately stated in the insurance contract or given to you in a separate statement. Federal tax forms 2012 Health coverage tax credit. Federal tax forms 2012   If, during 2013, you were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient, you must complete Form 8885 before completing Schedule A. Federal tax forms 2012 When figuring the amount of insurance premiums you can deduct on Schedule A, do not include: Any amounts you included on Form 8885, Any qualified health insurance premiums you paid to “U. Federal tax forms 2012 S. Federal tax forms 2012 Treasury–HCTC,” or Any health coverage tax credit advance payments shown on Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. Federal tax forms 2012 Employer-Sponsored Health Insurance Plan Do not include in your medical and dental expenses any insurance premiums paid by an employer-sponsored health insurance plan unless the premiums are included on your Form W-2, Wage and Tax Statement. Federal tax forms 2012 Also, do not include any other medical and dental expenses paid by the plan unless the amount paid is included on your Form W-2. Federal tax forms 2012 Example. Federal tax forms 2012 You are a federal employee participating in the premium conversion plan of the Federal Employee Health Benefits (FEHB) program. Federal tax forms 2012 Your share of the FEHB premium is paid by making a pre-tax reduction in your salary. Federal tax forms 2012 Because you are an employee whose insurance premiums are paid with money that is never included in your gross income, you cannot deduct the premiums paid with that money. Federal tax forms 2012 Long-term care services. Federal tax forms 2012   Contributions made by your employer to provide coverage for qualified long-term care services under a flexible spending or similar arrangement must be included in your income. Federal tax forms 2012 This amount will be reported as wages on your Form W-2. Federal tax forms 2012 Retired public safety officers. Federal tax forms 2012   If you are a retired public safety officer, do not include as medical expenses any health or long-term care insurance premiums that you elected to have paid with tax-free distributions from a retirement plan. Federal tax forms 2012 This applies only to distributions that would otherwise be included in income. Federal tax forms 2012 Health reimbursement arrangement (HRA). Federal tax forms 2012   If you have medical expenses that are reimbursed by a health reimbursement arrangement, you cannot include those expenses in your medical expenses. Federal tax forms 2012 This is because an HRA is funded solely by the employer. Federal tax forms 2012 Medicare A If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare A. Federal tax forms 2012 The payroll tax paid for Medicare A is not a medical expense. Federal tax forms 2012 If you are not covered under social security (or were not a government employee who paid Medicare tax), you can voluntarily enroll in Medicare A. Federal tax forms 2012 In this situation you can include the premiums you paid for Medicare A as a medical expense. Federal tax forms 2012 Medicare B Medicare B is a supplemental medical insurance. Federal tax forms 2012 Premiums you pay for Medicare B are a medical expense. Federal tax forms 2012 Check the information you received from the Social Security Administration to find out your premium. Federal tax forms 2012 Medicare D Medicare D is a voluntary prescription drug insurance program for persons with Medicare A or B. Federal tax forms 2012 You can include as a medical expense premiums you pay for Medicare D. Federal tax forms 2012 Prepaid Insurance Premiums Premiums you pay before you are age 65 for insurance for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Federal tax forms 2012 Unused Sick Leave Used To Pay Premiums You must include in gross income cash payments you receive at the time of retirement for unused sick leave. Federal tax forms 2012 You also must include in gross income the value of unused sick leave that, at your option, your employer applies to the cost of your continuing participation in your employer's health plan after you retire. Federal tax forms 2012 You can include this cost of continuing participation in the health plan as a medical expense. Federal tax forms 2012 If you participate in a health plan where your employer automatically applies the value of unused sick leave to the cost of your continuing participation in the health plan (and you do not have the option to receive cash), do not include the value of the unused sick leave in gross income. Federal tax forms 2012 You cannot include this cost of continuing participation in that health plan as a medical expense. Federal tax forms 2012 Insurance Premiums You Cannot Include You cannot include premiums you pay for: Life insurance policies, Policies providing payment for loss of earnings, Policies for loss of life, limb, sight, etc. Federal tax forms 2012 , Policies that pay you a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or injury, The part of your car insurance that provides medical insurance coverage for all persons injured in or by your car because the part of the premium providing insurance for you, your spouse, and your dependents is not stated separately from the part of the premium providing insurance for medical care for others, or Health or long-term care insurance if you elected to pay these premiums with tax-free distributions from a retirement plan made directly to the insurance provider and these distributions would otherwise have been included in income. Federal tax forms 2012 Taxes imposed by any governmental unit, such as Medicare taxes, are not insurance premiums. Federal tax forms 2012 Coverage for nondependents. Federal tax forms 2012   Generally, you cannot deduct any additional premium you pay as the result of including on your policy someone who is not your spouse or dependent, even if that person is your child under age 27. Federal tax forms 2012 However, you can deduct the additional premium if that person is: Your child whom you do not claim as a dependent because of the rules for children of divorced or separated parents, Any person you could have claimed as a dependent on your return except that person received $3,900 or more of gross income or filed a joint return, or Any person you could have claimed as a dependent except that you, or your spouse if filing jointly, can be claimed as a dependent on someone else's 2013 return. Federal tax forms 2012  Also, if you had family coverage when you added this individual to your policy and your premiums did not increase, you can enter on Schedule A (Form 1040) the full amount of your medical and dental insurance premiums. Federal tax forms 2012 Intellectually and Developmentally Disabled, Special Home for You can include in medical expenses the cost of keeping a person who is intellectually and developmentally disabled in a special home, not the home of a relative, on the recommendation of a psychiatrist to help the person adjust from life in a mental hospital to community living. Federal tax forms 2012 Laboratory Fees You can include in medical expenses the amounts you pay for laboratory fees that are part of medical care. Federal tax forms 2012 Lactation Expenses See Breast Pumps and Supplies , earlier. Federal tax forms 2012 Lead-Based Paint Removal You can include in medical expenses the cost of removing lead-based paints from surfaces in your home to prevent a child who has or had lead poisoning from eating the paint. Federal tax forms 2012 These surfaces must be in poor repair (peeling or cracking) or within the child's reach. Federal tax forms 2012 The cost of repainting the scraped area is not a medical expense. Federal tax forms 2012 If, instead of removing the paint, you cover the area with wallboard or paneling, treat these items as capital expenses. Federal tax forms 2012 See Capital Expenses , earlier. Federal tax forms 2012 Do not include the cost of painting the wallboard as a medical expense. Federal tax forms 2012 Learning Disability See Special Education , later. Federal tax forms 2012 Legal Fees You can include in medical expenses legal fees you paid that are necessary to authorize treatment for mental illness. Federal tax forms 2012 However, you cannot include in medical expenses fees for the management of a guardianship estate, fees for conducting the affairs of the person being treated, or other fees that are not necessary for medical care. Federal tax forms 2012 Lifetime Care—Advance Payments You can include in medical expenses a part of a life-care fee or “founder's fee” you pay either monthly or as a lump sum under an agreement with a retirement home. Federal tax forms 2012 The part of the payment you include is the amount properly allocable to medical care. Federal tax forms 2012 The agreement must require that you pay a specific fee as a condition for the home's promise to provide lifetime care that includes medical care. Federal tax forms 2012 You can use a statement from the retirement home to prove the amount properly allocable to medical care. Federal tax forms 2012 The statement must be based either on the home's prior experience or on information from a comparable home. Federal tax forms 2012 Dependents with disabilities. Federal tax forms 2012   You can include in medical expenses advance payments to a private institution for lifetime care, treatment, and training of your physically or mentally impaired child upon your death or when you become unable to provide care. Federal tax forms 2012 The payments must be a condition for the institution's future acceptance of your child and must not be refundable. Federal tax forms 2012 Payments for future medical care. Federal tax forms 2012   Generally, you cannot include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. Federal tax forms 2012 This rule does not apply in situations where the future care is purchased in connection with obtaining lifetime care of the type described earlier. Federal tax forms 2012 Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if a principal reason for being there is to receive medical care. Federal tax forms 2012 See Nursing Home , later. Federal tax forms 2012 You may be able to include in medical expenses the cost of lodging not provided in a hospital or similar institution. Federal tax forms 2012 You can include the cost of such lodging while away from home if all of the following requirements are met. Federal tax forms 2012 The lodging is primarily for and essential to medical care. Federal tax forms 2012 The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Federal tax forms 2012 The lodging is not lavish or extravagant under the circumstances. Federal tax forms 2012 There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Federal tax forms 2012 The amount you include in medical expenses for lodging cannot be more than $50 for each night for each person. Federal tax forms 2012 You can include lodging for a person traveling with the person receiving the medical care. Federal tax forms 2012 For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Federal tax forms 2012 Meals are not included. Federal tax forms 2012 Do not include the cost of lodging while away from home for medical treatment if that treatment is not received from a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital or if that lodging is not primarily for or essential to the medical care received. Federal tax forms 2012 Long-Term Care You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts. Federal tax forms 2012 Qualified Long-Term Care Services Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are: Required by a chronically ill individual, and Provided pursuant to a plan of care prescribed by a licensed health care practitioner. Federal tax forms 2012 Chronically ill individual. Federal tax forms 2012   An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions. Federal tax forms 2012 He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Federal tax forms 2012 Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Federal tax forms 2012 He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Federal tax forms 2012 Maintenance and personal care services. Federal tax forms 2012    Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment). Federal tax forms 2012 Qualified Long-Term Care Insurance Contracts A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. Federal tax forms 2012 The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses. Federal tax forms 2012 The amount of qualified long-term care premiums you can include is limited. Federal tax forms 2012 You can include the following as medical expenses on Schedule A (Form 1040). Federal tax forms 2012 Qualified long-term care premiums up to the following amounts. Federal tax forms 2012 Age 40 or under – $360. Federal tax forms 2012 Age 41 to 50 – $680. Federal tax forms 2012 Age 51 to 60 – $1,360. Federal tax forms 2012 Age 61 to 70 – $3,640. Federal tax forms 2012 Age 71 or over – $4,550. Federal tax forms 2012 Unreimbursed expenses for qualified long-term care services. Federal tax forms 2012 Note. Federal tax forms 2012 The limit on premiums is for each person. Federal tax forms 2012 Also, if you are an eligible retired public safety officer, you cannot include premiums for long-term care insurance if you elected to pay these premiums with tax-free distributions from a qualified retirement plan made directly to the insurance provider and these distributions would otherwise have been included in your income. Federal tax forms 2012 Meals You can include in medical expenses the cost of meals at a hospital or similar institution if a principal reason for being there is to get medical care. Federal tax forms 2012 You cannot include in medical expenses the cost of meals that are not part of inpatient care. Federal tax forms 2012 Also see Weight-Loss Program and Nutritional Supplements , later. Federal tax forms 2012 Medical Conferences You can include in medical expenses amounts paid for admission and transportation to a medical conference if the medical conference concerns the chronic illness of yourself, your spouse, or your dependent. Federal tax forms 2012 The costs of the medical conference must be primarily for and necessary to the medical care of you, your spouse, or your dependent. Federal tax forms 2012 The majority of the time spent at the conference must be spent attending sessions on medical information. Federal tax forms 2012 The cost of meals and lodging while attending the conference is not deductible as a medical expense. Federal tax forms 2012 Medical Information Plan You can include in medical expenses amounts paid to a plan that keeps medical information in a computer data bank and retrieves and furnishes the information upon request to an attending physician. Federal tax forms 2012 Medicines You can include in medical expenses amounts you pay for prescribed medicines and drugs. Federal tax forms 2012 A prescribed drug is one that requires a prescription by a doctor for its use by an individual. Federal tax forms 2012 You can also include amounts you pay for insulin. Federal tax forms 2012 Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. Federal tax forms 2012 Imported medicines and drugs. Federal tax forms 2012   If you imported medicines or drugs from other countries, see Medicines and Drugs From Other Countries , under What Expenses Are Not Includible, later. Federal tax forms 2012 Nursing Home You can include in medical expenses the cost of medical care in a nursing home, home for the aged, or similar institution, for yourself, your spouse, or your dependents. Federal tax forms 2012 This includes the cost of meals and lodging in the home if a principal reason for being there is to get medical care. Federal tax forms 2012 Do not include the cost of meals and lodging if the reason for being in the home is personal. Federal tax forms 2012 You can, however, include in medical expenses the part of the cost that is for medical or nursing care. Federal tax forms 2012 Nursing Services You can include in medical expenses wages and other amounts you pay for nursing services. Federal tax forms 2012 The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. Federal tax forms 2012 This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. Federal tax forms 2012 These services can be provided in your home or another care facility. Federal tax forms 2012 Generally, only the amount spent for nursing services is a medical expense. Federal tax forms 2012 If the attendant also provides personal and household services, amounts paid to the attendant must be divided between the time spent performing household and personal services and the time spent for nursing services. Federal tax forms 2012 For example, because of your medical condition you pay a visiting nurse $300 per week for medical and household services. Federal tax forms 2012 She spends 10% of her time doing household services such as washing dishes and laundry. Federal tax forms 2012 You can include only $270 per week as medical expenses. Federal tax forms 2012 The $30 (10% × $300) allocated to household services cannot be included. Federal tax forms 2012 However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Federal tax forms 2012 See Maintenance and personal care services under Long-Term Care, earlier. Federal tax forms 2012 Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. Federal tax forms 2012 See Publication 503. Federal tax forms 2012 You can also include in medical expenses part of the amount you pay for that attendant's meals. Federal tax forms 2012 Divide the food expense among the household members to find the cost of the attendant's food. Federal tax forms 2012 Then divide that cost in the same manner as in the preceding paragraph. Federal tax forms 2012 If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. Federal tax forms 2012 This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant. Federal tax forms 2012 Employment taxes. Federal tax forms 2012   You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for an attendant who provides medical care. Federal tax forms 2012 If the attendant also provides personal and household services, you can include as a medical expense only the amount of employment taxes paid for medical services as explained earlier. Federal tax forms 2012 For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide. Federal tax forms 2012 Operations You can include in medical expenses amounts you pay for legal operations that are not for unnecessary cosmetic surgery. Federal tax forms 2012 See Cosmetic Surgery under What Expenses Are Not Includible, later. Federal tax forms 2012 Optometrist See Eyeglasses , earlier. Federal tax forms 2012 Organ Donors See Transplants , later. Federal tax forms 2012 Osteopath You can include in medical expenses amounts you pay to an osteopath for medical care. Federal tax forms 2012 Oxygen You can include in medical expenses amounts you pay for oxygen and oxygen equipment to relieve breathing problems caused by a medical condition. Federal tax forms 2012 Physical Examination You can include in medical expenses the amount you pay for an annual physical examination and diagnostic tests by a physician. Federal tax forms 2012 You do not have to be ill at the time of the examination. Federal tax forms 2012 Pregnancy Test Kit You can include in medical expenses the amount you pay to purchase a pregnancy test kit to determine if you are pregnant. Federal tax forms 2012 Prosthesis See Artificial Limb and Breast Reconstruction Surgery , earlier. Federal tax forms 2012 Psychiatric Care You can include in medical expenses amounts you pay for psychiatric care. Federal tax forms 2012 This includes the cost of supporting a mentally ill dependent at a specially equipped medical center where the dependent receives medical care. Federal tax forms 2012 See Psychoanalysis, next, and Transportation , later. Federal tax forms 2012 Psychoanalysis You can include in medical expenses payments for psychoanalysis. Federal tax forms 2012 However, you cannot include payments for psychoanalysis that is part of required training to be a psychoanalyst. Federal tax forms 2012 Psychologist You can include in medical expenses amounts you pay to a psychologist for medical care. Federal tax forms 2012 Special Education You can include in medical expenses fees you pay on a doctor's recommendation for a child's tutoring by a teacher who is specially trained and qualified to work with children who have learning disabilities caused by mental or physical impairments, including nervous system disorders. Federal tax forms 2012 You can include in medical expenses the cost (tuition, meals, and lodging) of attending a school that furnishes special education to help a child to overcome learning disabilities. Federal tax forms 2012 A doctor must recommend that the child attend the school. Federal tax forms 2012 Overcoming the learning disabilities must be a principal reason for attending the school, and any ordinary education received must be incidental to the special education provided. Federal tax forms 2012 Special education includes: Teaching Braille to a visually impaired person, Teaching lip reading to a hearing disabled person, or Giving remedial language training to correct a condition caused by a birth defect. Federal tax forms 2012 Sterilization You can include in medical expenses the cost of a legal sterilization (a legally performed operation to make a person unable to have children). Federal tax forms 2012 Also see Vasectomy , later. Federal tax forms 2012 Stop-Smoking Programs You can include in medical expenses amounts you pay for a program to stop smoking. Federal tax forms 2012 However, you cannot include in medical expenses amounts you pay for drugs that do not require a prescription, such as nicotine gum or patches, that are designed to help stop smoking. Federal tax forms 2012 Surgery See Operations , earlier. Federal tax forms 2012 Telephone You can include in medical expenses the cost of special telephone equipment that lets a person who is deaf, hard of hearing or has a speech disability communicate over a regular telephone. Federal tax forms 2012 This includes teletypewriter (TTY) and telecommunications device for the deaf (TDD) equipment. Federal tax forms 2012 You can also include the cost of repairing the equipment. Federal tax forms 2012 Television You can include in medical expenses the cost of equipment that displays the audio part of television programs as subtitles for persons with a hearing disability. Federal tax forms 2012 This may be the cost of an adapter that attaches to a regular set. Federal tax forms 2012 It also may be the part of the cost of a specially equipped television that exceeds the cost of the same model regular television set. Federal tax forms 2012 Therapy You can include in medical expenses amounts you pay for therapy received as medical treatment. Federal tax forms 2012 Transplants You can include in medical expenses amounts paid for medical care you receive because you are a donor or a possible donor of a kidney or other organ. Federal tax forms 2012 This includes transportation. Federal tax forms 2012 You can include any expenses you pay for the medical care of a donor in connection with the donating of an organ. Federal tax forms 2012 This includes transportation. Federal tax forms 2012 Transportation You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Federal tax forms 2012 You can include:    Bus, taxi, train, or plane fares or ambulance service, Transportation expenses of a parent who must go with a child who needs medical care, Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone, and Transportation expenses for regular visits to see a mentally ill dependent, if these visits are recommended as a part of treatment. Federal tax forms 2012 Car expenses. Federal tax forms 2012   You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. Federal tax forms 2012 You cannot include depreciation, insurance, general repair, or maintenance expenses. Federal tax forms 2012   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents a mile. Federal tax forms 2012    You can also include parking fees and tolls. Federal tax forms 2012 You can add these fees and tolls to your medical expenses whether you use actual expenses or the standard mileage rate. Federal tax forms 2012 Example. Federal tax forms 2012 In 2013, Bill Jones drove 2,800 miles for medical reasons. Federal tax forms 2012 He spent $500 for gas, $30 for oil, and $100 for tolls and parking. Federal tax forms 2012 He wants to figure the amount he can include in medical expenses both ways to see which gives him the greater deduction. Federal tax forms 2012 He figures the actual expenses first. Federal tax forms 2012 He adds the $500 for gas, the $30 for oil, and the $100 for tolls and parking for a total of $630. Federal tax forms 2012 He then figures the standard mileage amount. Federal tax forms 2012 He multiplies 2,800 miles by 24 cents a mile for a total of $672. Federal tax forms 2012 He then adds the $100 tolls and parking for a total of $772. Federal tax forms 2012 Bill includes the $772 of car expenses with his other medical expenses for the year because the $772 is more than the $630 he figured using actual expenses. Federal tax forms 2012 Transportation expenses you cannot include. Federal tax forms 2012    You cannot include in medical expenses the cost of transportation in the following situations. Federal tax forms 2012 Going to and from work, even if your condition requires an unusual means of transportation. Federal tax forms 2012 Travel for purely personal reasons to another city for an operation or other medical care. Federal tax forms 2012 Travel that is merely for the general improvement of one's health. Federal tax forms 2012 The costs of operating a specially equipped car for other than medical reasons. Federal tax forms 2012 Trips You can include in medical expenses amounts you pay for transportation to another city if the trip is primarily for, and essential to, receiving medical services. Federal tax forms 2012 You may be able to include up to $50 for each night for each person. Federal tax forms 2012 You can include lodging for a person traveling with the person receiving the medical care. Federal tax forms 2012 For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Federal tax forms 2012 Meals are not included. Federal tax forms 2012 See Lodging , earlier. Federal tax forms 2012 You cannot include in medical expenses a trip or vacation taken merely for a change in environment, improvement of morale, or general improvement of health, even if the trip is made on the advice of a doctor. Federal tax forms 2012 However, see Medical Conferences , earlier. Federal tax forms 2012 Tuition Under special circumstances, you can include charges for tuition in medical expenses. Federal tax forms 2012 See Special Education , earlier. Federal tax forms 2012 You can include charges for a health plan included in a lump-sum tuition fee if the charges are separately stated or can easily be obtained from the school. Federal tax forms 2012 Vasectomy You can include in medical expenses the amount you pay for a vasectomy. Federal tax forms 2012 Vision Correction Surgery See Eye Surgery , earlier. Federal tax forms 2012 Weight-Loss Program You can include in medical expenses amounts you pay to lose weight if it is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). Federal tax forms 2012 This includes fees you pay for membership in a weight reduction group as well as fees for attendance at periodic meetings. Federal tax forms 2012 You cannot include membership dues in a gym, health club, or spa as medical expenses, but you can include separate fees charged there for weight loss activities. Federal tax forms 2012 You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. Federal tax forms 2012 You can include the cost of special food in medical expenses only if: The food does not satisfy normal nutritional needs, The food alleviates or treats an illness, and The need for the food is substantiated by a physician. Federal tax forms 2012 The amount you can include in medical expenses is limited to the amount by which the cost of the special food exceeds the cost of a normal diet. Federal tax forms 2012 See also Weight-Loss Program under What Expenses Are Not Includible, later. Federal tax forms 2012 Wheelchair You can include in medical expenses amounts you pay for a wheelchair used mainly for the relief of sickness or disability, and not just to provide transportation to and from work. Federal tax forms 2012 The cost of operating and maintaining the wheelchair is also a medical expense. Federal tax forms 2012 Wig You can include in medical expenses the cost of a wig purchased upon the advice of a physician for the mental health of a patient who has lost all of his or her hair from disease. Federal tax forms 2012 X-ray You can include in medical expenses amounts you pay for X-rays for medical reasons. Federal tax forms 2012 What Expenses Are Not Includible? Following is a list of some items that you cannot include in figuring your medical expense deduction. Federal tax forms 2012 The items are listed in alphabetical order. Federal tax forms 2012 Baby Sitting, Childcare, and Nursing Services for a Normal, Healthy Baby You cannot include in medical expenses amounts you pay for the care of children, even if the expenses enable you, your spouse, or your dependent to get medical or dental treatment. Federal tax forms 2012 Also, any expense allowed as a childcare credit cannot be treated as an expense paid for medical care. Federal tax forms 2012 Controlled Substances You cannot include in medical expenses amounts you pay for controlled substances (such as marijuana, laetrile, etc. Federal tax forms 2012 ), even if such substances are legalized by state law. Federal tax forms 2012 Such substances are not legal under federal law and cannot be included in medical expenses. Federal tax forms 2012 Cosmetic Surgery Generally, you cannot include in medical expenses the amount you pay for unnecessary cosmetic surgery. Federal tax forms 2012 This includes any procedure that is directed at improving the patient's appearance and does not meaningfully promote the proper function of the body or prevent or treat illness or disease. Federal tax forms 2012 You generally cannot include in medical expenses the amount you pay for procedures such as face lifts, hair transplants, hair removal (electrolysis), and liposuction. Federal tax forms 2012 You can include in medical expenses the amount you pay for cosmetic surgery if it is necessary to improve a deformity arising from, or directly related to, a congenital abnormality, a personal injury resulting from an accident or trauma, or a disfiguring disease. Federal tax forms 2012 Example. Federal tax forms 2012 An individual undergoes surgery that removes a breast as part of treatment for cancer. Federal tax forms 2012 She pays a surgeon to reconstruct the breast. Federal tax forms 2012 The surgery to reconstruct the breast corrects a deformity directly related to the disease. Federal tax forms 2012 The cost of the surgery is includible in her medical expenses. Federal tax forms 2012 Dancing Lessons You cannot include in medical expenses the cost of dancing lessons, swimming lessons, etc. Federal tax forms 2012 , even if they are recommended by a doctor, if they are only for the improvement of general health. Federal tax forms 2012 Diaper Service You cannot include in medical expenses the amount you pay for diapers or diaper services, unless they are needed to relieve the effects of a particular disease. Federal tax forms 2012 Electrolysis or Hair Removal See Cosmetic Surgery , earlier. Federal tax forms 2012 Flexible Spending Account You cannot include in medical expenses amounts for which you are fully reimbursed by your flexible spending account if you contribute a part of your income on a pre-tax basis to pay for the qualified benefit. Federal tax forms 2012 Funeral Expenses You cannot include in medical expenses amounts you pay for funerals. Federal tax forms 2012 Future Medical Care Generally, you cannot include in medical expenses current payments for medical care (including medical insurance) to be provided substantially beyond the end of the year. Federal tax forms 2012 This rule does not apply in situations where the future care is purchased in connection with obtaining lifetime care or long-term care of the type described at Lifetime Care—Advance Payments or Long-Term Care, earlier under What Medical Expenses Are Includible. Federal tax forms 2012 Hair Transplant See Cosmetic Surgery , earlier. Federal tax forms 2012 Health Club Dues You cannot include in medical expenses health club dues or amounts paid to improve one's general health or to relieve physical or mental discomfort not related to a particular medical condition. Federal tax forms 2012 You cannot include in medical expenses the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Federal tax forms 2012 Health Coverage Tax Credit You cannot include in medical expenses amounts you pay for health insurance that you use in figuring your health coverage tax credit. Federal tax forms 2012 For more information, see Health Coverage Tax Credit , later. Federal tax forms 2012 Health Savings Accounts You cannot include in medical expenses any payment or distribution for medical expenses out of a health savings account. Federal tax forms 2012 Contributions to health savings accounts are deducted separately. Federal tax forms 2012 See Publication 969. Federal tax forms 2012 Household Help You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor. Federal tax forms 2012 This is a personal expense that is not deductible. Federal tax forms 2012 However, you may be able to include certain expenses paid to a person providing nursing-type services. Federal tax forms 2012 For more information, see Nursing Services , earlier under What Medical Expenses Are Includible. Federal tax forms 2012 Also, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Federal tax forms 2012 For more information, see Long-Term Care , earlier under What Medical Expenses Are Includible. Federal tax forms 2012 Illegal Operations and Treatments You cannot include in medical expenses amounts you pay for illegal operations, treatments, or controlled substances whether rendered or prescribed by licensed or unlicensed practitioners. Federal tax forms 2012 Insurance Premiums See Insurance Premiums under What Medical Expenses Are Includible, earlier. Federal tax forms 2012 Maternity Clothes You cannot include in medical expenses amounts you pay for maternity clothes. Federal tax forms 2012 Medical Savings Account (MSA) You cannot include in medical expenses amounts you contribute to an Archer MSA. Federal tax forms 2012 You cannot include expenses you pay for with a tax-free distribution from your Archer MSA. Federal tax forms 2012 You also cannot use other funds equal to the amount of the distribution and include the expenses. Federal tax forms 2012 For more information on Archer MSAs, see Publication 969. Federal tax forms 2012 Medicines and Drugs From Other Countries In general, you cannot include in your medical expenses the cost of a prescribed drug brought in (or ordered shipped) from another country. Federal tax forms 2012 You can only include the cost of a drug that was imported legally. Federal tax forms 2012 For example, you can include the cost of a prescribed drug the Food and Drug Administration announces can be legally imported by individuals. Federal tax forms 2012 You can include the cost of a prescribed drug you purchase and consume in another country if the drug is legal in both the other country and the United States. Federal tax forms 2012 Nonprescription Drugs and Medicines Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. Federal tax forms 2012 Example. Federal tax forms 2012 Your doctor recommends that you take aspirin. Federal tax forms 2012 Because aspirin is a drug that does not require a physician's prescription, you cannot include its cost in your medical expenses. Federal tax forms 2012 Nutritional Supplements You cannot include in medical expenses the cost of nutritional supplements, vitamins, herbal supplements, “natural medicines,” etc. Federal tax forms 2012 unless they are recommended by a medical practitioner as treatment for a specific medical condition diagnosed by a physician. Federal tax forms 2012 Otherwise, these items are taken to maintain your ordinary good health, and are not for medical care. Federal tax forms 2012 Personal Use Items You cannot include in medical expenses the cost of an item ordinarily used for personal, living, or family purposes unless it is used primarily to prevent or alleviate a physical or mental defect or illness. Federal tax forms 2012 For example, the cost of a toothbrush and toothpaste is a nondeductible personal expense. Federal tax forms 2012 In order to accommodate an individual with a physical defect, you may have to purchase an item ordinarily used as a personal, living, or family item in a special form. Federal tax forms 2012 You can include the excess of the cost of the item in a special form over the cost of the item in normal form as a medical expense. Federal tax forms 2012 (See Braille Books and Magazines under What Medical Expenses Are Includible, earlier. Federal tax forms 2012 ) Swimming Lessons See Dancing Lessons , earlier. Federal tax forms 2012 Teeth Whitening You cannot include in medical expenses amounts paid to whiten teeth. Federal tax forms 2012 See Cosmetic Surgery , earlier. Federal tax forms 2012 Veterinary Fees You generally cannot include veterinary fees in your medical expenses, but see Guide Dog or Other Service Animal under What Medical Expenses Are Includible, earlier. Federal tax forms 2012 Weight-Loss Program You cannot include in medical expenses the cost of a weight-loss program if the purpose of the weight loss is the improvement of appearance, general health, or sense of well-being. Federal tax forms 2012 You cannot include amounts you pay to lose weight unless the weight loss is a treatment for a specific disease diagnosed by a physician (such as obesity, hypertension, or heart disease). Federal tax forms 2012 If the weight-loss treatment is not for a specific disease diagnosed by a physician, you cannot include either the fees you pay for membership in a weight reduction group or fees for attendance at periodic meetings. Federal tax forms 2012 Also, you cannot include membership dues in a gym, health club, or spa. Federal tax forms 2012 You cannot include the cost of diet food or beverages in medical expenses because the diet food and beverages substitute for what is normally consumed to satisfy nutritional needs. Federal tax forms 2012 See Weight-Loss Program under What Medical Expenses Are Includible, earlier. Federal tax forms 2012 How Do You Treat Reimbursements? You can include in medical expenses only those amounts paid during the tax year for which you received no insurance or other reimbursement. Federal tax forms 2012 Insurance Reimbursement You must reduce your total medical expenses for the year by all reimbursements for medical expenses that you receive from insurance or other sources during the year. Federal tax forms 2012 This includes payments from Medicare. Federal tax forms 2012 Even if a policy provides reimbursement only for certain specific medical expenses, you must use amounts you receive from that policy to reduce your total medical expenses, including those it does not reimburse. Federal tax forms 2012 Example. Federal tax forms 2012 You have insurance policies that cover your hospital and doctors' bills but not your nursing bills. Federal tax forms 2012 The insurance you receive for the hospital and doctors' bills is more than their charges. Federal tax forms 2012 In figuring your medical deduction, you must reduce the total amount you spent for medical care by the total amount of insurance you received, even if the policies do not cover some of your medical expenses. Federal tax forms 2012 Health reimbursement arrange
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The Federal Tax Forms 2012

Federal tax forms 2012 1. Federal tax forms 2012   Rental Income and Expenses (If No Personal Use of Dwelling) Table of Contents Rental IncomeWhen To Report Types of Income Rental ExpensesWhen To Deduct Types of Expenses This chapter discusses the various types of rental income and expenses for a residential rental activity with no personal use of the dwelling. Federal tax forms 2012 Generally, each year you will report all income and deduct all out-of-pocket expenses in full. Federal tax forms 2012 The deduction to recover the cost of your rental property—depreciation—is taken over a prescribed number of years, and is discussed in chapter 2, Depreciation of Rental Property. Federal tax forms 2012 If your rental income is from property you also use personally or rent to someone at less than a fair rental price, first read the information in chapter 5 , Personal Use of Dwelling Unit (Including Vacation Home). Federal tax forms 2012 Rental Income In most cases, you must include in your gross income all amounts you receive as rent. Federal tax forms 2012 Rental income is any payment you receive for the use or occupation of property. Federal tax forms 2012 In addition to amounts you receive as normal rental payments, there are other amounts that may be rental income. Federal tax forms 2012 When To Report When you report rental income on your tax return generally depends on whether you are a cash basis taxpayer or use an accrual method. Federal tax forms 2012 Most individual taxpayers use the cash method. Federal tax forms 2012 Cash method. Federal tax forms 2012   You are a cash basis taxpayer if you report income on your return in the year you actually or constructively receive it, regardless of when it was earned. Federal tax forms 2012 You constructively receive income when it is made available to you, for example, by being credited to your bank account. Federal tax forms 2012 Accrual method. Federal tax forms 2012    If you are an accrual basis taxpayer, you generally report income when you earn it, rather than when you receive it. Federal tax forms 2012 You generally deduct your expenses when you incur them, rather than when you pay them. Federal tax forms 2012 More information. Federal tax forms 2012   See Publication 538, Accounting Periods and Methods, for more information about when you constructively receive income and accrual methods of accounting. Federal tax forms 2012 Types of Income The following are common types of rental income. Federal tax forms 2012 Advance rent. Federal tax forms 2012   Advance rent is any amount you receive before the period that it covers. Federal tax forms 2012 Include advance rent in your rental income in the year you receive it regardless of the period covered or the method of accounting you use. Federal tax forms 2012 Example. Federal tax forms 2012 On March 18, 2013, you signed a 10-year lease to rent your property. Federal tax forms 2012 During 2013, you received $9,600 for the first year's rent and $9,600 as rent for the last year of the lease. Federal tax forms 2012 You must include $19,200 in your rental income in the first year. Federal tax forms 2012 Canceling a lease. Federal tax forms 2012   If your tenant pays you to cancel a lease, the amount you receive is rent. Federal tax forms 2012 Include the payment in your income in the year you receive it regardless of your method of accounting. Federal tax forms 2012 Expenses paid by tenant. Federal tax forms 2012   If your tenant pays any of your expenses, those payments are rental income. Federal tax forms 2012 Because you must include this amount in income, you can also deduct the expenses if they are deductible rental expenses. Federal tax forms 2012 For more information, see Rental Expenses , later. Federal tax forms 2012 Example 1. Federal tax forms 2012 Your tenant pays the water and sewage bill for your rental property and deducts the amount from the normal rent payment. Federal tax forms 2012 Under the terms of the lease, your tenant does not have to pay this bill. Federal tax forms 2012 Include the utility bill paid by the tenant and any amount received as a rent payment in your rental income. Federal tax forms 2012 You can deduct the utility payment made by your tenant as a rental expense. Federal tax forms 2012 Example 2. Federal tax forms 2012 While you are out of town, the furnace in your rental property stops working. Federal tax forms 2012 Your tenant pays for the necessary repairs and deducts the repair bill from the rent payment. Federal tax forms 2012 Include the repair bill paid by the tenant and any amount received as a rent payment in your rental income. Federal tax forms 2012 You can deduct the repair payment made by your tenant as a rental expense. Federal tax forms 2012 Property or services. Federal tax forms 2012   If you receive property or services as rent, instead of money, include the fair market value of the property or services in your rental income. Federal tax forms 2012   If the services are provided at an agreed upon or specified price, that price is the fair market value unless there is evidence to the contrary. Federal tax forms 2012 Example. Federal tax forms 2012 Your tenant is a house painter. Federal tax forms 2012 He offers to paint your rental property instead of paying 2 months rent. Federal tax forms 2012 You accept his offer. Federal tax forms 2012 Include in your rental income the amount the tenant would have paid for 2 months rent. Federal tax forms 2012 You can deduct that same amount as a rental expense for painting your property. Federal tax forms 2012 Security deposits. Federal tax forms 2012   Do not include a security deposit in your income when you receive it if you plan to return it to your tenant at the end of the lease. Federal tax forms 2012 But if you keep part or all of the security deposit during any year because your tenant does not live up to the terms of the lease, include the amount you keep in your income in that year. Federal tax forms 2012    If an amount called a security deposit is to be used as a final payment of rent, it is advance rent. Federal tax forms 2012 Include it in your income when you receive it. Federal tax forms 2012 Other Sources of Rental Income Lease with option to buy. Federal tax forms 2012   If the rental agreement gives your tenant the right to buy your rental property, the payments you receive under the agreement are generally rental income. Federal tax forms 2012 If your tenant exercises the right to buy the property, the payments you receive for the period after the date of sale are considered part of the selling price. Federal tax forms 2012 Part interest. Federal tax forms 2012   If you own a part interest in rental property, you must report your part of the rental income from the property. Federal tax forms 2012 Rental of property also used as your home. Federal tax forms 2012   If you rent property that you also use as your home and you rent it less than 15 days during the tax year, do not include the rent you receive in your income and do not deduct rental expenses. Federal tax forms 2012 However, you can deduct on Schedule A (Form 1040), Itemized Deductions, the interest, taxes, and casualty and theft losses that are allowed for nonrental property. Federal tax forms 2012 See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Federal tax forms 2012 Rental Expenses In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income. Federal tax forms 2012 Personal use of rental property. Federal tax forms 2012   If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Federal tax forms 2012 Also, your rental expense deductions may be limited. Federal tax forms 2012 See chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). Federal tax forms 2012 Part interest. Federal tax forms 2012   If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership. Federal tax forms 2012 Example. Federal tax forms 2012 Roger owns a one-half undivided interest in a rental house. Federal tax forms 2012 Last year he paid $968 for necessary repairs on the property. Federal tax forms 2012 Roger can deduct $484 (50% × $968) as a rental expense. Federal tax forms 2012 He is entitled to reimbursement for the remaining half from the co-owner. Federal tax forms 2012 When To Deduct You generally deduct your rental expenses in the year you pay them. Federal tax forms 2012 If you use the accrual method, see Publication 538 for more information. Federal tax forms 2012 Types of Expenses Listed below are the most common rental expenses. Federal tax forms 2012 Advertising. Federal tax forms 2012 Auto and travel expenses. Federal tax forms 2012 Cleaning and maintenance. Federal tax forms 2012 Commissions. Federal tax forms 2012 Depreciation. Federal tax forms 2012 Insurance. Federal tax forms 2012 Interest (other). Federal tax forms 2012 Legal and other professional fees. Federal tax forms 2012 Local transportation expenses. Federal tax forms 2012 Management fees. Federal tax forms 2012 Mortgage interest paid to banks, etc. Federal tax forms 2012 Points. Federal tax forms 2012 Rental payments. Federal tax forms 2012 Repairs. Federal tax forms 2012 Taxes. Federal tax forms 2012 Utilities. Federal tax forms 2012 Some of these expenses, as well as other less common ones, are discussed below. Federal tax forms 2012 Depreciation. Federal tax forms 2012   Depreciation is a capital expense. Federal tax forms 2012 It is the mechanism for recovering your cost in an income producing property and must be taken over the expected life of the property. Federal tax forms 2012   You can begin to depreciate rental property when it is ready and available for rent. Federal tax forms 2012 See Placed in Service under When Does Depreciation Begin and End in chapter 2. Federal tax forms 2012 Insurance premiums paid in advance. Federal tax forms 2012   If you pay an insurance premium for more than one year in advance, for each year of coverage you can deduct the part of the premium payment that will apply to that year. Federal tax forms 2012 You cannot deduct the total premium in the year you pay it. Federal tax forms 2012 See chapter 6 of Publication 535 for information on deductible premiums. Federal tax forms 2012 Interest expense. Federal tax forms 2012   You can deduct mortgage interest you pay on your rental property. Federal tax forms 2012 When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Federal tax forms 2012 Chapter 4 of Publication 535 explains mortgage interest in detail. Federal tax forms 2012 Expenses paid to obtain a mortgage. Federal tax forms 2012   Certain expenses you pay to obtain a mortgage on your rental property cannot be deducted as interest. Federal tax forms 2012 These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property. Federal tax forms 2012 Form 1098, Mortgage Interest Statement. Federal tax forms 2012   If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. Federal tax forms 2012 If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Federal tax forms 2012 Attach a statement to your return showing the name and address of the other person. Federal tax forms 2012 On the dotted line next to line 13, enter “See attached. Federal tax forms 2012 ” Legal and other professional fees. Federal tax forms 2012   You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. Federal tax forms 2012 For example, on your 2013 Schedule E you can deduct fees paid in 2013 to prepare Part I of your 2012 Schedule E. Federal tax forms 2012 You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities. Federal tax forms 2012 Local benefit taxes. Federal tax forms 2012   In most cases, you cannot deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. Federal tax forms 2012 These charges are nondepreciable capital expenditures and must be added to the basis of your property. Federal tax forms 2012 However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits. Federal tax forms 2012 Local transportation expenses. Federal tax forms 2012   You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to manage, conserve, or maintain your rental property. Federal tax forms 2012 However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. Federal tax forms 2012 See Publication 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business. Federal tax forms 2012   Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. Federal tax forms 2012 For 2013, the standard mileage rate for business use is 56. Federal tax forms 2012 5 cents per mile. Federal tax forms 2012 For more information, see chapter 4 of Publication 463. Federal tax forms 2012    To deduct car expenses under either method, you must keep records that follow the rules in chapter 5 of Publication 463. Federal tax forms 2012 In addition, you must complete Form 4562, Part V, and attach it to your tax return. Federal tax forms 2012 Pre-rental expenses. Federal tax forms 2012   You can deduct your ordinary and necessary expenses for managing, conserving, or maintaining rental property from the time you make it available for rent. Federal tax forms 2012 Rental of equipment. Federal tax forms 2012   You can deduct the rent you pay for equipment that you use for rental purposes. Federal tax forms 2012 However, in some cases, lease contracts are actually purchase contracts. Federal tax forms 2012 If so, you cannot deduct these payments. Federal tax forms 2012 You can recover the cost of purchased equipment through depreciation. Federal tax forms 2012 Rental of property. Federal tax forms 2012   You can deduct the rent you pay for property that you use for rental purposes. Federal tax forms 2012 If you buy a leasehold for rental purposes, you can deduct an equal part of the cost each year over the term of the lease. Federal tax forms 2012 Travel expenses. Federal tax forms 2012   You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. Federal tax forms 2012 You must properly allocate your expenses between rental and nonrental activities. Federal tax forms 2012 You cannot deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. Federal tax forms 2012 The cost of improvements is recovered by taking depreciation. Federal tax forms 2012 For information on travel expenses, see chapter 1 of Publication 463. Federal tax forms 2012    To deduct travel expenses, you must keep records that follow the rules in chapter 5 of Publication 463. Federal tax forms 2012 Uncollected rent. Federal tax forms 2012   If you are a cash basis taxpayer, do not deduct uncollected rent. Federal tax forms 2012 Because you have not included it in your income, it is not deductible. Federal tax forms 2012   If you use an accrual method, report income when you earn it. Federal tax forms 2012 If you are unable to collect the rent, you may be able to deduct it as a business bad debt. Federal tax forms 2012 See chapter 10 of Publication 535 for more information about business bad debts. Federal tax forms 2012 Vacant rental property. Federal tax forms 2012   If you hold property for rental purposes, you may be able to deduct your ordinary and necessary expenses (including depreciation) for managing, conserving, or maintaining the property while the property is vacant. Federal tax forms 2012 However, you cannot deduct any loss of rental income for the period the property is vacant. Federal tax forms 2012 Vacant while listed for sale. Federal tax forms 2012   If you sell property you held for rental purposes, you can deduct the ordinary and necessary expenses for managing, conserving, or maintaining the property until it is sold. Federal tax forms 2012 If the property is not held out and available for rent while listed for sale, the expenses are not deductible rental expenses. Federal tax forms 2012 Points The term “points” is often used to describe some of the charges paid, or treated as paid, by a borrower to take out a loan or a mortgage. Federal tax forms 2012 These charges are also called loan origination fees, maximum loan charges, or premium charges. Federal tax forms 2012 Any of these charges (points) that are solely for the use of money are interest. Federal tax forms 2012 Because points are prepaid interest, you generally cannot deduct the full amount in the year paid, but must deduct the interest over the term of the loan. Federal tax forms 2012 The method used to figure the amount of points you can deduct each year follows the original issue discount (OID) rules. Federal tax forms 2012 In this case, points are equivalent to OID, which is the difference between: The amount borrowed (redemption price at maturity, or principal) and The proceeds (issue price). Federal tax forms 2012 The first step is to determine whether your total OID (which you may have on bonds or other investments in addition to the mortgage loan), including the OID resulting from the points, is insignificant or de minimis. Federal tax forms 2012 If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct. Federal tax forms 2012 De minimis OID. Federal tax forms 2012   The OID is de minimis if it is less than one-fourth of 1% (. Federal tax forms 2012 0025) of the stated redemption price at maturity (principal amount of the loan) multiplied by the number of full years from the date of original issue to maturity (term of the loan). Federal tax forms 2012   If the OID is de minimis, you can choose one of the following ways to figure the amount of points you can deduct each year. Federal tax forms 2012 On a constant-yield basis over the term of the loan. Federal tax forms 2012 On a straight line basis over the term of the loan. Federal tax forms 2012 In proportion to stated interest payments. Federal tax forms 2012 In its entirety at maturity of the loan. Federal tax forms 2012 You make this choice by deducting the OID (points) in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. Federal tax forms 2012 Example. Federal tax forms 2012 Carol Madison took out a $100,000 mortgage loan on January 1, 2013, to buy a house she will use as a rental during 2013. Federal tax forms 2012 The loan is to be repaid over 30 years. Federal tax forms 2012 During 2013, Carol paid $10,000 of mortgage interest (stated interest) to the lender. Federal tax forms 2012 When the loan was made, she paid $1,500 in points to the lender. Federal tax forms 2012 The points reduced the principal amount of the loan from $100,000 to $98,500, resulting in $1,500 of OID. Federal tax forms 2012 Carol determines that the points (OID) she paid are de minimis based on the following computation. Federal tax forms 2012 Redemption price at maturity (principal amount of the loan) $100,000 Multiplied by: The term of the  loan in complete years ×30 Multiplied by ×. Federal tax forms 2012 0025 De minimis amount $7,500 The points (OID) she paid ($1,500) are less than the de minimis amount ($7,500). Federal tax forms 2012 Therefore, Carol has de minimis OID and she can choose one of the four ways discussed earlier to figure the amount she can deduct each year. Federal tax forms 2012 Under the straight line method, she can deduct $50 each year for 30 years. Federal tax forms 2012 Constant-yield method. Federal tax forms 2012   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. Federal tax forms 2012   You figure your deduction for the first year in the following manner. Federal tax forms 2012 Determine the issue price of the loan. Federal tax forms 2012 If you paid points on the loan, the issue price generally is the difference between the principal and the points. Federal tax forms 2012 Multiply the result in (1) by the yield to maturity (defined later). Federal tax forms 2012 Subtract any qualified stated interest payments (defined later) from the result in (2). Federal tax forms 2012 This is the OID you can deduct in the first year. Federal tax forms 2012 Yield to maturity (YTM). Federal tax forms 2012   This rate is generally shown in the literature you receive from your lender. Federal tax forms 2012 If you do not have this information, consult your lender or tax advisor. Federal tax forms 2012 In general, the YTM is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. Federal tax forms 2012 Qualified stated interest (QSI). Federal tax forms 2012   In general, this is the stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a fixed rate. Federal tax forms 2012 Example—Year 1. Federal tax forms 2012 The facts are the same as in the previous example. Federal tax forms 2012 The yield to maturity on Carol's loan is 10. Federal tax forms 2012 2467%, compounded annually. Federal tax forms 2012 She figured the amount of points (OID) she could deduct in 2013 as follows. Federal tax forms 2012 Principal amount of the loan $100,000 Minus: Points (OID) –1,500 Issue price of the loan $98,500 Multiplied by: YTM × . Federal tax forms 2012 102467 Total 10,093 Minus: QSI –10,000 Points (OID) deductible in 2013 $93 To figure your deduction in any subsequent year, you start with the adjusted issue price. Federal tax forms 2012 To get the adjusted issue price, add to the issue price figured in Year 1 any OID previously deducted. Federal tax forms 2012 Then follow steps (2) and (3), earlier. Federal tax forms 2012 Example—Year 2. Federal tax forms 2012 Carol figured the deduction for 2014 as follows. Federal tax forms 2012 Issue price $98,500 Plus: Points (OID) deducted  in 2013 +93 Adjusted issue price $98,593 Multiplied by: YTM × . Federal tax forms 2012 102467 Total 10,103 Minus: QSI –10,000 Points (OID) deductible in 2014 $103 Loan or mortgage ends. Federal tax forms 2012    If your loan or mortgage ends, you may be able to deduct any remaining points (OID) in the tax year in which the loan or mortgage ends. Federal tax forms 2012 A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. Federal tax forms 2012 However, if the refinancing is with the same lender, the remaining points (OID) generally are not deductible in the year in which the refinancing occurs, but may be deductible over the term of the new mortgage or loan. Federal tax forms 2012 Points when loan refinance is more than the previous outstanding balance. Federal tax forms 2012   When you refinance a rental property for more than the previous outstanding balance, the portion of the points allocable to loan proceeds not related to rental use generally cannot be deducted as a rental expense. Federal tax forms 2012 For example, if an individual refinanced a loan with a balance of $100,000, the amount of the new loan was $120,000, and the taxpayer used $20,000 to purchase a car, points allocable to the $20,000 would be treated as nondeductible personal interest. Federal tax forms 2012 Repairs and Improvements Generally, an expense for repairing or maintaining your rental property may be deducted if you are not required to capitalize the expense. Federal tax forms 2012 Improvements. Federal tax forms 2012   You must capitalize any expense you pay to improve your rental property. Federal tax forms 2012 An expense is for an improvement if it results in a betterment to your property, restores your property, or adapts your property to a new or different use. Federal tax forms 2012 Betterments. Federal tax forms 2012   Expenses that may result in a betterment to your property include expenses for fixing a pre-existing defect or condition, enlarging or expanding your property, or increasing the capacity, strength, or quality of your property. Federal tax forms 2012 Restoration. Federal tax forms 2012   Expenses that may be for restoration include expenses for replacing a substantial structural part of your property, repairing damage to your property after you properly adjusted the basis of your property as a result of a casualty loss, or rebuilding your property to a like-new condition. Federal tax forms 2012 Adaptation. Federal tax forms 2012   Expenses that may be for adaptation include expenses for altering your property to a use that is not consistent with the intended ordinary use of your property when you began renting the property. Federal tax forms 2012 Separate the costs of repairs and improvements, and keep accurate records. Federal tax forms 2012 You will need to know the cost of improvements when you sell or depreciate your property. Federal tax forms 2012 The expenses you capitalize for improving your property can generally be depreciated as if the improvement were separate property. Federal tax forms 2012 Table 1-1. Federal tax forms 2012 Examples of Improvements Additions Bedroom Bathroom Deck Garage Porch Patio  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   Heating & Air Conditioning Heating system Central air conditioning Furnace Duct work Central humidifier Filtration 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, floor Pipes, duct work Prev  Up  Next   Home   More Online Publications