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File federal and state taxes online for free 12. File federal and state taxes online for free   Other Income Table of Contents Introduction Useful Items - You may want to see: Bartering Canceled DebtsInterest included in canceled debt. File federal and state taxes online for free Exceptions Host or Hostess Life Insurance ProceedsSurviving spouse. File federal and state taxes online for free Endowment Contract Proceeds Accelerated Death Benefits Public Safety Officer Killed in the Line of Duty Partnership Income S Corporation Income RecoveriesItemized Deduction Recoveries Rents from Personal Property RepaymentsMethod 1. File federal and state taxes online for free Method 2. File federal and state taxes online for free RoyaltiesDepletion. File federal and state taxes online for free Coal and iron ore. File federal and state taxes online for free Sale of property interest. File federal and state taxes online for free Part of future production sold. File federal and state taxes online for free Unemployment BenefitsTypes of unemployment compensation. File federal and state taxes online for free Governmental program. File federal and state taxes online for free Repayment of unemployment compensation. File federal and state taxes online for free Tax withholding. File federal and state taxes online for free Repayment of benefits. File federal and state taxes online for free Welfare and Other Public Assistance Benefits Other IncomeEmotional distress. File federal and state taxes online for free Deduction for costs involved in unlawful discrimination suits. File federal and state taxes online for free Energy conservation measure. File federal and state taxes online for free Dwelling unit. File federal and state taxes online for free Current income required to be distributed. File federal and state taxes online for free Current income not required to be distributed. File federal and state taxes online for free How to report. File federal and state taxes online for free Losses. File federal and state taxes online for free Grantor trust. File federal and state taxes online for free Nonemployee compensation. File federal and state taxes online for free Corporate director. File federal and state taxes online for free Personal representatives. File federal and state taxes online for free Manager of trade or business for bankruptcy estate. File federal and state taxes online for free Notary public. File federal and state taxes online for free Election precinct official. File federal and state taxes online for free Difficulty-of-care payments. File federal and state taxes online for free Maintaining space in home. File federal and state taxes online for free Reporting taxable payments. File federal and state taxes online for free Lotteries and raffles. File federal and state taxes online for free Form W-2G. File federal and state taxes online for free Reporting winnings and recordkeeping. File federal and state taxes online for free Inherited pension or IRA. File federal and state taxes online for free Employee awards or bonuses. File federal and state taxes online for free Pulitzer, Nobel, and similar prizes. File federal and state taxes online for free Payment for services. File federal and state taxes online for free VA payments. File federal and state taxes online for free Prizes. File federal and state taxes online for free Strike and lockout benefits. File federal and state taxes online for free Introduction You must include on your return all items of income you receive in the form of money, property, and services unless the tax law states that you do not include them. File federal and state taxes online for free Some items, however, are only partly excluded from income. File federal and state taxes online for free This chapter discusses many kinds of income and explains whether they are taxable or nontaxable. File federal and state taxes online for free Income that is taxable must be reported on your tax return and is subject to tax. File federal and state taxes online for free Income that is nontaxable may have to be shown on your tax return but is not taxable. File federal and state taxes online for free This chapter begins with discussions of the following income items. File federal and state taxes online for free Bartering. File federal and state taxes online for free Canceled debts. File federal and state taxes online for free Sales parties at which you are the host or hostess. File federal and state taxes online for free Life insurance proceeds. File federal and state taxes online for free Partnership income. File federal and state taxes online for free S Corporation income. File federal and state taxes online for free Recoveries (including state income tax refunds). File federal and state taxes online for free Rents from personal property. File federal and state taxes online for free Repayments. File federal and state taxes online for free Royalties. File federal and state taxes online for free Unemployment benefits. File federal and state taxes online for free Welfare and other public assistance benefits. File federal and state taxes online for free These discussions are followed by brief discussions of other income items. File federal and state taxes online for free Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 544 Sales and Other Dispositions of Assets 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Bartering Bartering is an exchange of property or services. File federal and state taxes online for free You must include in your income, at the time received, the fair market value of property or services you receive in bartering. File federal and state taxes online for free If you exchange services with another person and you both have agreed ahead of time on the value of the services, that value will be accepted as fair market value unless the value can be shown to be otherwise. File federal and state taxes online for free Generally, you report this income on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. File federal and state taxes online for free However, if the barter involves an exchange of something other than services, such as in Example 3 below, you may have to use another form or schedule instead. File federal and state taxes online for free Example 1. File federal and state taxes online for free You are a self-employed attorney who performs legal services for a client, a small corporation. File federal and state taxes online for free The corporation gives you shares of its stock as payment for your services. File federal and state taxes online for free You must include the fair market value of the shares in your income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) in the year you receive them. File federal and state taxes online for free Example 2. File federal and state taxes online for free You are self-employed and a member of a barter club. File federal and state taxes online for free The club uses “credit units” as a means of exchange. File federal and state taxes online for free It adds credit units to your account for goods or services you provide to members, which you can use to purchase goods or services offered by other members of the barter club. File federal and state taxes online for free The club subtracts credit units from your account when you receive goods or services from other members. File federal and state taxes online for free You must include in your income the value of the credit units that are added to your account, even though you may not actually receive goods or services from other members until a later tax year. File federal and state taxes online for free Example 3. File federal and state taxes online for free You own a small apartment building. File federal and state taxes online for free In return for 6 months rent-free use of an apartment, an artist gives you a work of art she created. File federal and state taxes online for free You must report as rental income on Schedule E (Form 1040), Supplemental Income and Loss, the fair market value of the artwork, and the artist must report as income on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) the fair rental value of the apartment. File federal and state taxes online for free Form 1099-B from barter exchange. File federal and state taxes online for free   If you exchanged property or services through a barter exchange, Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or a similar statement from the barter exchange should be sent to you by February 18, 2014. File federal and state taxes online for free It should show the value of cash, property, services, credits, or scrip you received from exchanges during 2013. File federal and state taxes online for free The IRS also will receive a copy of Form 1099-B. File federal and state taxes online for free Canceled Debts In most cases, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. File federal and state taxes online for free You have no income from the canceled debt if it is intended as a gift to you. File federal and state taxes online for free A debt includes any indebtedness for which you are liable or which attaches to property you hold. File federal and state taxes online for free If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21. File federal and state taxes online for free If it is a business debt, report the amount on Schedule C (Form 1040) or Schedule C-EZ (Form 1040) (or on Schedule F (Form 1040), Profit or Loss From Farming, if the debt is farm debt and you are a farmer). File federal and state taxes online for free Form 1099-C. File federal and state taxes online for free   If a Federal Government agency, financial institution, or credit union cancels or forgives a debt you owe of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. File federal and state taxes online for free The amount of the canceled debt is shown in box 2. File federal and state taxes online for free Interest included in canceled debt. File federal and state taxes online for free   If any interest is forgiven and included in the amount of canceled debt in box 2, the amount of interest also will be shown in box 3. File federal and state taxes online for free Whether or not you must include the interest portion of the canceled debt in your income depends on whether the interest would be deductible when you paid it. File federal and state taxes online for free See Deductible debt under Exceptions, later. File federal and state taxes online for free   If the interest would not be deductible (such as interest on a personal loan), include in your income the amount from Form 1099-C, box 2. File federal and state taxes online for free If the interest would be deductible (such as on a business loan), include in your income the net amount of the canceled debt (the amount shown in box 2 less the interest amount shown in box 3). File federal and state taxes online for free Discounted mortgage loan. File federal and state taxes online for free   If your financial institution offers a discount for the early payment of your mortgage loan, the amount of the discount is canceled debt. File federal and state taxes online for free You must include the canceled amount in your income. File federal and state taxes online for free Mortgage relief upon sale or other disposition. File federal and state taxes online for free   If you are personally liable for a mortgage (recourse debt), and you are relieved of the mortgage when you dispose of the property, you may realize gain or loss up to the fair market value of the property. File federal and state taxes online for free To the extent the mortgage discharge exceeds the fair market value of the property, it is income from discharge of indebtedness unless it qualifies for exclusion under Excluded debt , later. File federal and state taxes online for free Report any income from discharge of indebtedness on nonbusiness debt that does not qualify for exclusion as other income on Form 1040, line 21. File federal and state taxes online for free    You may be able to exclude part of the mortgage relief on your principal residence. File federal and state taxes online for free See Excluded debt, later. File federal and state taxes online for free   If you are not personally liable for a mortgage (nonrecourse debt), and you are relieved of the mortgage when you dispose of the property (such as through foreclosure), that relief is included in the amount you realize. File federal and state taxes online for free You may have a taxable gain if the amount you realize exceeds your adjusted basis in the property. File federal and state taxes online for free Report any gain on nonbusiness property as a capital gain. File federal and state taxes online for free   See Publication 4681 for more information. File federal and state taxes online for free Stockholder debt. File federal and state taxes online for free   If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution that is generally dividend income to you. File federal and state taxes online for free For more information, see Publication 542, Corporations. File federal and state taxes online for free   If you are a stockholder in a corporation and you cancel a debt owed to you by the corporation, you generally do not realize income. File federal and state taxes online for free This is because the canceled debt is considered as a contribution to the capital of the corporation equal to the amount of debt principal that you canceled. File federal and state taxes online for free Repayment of canceled debt. File federal and state taxes online for free   If you included a canceled amount in your income and later pay the debt, you may be able to file a claim for refund for the year the amount was included in income. File federal and state taxes online for free You can file a claim on Form 1040X if the statute of limitations for filing a claim is still open. File federal and state taxes online for free The statute of limitations generally does not end until 3 years after the due date of your original return. File federal and state taxes online for free Exceptions There are several exceptions to the inclusion of canceled debt in income. File federal and state taxes online for free These are explained next. File federal and state taxes online for free Student loans. File federal and state taxes online for free   Certain student loans contain a provision that all or part of the debt incurred to attend the qualified educational institution will be canceled if you work for a certain period of time in certain professions for any of a broad class of employers. File federal and state taxes online for free   You do not have income if your student loan is canceled after you agreed to this provision and then performed the services required. File federal and state taxes online for free To qualify, the loan must have been made by: The Federal Government, a state or local government, or an instrumentality, agency, or subdivision thereof, A tax-exempt public benefit corporation that has assumed control of a state, county, or municipal hospital, and whose employees are considered public employees under state law, or An educational institution: Under an agreement with an entity described in (1) or (2) that provided the funds to the institution to make the loan, or As part of a program of the institution designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or a tax-exempt organization described in section 501(c)(3). File federal and state taxes online for free   A loan to refinance a qualified student loan also will qualify if it was made by an educational institution or a qualified tax-exempt organization under its program designed as described in (3)(b) above. File federal and state taxes online for free Education loan repayment assistance. File federal and state taxes online for free   Education loan repayments made to you by the National Health Service Corps Loan Repayment Program (NHSC Loan Repayment Program), a state education loan repayment program eligible for funds under the Public Health Service Act, or any other state loan repayment or loan forgiveness program that is intended to provide for the increased availability of health services in underserved or health professional shortage areas are not taxable. File federal and state taxes online for free    The provision relating to the “other state loan repayment or loan forgiveness program” was added to this exclusion for amounts received in tax years beginning after December 31, 2008. File federal and state taxes online for free If you included these amounts in income in 2010, 2011, or 2012, you should file an amended tax return to exclude this income. File federal and state taxes online for free See Form 1040X and its instructions for details on filing. File federal and state taxes online for free Deductible debt. File federal and state taxes online for free   You do not have income from the cancellation of a debt if your payment of the debt would be deductible. File federal and state taxes online for free This exception applies only if you use the cash method of accounting. File federal and state taxes online for free For more information, see chapter 5 of Publication 334, Tax Guide for Small Business. File federal and state taxes online for free Price reduced after purchase. File federal and state taxes online for free   In most cases, if the seller reduces the amount of debt you owe for property you purchased, you do not have income from the reduction. File federal and state taxes online for free The reduction of the debt is treated as a purchase price adjustment and reduces your basis in the property. File federal and state taxes online for free Excluded debt. File federal and state taxes online for free   Do not include a canceled debt in your gross income in the following situations. File federal and state taxes online for free The debt is canceled in a bankruptcy case under title 11 of the U. File federal and state taxes online for free S. File federal and state taxes online for free Code. File federal and state taxes online for free See Publication 908, Bankruptcy Tax Guide. File federal and state taxes online for free The debt is canceled when you are insolvent. File federal and state taxes online for free However, you cannot exclude any amount of canceled debt that is more than the amount by which you are insolvent. File federal and state taxes online for free See Publication 908. File federal and state taxes online for free The debt is qualified farm debt and is canceled by a qualified person. File federal and state taxes online for free See chapter 3 of Publication 225, Farmer's Tax Guide. File federal and state taxes online for free The debt is qualified real property business debt. File federal and state taxes online for free See chapter 5 of Publication 334. File federal and state taxes online for free The cancellation is intended as a gift. File federal and state taxes online for free The debt is qualified principal residence indebtedness. File federal and state taxes online for free See Publication 525 for additional information. File federal and state taxes online for free Host or Hostess If you host a party or event at which sales are made, any gift or gratuity you receive for giving the event is a payment for helping a direct seller make sales. File federal and state taxes online for free You must report this item as income at its fair market value. File federal and state taxes online for free Your out-of-pocket party expenses are subject to the 50% limit for meal and entertainment expenses. File federal and state taxes online for free These expenses are deductible as miscellaneous itemized deductions subject to the 2%-of-AGI limit on Schedule A (Form 1040), but only up to the amount of income you receive for giving the party. File federal and state taxes online for free For more information about the 50% limit for meal and entertainment expenses, see chapter 26. File federal and state taxes online for free Life Insurance Proceeds Life insurance proceeds paid to you because of the death of the insured person are not taxable unless the policy was turned over to you for a price. File federal and state taxes online for free This is true even if the proceeds were paid under an accident or health insurance policy or an endowment contract. File federal and state taxes online for free However, interest income received as a result of life insurance proceeds may be taxable. File federal and state taxes online for free Proceeds not received in installments. File federal and state taxes online for free   If death benefits are paid to you in a lump sum or other than at regular intervals, include in your income only the benefits that are more than the amount payable to you at the time of the insured person's death. File federal and state taxes online for free If the benefit payable at death is not specified, you include in your income the benefit payments that are more than the present value of the payments at the time of death. File federal and state taxes online for free Proceeds received in installments. File federal and state taxes online for free   If you receive life insurance proceeds in installments, you can exclude part of each installment from your income. File federal and state taxes online for free   To determine the excluded part, divide the amount held by the insurance company (generally the total lump sum payable at the death of the insured person) by the number of installments to be paid. File federal and state taxes online for free Include anything over this excluded part in your income as interest. File federal and state taxes online for free Surviving spouse. File federal and state taxes online for free   If your spouse died before October 23, 1986, and insurance proceeds paid to you because of the death of your spouse are received in installments, you can exclude up to $1,000 a year of the interest included in the installments. File federal and state taxes online for free If you remarry, you can continue to take the exclusion. File federal and state taxes online for free Surrender of policy for cash. File federal and state taxes online for free   If you surrender a life insurance policy for cash, you must include in income any proceeds that are more than the cost of the life insurance policy. File federal and state taxes online for free In most cases, your cost (or investment in the contract) is the total of premiums that you paid for the life insurance policy, less any refunded premiums, rebates, dividends, or unrepaid loans that were not included in your income. File federal and state taxes online for free    You should receive a Form 1099-R showing the total proceeds and the taxable part. File federal and state taxes online for free Report these amounts on lines 16a and 16b of Form 1040 or lines 12a and 12b of Form 1040A. File federal and state taxes online for free More information. File federal and state taxes online for free   For more information, see Life Insurance Proceeds in Publication 525. File federal and state taxes online for free Endowment Contract Proceeds An endowment contract is a policy under which you are paid a specified amount of money on a certain date unless you die before that date, in which case, the money is paid to your designated beneficiary. File federal and state taxes online for free Endowment proceeds paid in a lump sum to you at maturity are taxable only if the proceeds are more than the cost of the policy. File federal and state taxes online for free To determine your cost, subtract any amount that you previously received under the contract and excluded from your income from the total premiums (or other consideration) paid for the contract. File federal and state taxes online for free Include the part of the lump sum payment that is more than your cost in your income. File federal and state taxes online for free Accelerated Death Benefits Certain amounts paid as accelerated death benefits under a life insurance contract or viatical settlement before the insured's death are excluded from income if the insured is terminally or chronically ill. File federal and state taxes online for free Viatical settlement. File federal and state taxes online for free   This is the sale or assignment of any part of the death benefit under a life insurance contract to a viatical settlement provider. File federal and state taxes online for free A viatical settlement provider is a person who regularly engages in the business of buying or taking assignment of life insurance contracts on the lives of insured individuals who are terminally or chronically ill and who meets the requirements of section 101(g)(2)(B) of the Internal Revenue Code. File federal and state taxes online for free Exclusion for terminal illness. File federal and state taxes online for free    Accelerated death benefits are fully excludable if the insured is a terminally ill individual. File federal and state taxes online for free This is a person who has been certified by a physician as having an illness or physical condition that can reasonably be expected to result in death within 24 months from the date of the certification. File federal and state taxes online for free Exclusion for chronic illness. File federal and state taxes online for free    If the insured is a chronically ill individual who is not terminally ill, accelerated death benefits paid on the basis of costs incurred for qualified long-term care services are fully excludable. File federal and state taxes online for free Accelerated death benefits paid on a per diem or other periodic basis are excludable up to a limit. File federal and state taxes online for free This limit applies to the total of the accelerated death benefits and any periodic payments received from long-term care insurance contracts. File federal and state taxes online for free For information on the limit and the definitions of chronically ill individual, qualified long-term care services, and long-term care insurance contracts, see Long-Term Care Insurance Contracts under Sickness and Injury Benefits in Publication 525. File federal and state taxes online for free Exception. File federal and state taxes online for free   The exclusion does not apply to any amount paid to a person (other than the insured) who has an insurable interest in the life of the insured because the insured: Is a director, officer, or employee of the person, or Has a financial interest in the person's business. File federal and state taxes online for free Form 8853. File federal and state taxes online for free   To claim an exclusion for accelerated death benefits made on a per diem or other periodic basis, you must file Form 8853, Archer MSAs and Long-Term Care Insurance Contracts, with your return. File federal and state taxes online for free You do not have to file Form 8853 to exclude accelerated death benefits paid on the basis of actual expenses incurred. File federal and state taxes online for free Public Safety Officer Killed in the Line of Duty If you are a survivor of a public safety officer who was killed in the line of duty, you may be able to exclude from income certain amounts you receive. File federal and state taxes online for free For this purpose, the term public safety officer includes law enforcement officers, firefighters, chaplains, and rescue squad and ambulance crew members. File federal and state taxes online for free For more information, see Publication 559, Survivors, Executors, and Administrators. File federal and state taxes online for free Partnership Income A partnership generally is not a taxable entity. File federal and state taxes online for free The income, gains, losses, deductions, and credits of a partnership are passed through to the partners based on each partner's distributive share of these items. File federal and state taxes online for free Schedule K-1 (Form 1065). File federal and state taxes online for free    Although a partnership generally pays no tax, it must file an information return on Form 1065, U. File federal and state taxes online for free S. File federal and state taxes online for free Return of Partnership Income, and send Schedule K-1 (Form 1065) to each partner. File federal and state taxes online for free In addition, the partnership will send each partner a copy of the Partner's Instructions for Schedule K-1 (Form 1065) to help each partner report his or her share of the partnership's income, deductions, credits, and tax preference items. File federal and state taxes online for free Keep Schedule K-1 (Form 1065) for your records. File federal and state taxes online for free Do not attach it to your Form 1040, unless you are specifically required to do so. File federal and state taxes online for free For more information on partnerships, see Publication 541, Partnerships. File federal and state taxes online for free Qualified joint venture. File federal and state taxes online for free   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. File federal and state taxes online for free To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. File federal and state taxes online for free For further information on how to make the election and which schedule(s) to file, see the instructions for your individual tax return. File federal and state taxes online for free S Corporation Income In most cases, an S corporation does not pay tax on its income. File federal and state taxes online for free Instead, the income, losses, deductions, and credits of the corporation are passed through to the shareholders based on each shareholder's pro rata share. File federal and state taxes online for free Schedule K-1 (Form 1120S). File federal and state taxes online for free   An S corporation must file a return on Form 1120S, U. File federal and state taxes online for free S. File federal and state taxes online for free Income Tax Return for an S Corporation, and send Schedule K-1 (Form 1120S) to each shareholder. File federal and state taxes online for free In addition, the S corporation will send each shareholder a copy of the Shareholder's Instructions for Schedule K-1 (Form 1120S) to help each shareholder report his or her share of the S corporation's income, losses, credits, and deductions. File federal and state taxes online for free Keep Schedule K-1 (Form 1120S) for your records. File federal and state taxes online for free Do not attach it to your Form 1040, unless you are specifically required to do so. File federal and state taxes online for free For more information on S corporations and their shareholders, see the Instructions for Form 1120S. File federal and state taxes online for free Recoveries A recovery is a return of an amount you deducted or took a credit for in an earlier year. File federal and state taxes online for free The most common recoveries are refunds, reimbursements, and rebates of deductions itemized on Schedule A (Form 1040). File federal and state taxes online for free You also may have recoveries of non-itemized deductions (such as payments on previously deducted bad debts) and recoveries of items for which you previously claimed a tax credit. File federal and state taxes online for free Tax benefit rule. File federal and state taxes online for free   You must include a recovery in your income in the year you receive it up to the amount by which the deduction or credit you took for the recovered amount reduced your tax in the earlier year. File federal and state taxes online for free For this purpose, any increase to an amount carried over to the current year that resulted from the deduction or credit is considered to have reduced your tax in the earlier year. File federal and state taxes online for free For more information, see Publication 525. File federal and state taxes online for free Federal income tax refund. File federal and state taxes online for free   Refunds of federal income taxes are not included in your income because they are never allowed as a deduction from income. File federal and state taxes online for free State tax refund. File federal and state taxes online for free   If you received a state or local income tax refund (or credit or offset) in 2013, you generally must include it in income if you deducted the tax in an earlier year. File federal and state taxes online for free The payer should send Form 1099-G, Certain Government Payments, to you by January 31, 2014. File federal and state taxes online for free The IRS also will receive a copy of the Form 1099-G. File federal and state taxes online for free If you file Form 1040, use the State and Local Income Tax Refund Worksheet in the 2013 Form 1040 instructions for line 10 to figure the amount (if any) to include in your income. File federal and state taxes online for free See Publication 525 for when you must use another worksheet. File federal and state taxes online for free   If you could choose to deduct for a tax year either: State and local income taxes, or State and local general sales taxes, then the maximum refund that you may have to include in income is limited to the excess of the tax you chose to deduct for that year over the tax you did not choose to deduct for that year. File federal and state taxes online for free For examples, see Publication 525. File federal and state taxes online for free Mortgage interest refund. File federal and state taxes online for free    If you received a refund or credit in 2013 of mortgage interest paid in an earlier year, the amount should be shown in box 3 of your Form 1098, Mortgage Interest Statement. File federal and state taxes online for free Do not subtract the refund amount from the interest you paid in 2013. File federal and state taxes online for free You may have to include it in your income under the rules explained in the following discussions. File federal and state taxes online for free Interest on recovery. File federal and state taxes online for free   Interest on any of the amounts you recover must be reported as interest income in the year received. File federal and state taxes online for free For example, report any interest you received on state or local income tax refunds on Form 1040, line 8a. File federal and state taxes online for free Recovery and expense in same year. File federal and state taxes online for free   If the refund or other recovery and the expense occur in the same year, the recovery reduces the deduction or credit and is not reported as income. File federal and state taxes online for free Recovery for 2 or more years. File federal and state taxes online for free   If you receive a refund or other recovery that is for amounts you paid in 2 or more separate years, you must allocate, on a pro rata basis, the recovered amount between the years in which you paid it. File federal and state taxes online for free This allocation is necessary to determine the amount of recovery from any earlier years and to determine the amount, if any, of your allowable deduction for this item for the current year. File federal and state taxes online for free For information on how to compute the allocation, see Recoveries in Publication 525. File federal and state taxes online for free Itemized Deduction Recoveries If you recover any amount that you deducted in an earlier year on Schedule A (Form 1040), you generally must include the full amount of the recovery in your income in the year you receive it. File federal and state taxes online for free Where to report. File federal and state taxes online for free   Enter your state or local income tax refund on Form 1040, line 10, and the total of all other recoveries as other income on Form 1040, line 21. File federal and state taxes online for free You cannot use Form 1040A or Form 1040EZ. File federal and state taxes online for free Standard deduction limit. File federal and state taxes online for free   You generally are allowed to claim the standard deduction if you do not itemize your deductions. File federal and state taxes online for free Only your itemized deductions that are more than your standard deduction are subject to the recovery rule (unless you are required to itemize your deductions). File federal and state taxes online for free If your total deductions on the earlier year return were not more than your income for that year, include in your income this year the lesser of: Your recoveries, or The amount by which your itemized deductions exceeded the standard deduction. File federal and state taxes online for free Example. File federal and state taxes online for free For 2012, you filed a joint return. File federal and state taxes online for free Your taxable income was $60,000 and you were not entitled to any tax credits. File federal and state taxes online for free Your standard deduction was $11,900, and you had itemized deductions of $14,000. File federal and state taxes online for free In 2013, you received the following recoveries for amounts deducted on your 2012 return: Medical expenses $200 State and local income tax refund 400 Refund of mortgage interest 325 Total recoveries $925 None of the recoveries were more than the deductions taken for 2012. File federal and state taxes online for free The difference between the state and local income tax you deducted and your local general sales tax was more than $400. File federal and state taxes online for free Your total recoveries are less than the amount by which your itemized deductions exceeded the standard deduction ($14,000 − 11,900 = $2,100), so you must include your total recoveries in your income for 2013. File federal and state taxes online for free Report the state and local income tax refund of $400 on Form 1040, line 10, and the balance of your recoveries, $525, on Form 1040, line 21. File federal and state taxes online for free Standard deduction for earlier years. File federal and state taxes online for free   To determine if amounts recovered in 2013 must be included in your income, you must know the standard deduction for your filing status for the year the deduction was claimed. File federal and state taxes online for free Look in the instructions for your tax return from prior years to locate the standard deduction for the filing status for that prior year. File federal and state taxes online for free Example. File federal and state taxes online for free You filed a joint return on Form 1040 for 2012 with taxable income of $45,000. File federal and state taxes online for free Your itemized deductions were $12,350. File federal and state taxes online for free The standard deduction that you could have claimed was $11,900. File federal and state taxes online for free In 2013, you recovered $2,100 of your 2012 itemized deductions. File federal and state taxes online for free None of the recoveries were more than the actual deductions for 2012. File federal and state taxes online for free Include $450 of the recoveries in your 2013 income. File federal and state taxes online for free This is the smaller of your recoveries ($2,100) or the amount by which your itemized deductions were more than the standard deduction ($12,350 − $11,900 = $450). File federal and state taxes online for free Recovery limited to deduction. File federal and state taxes online for free   You do not include in your income any amount of your recovery that is more than the amount you deducted in the earlier year. File federal and state taxes online for free The amount you include in your income is limited to the smaller of: The amount deducted on Schedule A (Form 1040), or The amount recovered. File federal and state taxes online for free Example. File federal and state taxes online for free During 2012 you paid $1,700 for medical expenses. File federal and state taxes online for free From this amount you subtracted $1,500, which was 7. File federal and state taxes online for free 5% of your adjusted gross income. File federal and state taxes online for free Your actual medical expense deduction was $200. File federal and state taxes online for free In 2013, you received a $500 reimbursement from your medical insurance for your 2012 expenses. File federal and state taxes online for free The only amount of the $500 reimbursement that must be included in your income for 2013 is $200—the amount actually deducted. File federal and state taxes online for free Other recoveries. File federal and state taxes online for free   See Recoveries in Publication 525 if: You have recoveries of items other than itemized deductions, or You received a recovery for an item for which you claimed a tax credit (other than investment credit or foreign tax credit) in a prior year. File federal and state taxes online for free Rents from Personal Property If you rent out personal property, such as equipment or vehicles, how you report your income and expenses is in most cases determined by: Whether or not the rental activity is a business, and Whether or not the rental activity is conducted for profit. File federal and state taxes online for free In most cases, if your primary purpose is income or profit and you are involved in the rental activity with continuity and regularity, your rental activity is a business. File federal and state taxes online for free See Publication 535, Business Expenses, for details on deducting expenses for both business and not-for-profit activities. File federal and state taxes online for free Reporting business income and expenses. File federal and state taxes online for free    If you are in the business of renting personal property, report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). File federal and state taxes online for free The form instructions have information on how to complete them. File federal and state taxes online for free Reporting nonbusiness income. File federal and state taxes online for free   If you are not in the business of renting personal property, report your rental income on Form 1040, line 21. File federal and state taxes online for free List the type and amount of the income on the dotted line next to line 21. File federal and state taxes online for free Reporting nonbusiness expenses. File federal and state taxes online for free   If you rent personal property for profit, include your rental expenses in the total amount you enter on Form 1040, line 36. File federal and state taxes online for free Also enter the amount and “PPR” on the dotted line next to line 36. File federal and state taxes online for free   If you do not rent personal property for profit, your deductions are limited and you cannot report a loss to offset other income. File federal and state taxes online for free See Activity not for profit , under Other Income, later. File federal and state taxes online for free Repayments If you had to repay an amount that you included in your income in an earlier year, you may be able to deduct the amount repaid from your income for the year in which you repaid it. File federal and state taxes online for free Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. File federal and state taxes online for free Generally, you can claim a deduction or credit only if the repayment qualifies as an expense or loss incurred in your trade or business or in a for-profit transaction. File federal and state taxes online for free Type of deduction. File federal and state taxes online for free   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. File federal and state taxes online for free You generally deduct the repayment on the same form or schedule on which you previously reported it as income. File federal and state taxes online for free For example, if you reported it as self-employment income, deduct it as a business expense on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). File federal and state taxes online for free If you reported it as a capital gain, deduct it as a capital loss as explained in the Instructions for Schedule D (Form 1040). File federal and state taxes online for free If you reported it as wages, unemployment compensation, or other nonbusiness income, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040). File federal and state taxes online for free Repaid social security benefits. File federal and state taxes online for free   If you repaid social security benefits or equivalent railroad retirement benefits, see Repayment of benefits in chapter 11. File federal and state taxes online for free Repayment of $3,000 or less. File federal and state taxes online for free   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. File federal and state taxes online for free If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 23. File federal and state taxes online for free Repayment over $3,000. File federal and state taxes online for free   If the amount you repaid was more than $3,000, you can deduct the repayment (as explained under Type of deduction , earlier). File federal and state taxes online for free However, you can choose instead to take a tax credit for the year of repayment if you included the income under a claim of right. File federal and state taxes online for free This means that at the time you included the income, it appeared that you had an unrestricted right to it. File federal and state taxes online for free If you qualify for this choice, figure your tax under both methods and compare the results. File federal and state taxes online for free Use the method (deduction or credit) that results in less tax. File federal and state taxes online for free When determining whether the amount you repaid was more or less than $3,000, consider the total amount being repaid on the return. File federal and state taxes online for free Each instance of repayment is not considered separately. File federal and state taxes online for free Method 1. File federal and state taxes online for free   Figure your tax for 2013 claiming a deduction for the repaid amount. File federal and state taxes online for free If you must deduct it as a miscellaneous itemized deduction, enter it on Schedule A (Form 1040), line 28. File federal and state taxes online for free Method 2. File federal and state taxes online for free   Figure your tax for 2013 claiming a credit for the repaid amount. File federal and state taxes online for free Follow these steps. File federal and state taxes online for free Figure your tax for 2013 without deducting the repaid amount. File federal and state taxes online for free Refigure your tax from the earlier year without including in income the amount you repaid in 2013. File federal and state taxes online for free Subtract the tax in (2) from the tax shown on your return for the earlier year. File federal and state taxes online for free This is the credit. File federal and state taxes online for free Subtract the answer in (3) from the tax for 2013 figured without the deduction (Step 1). File federal and state taxes online for free   If method 1 results in less tax, deduct the amount repaid. File federal and state taxes online for free If method 2 results in less tax, claim the credit figured in (3) above on Form 1040, line 71, by adding the amount of the credit to any other credits on this line, and entering “I. File federal and state taxes online for free R. File federal and state taxes online for free C. File federal and state taxes online for free 1341” in the column to the right of line 71. File federal and state taxes online for free   An example of this computation can be found in Publication 525. File federal and state taxes online for free Repaid wages subject to social security and Medicare taxes. File federal and state taxes online for free   If you had to repay an amount that you included in your wages or compensation in an earlier year on which social security, Medicare, or tier 1 RRTA taxes were paid, ask your employer to refund the excess amount to you. File federal and state taxes online for free If the employer refuses to refund the taxes, ask for a statement indicating the amount of the overcollection to support your claim. File federal and state taxes online for free File a claim for refund using Form 843, Claim for Refund and Request for Abatement. File federal and state taxes online for free Repaid wages subject to Additional Medicare Tax. File federal and state taxes online for free   Employers cannot make an adjustment or file a claim for refund for Additional Medicare Tax withholding when there is a repayment of wages received by an employee in a prior year because the employee determines liability for Additional Medicare Tax on the employee's income tax return for the prior year. File federal and state taxes online for free If you had to repay an amount that you included in your wages or compensation in an earlier year, and on which Additional Medicare Tax was paid, you may be able to recover the Additional Medicare Tax paid on the amount. File federal and state taxes online for free To recover Additional Medicare Tax on the repaid wages or compensation, you must file Form 1040X, Amended U. File federal and state taxes online for free S. File federal and state taxes online for free Individual Income Tax Return, for the prior year in which the wages or compensation were originally received. File federal and state taxes online for free See the Instructions for Form 1040X. File federal and state taxes online for free Royalties Royalties from copyrights, patents, and oil, gas, and mineral properties are taxable as ordinary income. File federal and state taxes online for free In most cases you report royalties in Part I of Schedule E (Form 1040). File federal and state taxes online for free However, if you hold an operating oil, gas, or mineral interest or are in business as a self-employed writer, inventor, artist, etc. File federal and state taxes online for free , report your income and expenses on Schedule C or Schedule C-EZ (Form 1040). File federal and state taxes online for free Copyrights and patents. File federal and state taxes online for free   Royalties from copyrights on literary, musical, or artistic works, and similar property, or from patents on inventions, are amounts paid to you for the right to use your work over a specified period of time. File federal and state taxes online for free Royalties generally are based on the number of units sold, such as the number of books, tickets to a performance, or machines sold. File federal and state taxes online for free Oil, gas, and minerals. File federal and state taxes online for free   Royalty income from oil, gas, and mineral properties is the amount you receive when natural resources are extracted from your property. File federal and state taxes online for free The royalties are based on units, such as barrels, tons, etc. File federal and state taxes online for free , and are paid to you by a person or company who leases the property from you. File federal and state taxes online for free Depletion. File federal and state taxes online for free   If you are the owner of an economic interest in mineral deposits or oil and gas wells, you can recover your investment through the depletion allowance. File federal and state taxes online for free For information on this subject, see chapter 9 of Publication 535. File federal and state taxes online for free Coal and iron ore. File federal and state taxes online for free   Under certain circumstances, you can treat amounts you receive from the disposal of coal and iron ore as payments from the sale of a capital asset, rather than as royalty income. File federal and state taxes online for free For information about gain or loss from the sale of coal and iron ore, see Publication 544. File federal and state taxes online for free Sale of property interest. File federal and state taxes online for free   If you sell your complete interest in oil, gas, or mineral rights, the amount you receive is considered payment for the sale of property used in a trade or business under section 1231, not royalty income. File federal and state taxes online for free Under certain circumstances, the sale is subject to capital gain or loss treatment as explained in the Instructions for Schedule D (Form 1040). File federal and state taxes online for free For more information on selling section 1231 property, see chapter 3 of Publication 544. File federal and state taxes online for free   If you retain a royalty, an overriding royalty, or a net profit interest in a mineral property for the life of the property, you have made a lease or a sublease, and any cash you receive for the assignment of other interests in the property is ordinary income subject to a depletion allowance. File federal and state taxes online for free Part of future production sold. File federal and state taxes online for free   If you own mineral property but sell part of the future production, in most cases you treat the money you receive from the buyer at the time of the sale as a loan from the buyer. File federal and state taxes online for free Do not include it in your income or take depletion based on it. File federal and state taxes online for free   When production begins, you include all the proceeds in your income, deduct all the production expenses, and deduct depletion from that amount to arrive at your taxable income from the property. File federal and state taxes online for free Unemployment Benefits The tax treatment of unemployment benefits you receive depends on the type of program paying the benefits. File federal and state taxes online for free Unemployment compensation. File federal and state taxes online for free   You must include in income all unemployment compensation you receive. File federal and state taxes online for free You should receive a Form 1099-G showing in box 1 the total unemployment compensation paid to you. File federal and state taxes online for free In most cases, you enter unemployment compensation on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. File federal and state taxes online for free Types of unemployment compensation. File federal and state taxes online for free   Unemployment compensation generally includes any amount received under an unemployment compensation law of the United States or of a state. File federal and state taxes online for free It includes the following benefits. File federal and state taxes online for free Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund. File federal and state taxes online for free State unemployment insurance benefits. File federal and state taxes online for free Railroad unemployment compensation benefits. File federal and state taxes online for free Disability payments from a government program paid as a substitute for unemployment compensation. File federal and state taxes online for free (Amounts received as workers' compensation for injuries or illness are not unemployment compensation. File federal and state taxes online for free See chapter 5 for more information. File federal and state taxes online for free ) Trade readjustment allowances under the Trade Act of 1974. File federal and state taxes online for free Unemployment assistance under the Disaster Relief and Emergency Assistance Act. File federal and state taxes online for free Unemployment assistance under the Airline Deregulation Act of 1974 Program. File federal and state taxes online for free Governmental program. File federal and state taxes online for free   If you contribute to a governmental unemployment compensation program and your contributions are not deductible, amounts you receive under the program are not included as unemployment compensation until you recover your contributions. File federal and state taxes online for free If you deducted all of your contributions to the program, the entire amount you receive under the program is included in your income. File federal and state taxes online for free Repayment of unemployment compensation. File federal and state taxes online for free   If you repaid in 2013 unemployment compensation you received in 2013, subtract the amount you repaid from the total amount you received and enter the difference on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. File federal and state taxes online for free On the dotted line next to your entry enter “Repaid” and the amount you repaid. File federal and state taxes online for free If you repaid unemployment compensation in 2013 that you included in income in an earlier year, you can deduct the amount repaid on Schedule A (Form 1040), line 23, if you itemize deductions. File federal and state taxes online for free If the amount is more than $3,000, see Repayments , earlier. File federal and state taxes online for free Tax withholding. File federal and state taxes online for free   You can choose to have federal income tax withheld from your unemployment compensation. File federal and state taxes online for free To make this choice, complete Form W-4V, Voluntary Withholding Request, and give it to the paying office. File federal and state taxes online for free Tax will be withheld at 10% of your payment. File federal and state taxes online for free    If you do not choose to have tax withheld from your unemployment compensation, you may be liable for estimated tax. File federal and state taxes online for free If you do not pay enough tax, either through withholding or estimated tax, or a combination of both, you may have to pay a penalty. File federal and state taxes online for free For more information on estimated tax, see chapter 4. File federal and state taxes online for free Supplemental unemployment benefits. File federal and state taxes online for free   Benefits received from an employer-financed fund (to which the employees did not contribute) are not unemployment compensation. File federal and state taxes online for free They are taxable as wages and are subject to withholding for income tax. File federal and state taxes online for free They may be subject to social security and Medicare taxes. File federal and state taxes online for free For more information, see Supplemental Unemployment Benefits in section 5 of Publication 15-A, Employer's Supplemental Tax Guide. File federal and state taxes online for free Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. File federal and state taxes online for free Repayment of benefits. File federal and state taxes online for free   You may have to repay some of your supplemental unemployment benefits to qualify for trade readjustment allowances under the Trade Act of 1974. File federal and state taxes online for free If you repay supplemental unemployment benefits in the same year you receive them, reduce the total benefits by the amount you repay. File federal and state taxes online for free If you repay the benefits in a later year, you must include the full amount of the benefits received in your income for the year you received them. File federal and state taxes online for free   Deduct the repayment in the later year as an adjustment to gross income on Form 1040. File federal and state taxes online for free (You cannot use Form 1040A or Form 1040EZ. File federal and state taxes online for free ) Include the repayment on Form 1040, line 36, and enter “Sub-Pay TRA” and the amount on the dotted line next to line 36. File federal and state taxes online for free If the amount you repay in a later year is more than $3,000, you may be able to take a credit against your tax for the later year instead of deducting the amount repaid. File federal and state taxes online for free For more information on this, see Repayments , earlier. File federal and state taxes online for free Private unemployment fund. File federal and state taxes online for free   Unemployment benefit payments from a private (nonunion) fund to which you voluntarily contribute are taxable only if the amounts you receive are more than your total payments into the fund. File federal and state taxes online for free Report the taxable amount on Form 1040, line 21. File federal and state taxes online for free Payments by a union. File federal and state taxes online for free   Benefits paid to you as an unemployed member of a union from regular union dues are included in your income on Form 1040, line 21. File federal and state taxes online for free However, if you contribute to a special union fund and your payments to the fund are not deductible, the unemployment benefits you receive from the fund are includible in your income only to the extent they are more than your contributions. File federal and state taxes online for free Guaranteed annual wage. File federal and state taxes online for free   Payments you receive from your employer during periods of unemployment, under a union agreement that guarantees you full pay during the year, are taxable as wages. File federal and state taxes online for free Include them on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. File federal and state taxes online for free State employees. File federal and state taxes online for free   Payments similar to a state's unemployment compensation may be made by the state to its employees who are not covered by the state's unemployment compensation law. File federal and state taxes online for free Although the payments are fully taxable, do not report them as unemployment compensation. File federal and state taxes online for free Report these payments on Form 1040, line 21. File federal and state taxes online for free Welfare and Other Public Assistance Benefits Do not include in your income governmental benefit payments from a public welfare fund based upon need, such as payments to blind individuals under a state public assistance law. File federal and state taxes online for free Payments from a state fund for the victims of crime should not be included in the victims' incomes if they are in the nature of welfare payments. File federal and state taxes online for free Do not deduct medical expenses that are reimbursed by such a fund. File federal and state taxes online for free You must include in your income any welfare payments that are compensation for services or that are obtained fraudulently. File federal and state taxes online for free Reemployment Trade Adjustment Assistance (RTAA) payments. File federal and state taxes online for free   RTAA payments received from a state must be included in your income. File federal and state taxes online for free The state must send you Form 1099-G to advise you of the amount you should include in income. File federal and state taxes online for free The amount should be reported on Form 1040, line 21. File federal and state taxes online for free Persons with disabilities. File federal and state taxes online for free   If you have a disability, you must include in income compensation you receive for services you perform unless the compensation is otherwise excluded. File federal and state taxes online for free However, you do not include in income the value of goods, services, and cash that you receive, not in return for your services, but for your training and rehabilitation because you have a disability. File federal and state taxes online for free Excludable amounts include payments for transportation and attendant care, such as interpreter services for the deaf, reader services for the blind, and services to help individuals with an intellectual disability do their work. File federal and state taxes online for free Disaster relief grants. File federal and state taxes online for free    Do not include post-disaster grants received under the Robert T. File federal and state taxes online for free Stafford Disaster Relief and Emergency Assistance Act in your income if the grant payments are made to help you meet necessary expenses or serious needs for medical, dental, housing, personal property, transportation, child care, or funeral expenses. File federal and state taxes online for free Do not deduct casualty losses or medical expenses that are specifically reimbursed by these disaster relief grants. File federal and state taxes online for free If you have deducted a casualty loss for the loss of your personal residence and you later receive a disaster relief grant for the loss of the same residence, you may have to include part or all of the grant in your taxable income. File federal and state taxes online for free See Recoveries , earlier. File federal and state taxes online for free Unemployment assistance payments under the Act are taxable unemployment compensation. File federal and state taxes online for free See Unemployment compensation under Unemployment Benefits, earlier. File federal and state taxes online for free Disaster relief payments. File federal and state taxes online for free   You can exclude from income any amount you receive that is a qualified disaster relief payment. File federal and state taxes online for free A qualified disaster relief payment is an amount paid to you: To reimburse or pay reasonable and necessary personal, family, living, or funeral expenses that result from a qualified disaster; To reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of your home or repair or replacement of its contents to the extent it is due to a qualified disaster; By a person engaged in the furnishing or sale of transportation as a common carrier because of the death or personal physical injuries incurred as a result of a qualified disaster; or By a federal, state, or local government, or agency, or instrumentality in connection with a qualified disaster in order to promote the general welfare. File federal and state taxes online for free You can exclude this amount only to the extent any expense it pays for is not paid for by insurance or otherwise. File federal and state taxes online for free The exclusion does not apply if you were a participant or conspirator in a terrorist action or a representative of one. File federal and state taxes online for free   A qualified disaster is: A disaster which results from a terrorist or military action; A federally declared disaster; or A disaster which results from an accident involving a common carrier, or from any other event, which is determined to be catastrophic by the Secretary of the Treasury or his or her delegate. File federal and state taxes online for free   For amounts paid under item (4), a disaster is qualified if it is determined by an applicable federal, state, or local authority to warrant assistance from the federal, state, or local government, agency, or instrumentality. File federal and state taxes online for free Disaster mitigation payments. File federal and state taxes online for free   You also can exclude from income any amount you receive that is a qualified disaster mitigation payment. File federal and state taxes online for free Qualified disaster mitigation payments are also most commonly paid to you in the period immediately following damage to property as a result of a natural disaster. File federal and state taxes online for free However, disaster mitigation payments are used to mitigate (reduce the severity of) potential damage from future natural disasters. File federal and state taxes online for free They are paid to you through state and local governments based on the provisions of the Robert T. File federal and state taxes online for free Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act. File federal and state taxes online for free   You cannot increase the basis or adjusted basis of your property for improvements made with nontaxable disaster mitigation payments. File federal and state taxes online for free Home Affordable Modification Program (HAMP). File federal and state taxes online for free   If you benefit from Pay-for-Performance Success Payments under HAMP, the payments are not taxable. File federal and state taxes online for free Mortgage assistance payments under section 235 of the National Housing Act. File federal and state taxes online for free   Payments made under section 235 of the National Housing Act for mortgage assistance are not included in the homeowner's income. File federal and state taxes online for free Interest paid for the homeowner under the mortgage assistance program cannot be deducted. File federal and state taxes online for free Medicare. File federal and state taxes online for free   Medicare benefits received under title XVIII of the Social Security Act are not includible in the gross income of the individuals for whom they are paid. File federal and state taxes online for free This includes basic (part A (Hospital Insurance Benefits for the Aged)) and supplementary (part B (Supplementary Medical Insurance Benefits for the Aged)). File federal and state taxes online for free Old-age, survivors, and disability insurance benefits (OASDI). File federal and state taxes online for free   Generally, OASDI payments under section 202 of title II of the Social Security Act are not includible in the gross income of the individuals to whom they are paid. File federal and state taxes online for free This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment. File federal and state taxes online for free Nutrition Program for the Elderly. File federal and state taxes online for free    Food benefits you receive under the Nutrition Program for the Elderly are not taxable. File federal and state taxes online for free If you prepare and serve free meals for the program, include in your income as wages the cash pay you receive, even if you are also eligible for food benefits. File federal and state taxes online for free Payments to reduce cost of winter energy. File federal and state taxes online for free   Payments made by a state to qualified people to reduce their cost of winter energy use are not taxable. File federal and state taxes online for free Other Income The following brief discussions are arranged in alphabetical order. File federal and state taxes online for free Other income items briefly discussed below are referenced to publications which provide more topical information. File federal and state taxes online for free Activity not for profit. File federal and state taxes online for free   You must include on your return income from an activity from which you do not expect to make a profit. File federal and state taxes online for free An example of this type of activity is a hobby or a farm you operate mostly for recreation and pleasure. File federal and state taxes online for free Enter this income on Form 1040, line 21. File federal and state taxes online for free Deductions for expenses related to the activity are limited. File federal and state taxes online for free They cannot total more than the income you report and can be taken only if you itemize deductions on Schedule A (Form 1040). File federal and state taxes online for free See Not-for-Profit Activities in chapter 1 of Publication 535 for information on whether an activity is considered carried on for a profit. File federal and state taxes online for free Alaska Permanent Fund dividend. File federal and state taxes online for free   If you received a payment from Alaska's mineral income fund (Alaska Permanent Fund dividend), report it as income on line 21 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. File federal and state taxes online for free The state of Alaska sends each recipient a document that shows the amount of the payment with the check. File federal and state taxes online for free The amount also is reported to IRS. File federal and state taxes online for free Alimony. File federal and state taxes online for free   Include in your income on Form 1040, line 11, any alimony payments you receive. File federal and state taxes online for free Amounts you receive for child support are not income to you. File federal and state taxes online for free Alimony and child support payments are discussed in chapter 18. File federal and state taxes online for free Bribes. File federal and state taxes online for free   If you receive a bribe, include it in your income. File federal and state taxes online for free Campaign contributions. File federal and state taxes online for free   These contributions are not income to a candidate unless they are diverted to his or her personal use. File federal and state taxes online for free To be exempt from tax, the contributions must be spent for campaign purposes or kept in a fund for use in future campaigns. File federal and state taxes online for free However, interest earned on bank deposits, dividends received on contributed securities, and net gains realized on sales of contributed securities are taxable and must be reported on Form 1120-POL, U. File federal and state taxes online for free S. File federal and state taxes online for free Income Tax Return for Certain Political Organizations. File federal and state taxes online for free Excess campaign funds transferred to an office account must be included in the officeholder's income on Form 1040, line 21, in the year transferred. File federal and state taxes online for free Car pools. File federal and state taxes online for free   Do not include in your income amounts you receive from the passengers for driving a car in a car pool to and from work. File federal and state taxes online for free These amounts are considered reimbursement for your expenses. File federal and state taxes online for free However, this rule does not apply if you have developed car pool arrangements into a profit-making business of transporting workers for hire. File federal and state taxes online for free Cash rebates. File federal and state taxes online for free   A cash rebate you receive from a dealer or manufacturer of an item you buy is not income, but you must reduce your basis by the amount of the rebate. File federal and state taxes online for free Example. File federal and state taxes online for free You buy a new car for $24,000 cash and receive a $2,000 rebate check from the manufacturer. File federal and state taxes online for free The $2,000 is not income to you. File federal and state taxes online for free Your basis in the car is $22,000. File federal and state taxes online for free This is the basis on which you figure gain or loss if you sell the car and depreciation if you use it for business. File federal and state taxes online for free Casualty insurance and other reimbursements. File federal and state taxes online for free   You generally should not report these reimbursements on your return unless you are figuring gain or loss from the casualty or theft. File federal and state taxes online for free See chapter 25 for more information. File federal and state taxes online for free Child support payments. File federal and state taxes online for free   You should not report these payments on your return. File federal and state taxes online for free See chapter 18 for more information. File federal and state taxes online for free Court awards and damages. File federal and state taxes online for free   To determine if settlement amounts you receive by compromise or judgment must be included in your income, you must consider the item that the settlement replaces. File federal and state taxes online for free The character of the income as ordinary income or capital gain depends on the nature of the underlying claim. File federal and state taxes online for free Include the following as ordinary income. File federal and state taxes online for free Interest on any award. File federal and state taxes online for free Compensation for lost wages or lost profits in most cases. File federal and state taxes online for free Punitive damages, in most cases. File federal and state taxes online for free It does not matter if they relate to a physical injury or physical sickness. File federal and state taxes online for free Amounts received in settlement of pension rights (if you did not contribute to the plan). File federal and state taxes online for free Damages for: Patent or copyright infringement, Breach of contract, or Interference with business operations. File federal and state taxes online for free Back pay and damages for emotional distress received to satisfy a claim under title VII of the Civil Rights Act of 1964. File federal and state taxes online for free Attorney fees and costs (including contingent fees) where the underlying recovery is included in gross income. File federal and state taxes online for free   Do not include in your income compensatory damages for personal physical injury or physical sickness (whether received in a lump sum or installments). File federal and state taxes online for free Emotional distress. File federal and state taxes online for free   Emotional distress itself is not a physical injury or physical sickness, but damages you receive for emotional distress due to a physical injury or sickness are treated as received for the physical injury or sickness. File federal and state taxes online for free Do not include them in your income. File federal and state taxes online for free   If the emotional distress is due to a personal injury that is not due to a physical injury or sickness (for example, employment discrimination or injury to reputation), you must include the damages in your income, except for any damages you receive for medical care due to that emotional distress. File federal and state taxes online for free Emotional distress includes physical symptoms that result from emotional distress, such as headaches, insomnia, and stomach disorders. File federal and state taxes online for free Deduction for costs involved in unlawful discrimination suits. File federal and state taxes online for free   You may be able to deduct attorney fees and court costs paid to recover a judgment or settlement for a claim of unlawful discrimination under various provisions of federal, state, and local law listed in Internal Revenue Code section 62(e), a claim against the United States government, or a claim under section 1862(b)(3)(A) of the Social Security Act. File federal and state taxes online for free For more information, see Publication 525. File federal and state taxes online for free Credit card insurance. File federal and state taxes online for free   In most cases, if you receive benefits under a credit card disability or unemployment insurance plan, the benefits are taxable to you. File federal and state taxes online for free These plans make the minimum monthly payment on your credit card account if you cannot make the payment due to injury, illness, disability, or unemployment. File federal and state taxes online for free Report on Form 1040, line 21, the amount of benefits you received during the year that is more than the amount of the premiums you paid during the year. File federal and state taxes online for free Down payment assistance. File federal and state taxes online for free   If you purchase a home and receive assistance from a nonprofit corporation to make the down payment, that assistance is not included in your income. File federal and state taxes online for free If the corporation qualifies as a tax-exempt charitable organization, the assistance is treated as a gift and is included in your basis of the house. File federal and state taxes online for free If the corporation does not qualify, the assistance is treated as a rebate or reduction of the purchase price and is not included in your basis. File federal and state taxes online for free Employment agency fees. File federal and state taxes online for free   If you get a job through an employment agency, and the fee is paid by your employer, the fee is not includible in your income if you are not liable for it. File federal and state taxes online for free However, if you pay it and your employer reimburses you for it, it is includible in your income. File federal and state taxes online for free Energy conservation subsidies. File federal and state taxes online for free   You can exclude from gross income any subsidy provided, either directly or indirectly, by public utilities for the purchase or installation of an energy conservation measure for a dwelling unit. File federal and state taxes online for free Energy conservation measure. File federal and state taxes online for free   This includes installations or modifications that are primarily designed to reduce consumption of electricity or natural gas, or improve the management of energy demand. File federal and state taxes online for free Dwelling unit. File federal and state taxes online for free   This includes a house, apartment, condominium, mobile home, boat, or similar property. File federal and state taxes online for free If a building or structure contains both dwelling and other units, any subsidy must be properly allocated. File federal and state taxes online for free Estate and trust income. File federal and state taxes online for free    An estate or trust, unlike a partnership, may have to pay federal income tax. File federal and state taxes online for free If you are a beneficiary of an estate or trust, you may be taxed on your share of its income distributed or required to be distributed to you. File federal and state taxes online for free However, there is never a double tax. File federal and state taxes online for free Estates and trusts file their returns on Form 1041, U. File federal and state taxes online for free S. File federal and state taxes online for free Income Tax Return for Estates and Trusts, and your share of the income is reported to you on Schedule K-1 (Form 1041). File federal and state taxes online for free Current income required to be distributed. File federal and state taxes online for free   If you are the beneficiary of an estate or trust that must distribute all of its current income, you must report your share of the distributable net income, whether or not you actually received it. File federal and state taxes online for free Current income not required to be distributed. File federal and state taxes online for free    If you are the beneficiary of an estate or trust and the fiduciary has the choice of whether to distribute all or part of the current income, you must report: All income that is required to be distributed to you, whether or not it is actually distributed, plus All other amounts actually paid or credited to you, up to the amount of your share of distributable net income. File federal and state taxes online for free How to report. File federal and state taxes online for free   Treat each item of income the same way that the estate or trust would treat it. File federal and state taxes online for free For example, if a trust's dividend income is distributed to you, you report the distribution as dividend income on your return. File federal and state taxes online for free The same rule applies to distributions of tax-exempt interest and capital gains. File federal and state taxes online for free   The fiduciary of the estate or trust must tell you the type of items making up your share of the estate or trust income and any credits you are allowed on your individual income tax return. File federal and state taxes online for free Losses. File federal and state taxes online for free   Losses of estates and trusts generally are not deductible by the beneficiaries. File federal and state taxes online for free Grantor trust. File federal and state taxes online for free   Income earned by a grantor trust is taxable to the grantor, not the beneficiary, if the grantor keeps certain control over the trust. File federal and state taxes online for free (The grantor is the one who transferred property to the trust. File federal and state taxes online for free ) This rule applies if the property (or income from the property) put into the trust will or may revert (be returned) to the grantor or the grantor's spouse. File federal and state taxes online for free   Generally, a trust is a grantor trust if the grantor has a reversionary interest valued (at the date of transfer) at more than 5% of the value of the transferred property. File federal and state taxes online for free Expenses paid by another. File federal and state taxes online for free   If your personal expenses are paid for by another person, such as a corporation, the payment may be taxable to you depending upon your relationship with that person and the nature of the payment. File federal and state taxes online for free But if the payment makes up for a loss caused by that person, and only restores you to the position you were in before the loss, the payment is not includible in your income. File federal and state taxes online for free Fees for services. File federal and state taxes online for free   Include all fees for your services in your income. File federal and state taxes online for free Examples of these fees are amounts you receive for services you perform as: A corporate director, An executor, administrator, or personal representative of an estate, A manager of a trade or business you operated before declaring Chapter 11 bankruptcy, A notary public, or An election precinct official. File federal and state taxes online for free Nonemployee compensation. File federal and state taxes online for free   If you are not an employee and the fees for your services from the same payer total $600 or more for the year, you may receive a Form 1099-MISC. File federal and state taxes online for free You may need to report your fees as self-employment income. File federal and state taxes online for free See Self-Employed Persons , in chapter 1, for a discussion of when you are considered self-employed. File federal and state taxes online for free Corporate director. File federal and state taxes online for free   Corporate director fees are self-employment income. File federal and state taxes online for free Report these payments on Schedule C or Schedule C-EZ (Form 1040). File federal and state taxes online for free Personal representatives. File federal and state taxes online for free   All personal representatives must include in their gross income fees paid to them from an estate. File federal and state taxes online for free If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on Form 1040, line 21. File federal and state taxes online for free If you are in the trade or business of being an executor, report these fees as self-employment income on Schedule C or Schedule C-EZ (Form 1040). File federal and state taxes online for free The fee is not includible in income if it is waived. File federal and state taxes online for free Manager of trade or business for bankruptcy estate. File federal and state taxes online for free   Include in your income all payments received from your bankruptcy estate for managing or operating a trade or business that you operated before you filed for bankruptcy. File federal and state taxes online for free Report this income on Form 1040, line 21. File federal and state taxes online for free Notary public. File federal and state taxes online for free    Report payments for these services on Schedule C or Schedule C-EZ (Form 1040). File federal and state taxes online for free These payments are not subject to self-employment tax. File federal and state taxes online for free See the separate instructions for Schedule SE (Form 1040) for details. File federal and state taxes online for free Election precinct official. File federal and state taxes online for free    You should receive a Form W-2 showing payments for services performed as an election official or election worker. File federal and state taxes online for free Report these payments on line 7 of Form 1040 or Form 1040A or on line 1 of Form 1040EZ. File federal and state taxes online for free Foster care providers. File federal and state taxes online for free   Payments you receive from a state, political subdivision, or a qualified foster care placement agency for providing care to qualified foster individuals in your home generally are not included in your income. File federal and state taxes online for free However, you must include in your income payments received for the care of more than 5 individuals age 19 or older and certain difficulty-of-care payments. File federal and state taxes online for free   A qualified foster individual is a person who: Is living in a foster family home, and Was placed there by: An agency of a state or one of its political subdivisions, or A qualified foster care placement agency. File federal and state taxes online for free Difficulty-of-care payments. File federal and state taxes online for free   These are additional payments that are designated by the payer as compensation for providing the additional care that is required for physically, mentally, or emotionally handicapped qualified foster individuals. File federal and state taxes online for free A state must determine that the additional compensation is needed, and the care for which the payments are made must be provided in your home. File federal and state taxes online for free   You must include in your income difficulty-of-care payments received for more than: 10 qualified foster individuals under age 19, or 5 qualified foster individuals age 19 or older. File federal and state taxes online for free Maintaining space in home. File federal and state taxes online for free   If you are paid to maintain space in your home for emergency foster care, you must include the payment in your income. File federal and state taxes online for free Reporting taxable payments. File federal and state taxes online for free    If you receive payments that you must include in your income, you are in business as a foster care provider and you are self-employed. File federal and state taxes online for free Report the payments on Schedule C or Schedule C-EZ (Form 1040). File federal and state taxes online for free See Publication 587, Business Use of Your Home, to help you determine the amount you can deduct for the use of your home. File federal and state taxes online for free Found property. File federal and state taxes online for free   If you find and keep property that does not belong to you that has been lost or abandoned (treasure-trove), it is taxable to you at its fair market value in the first year it is your undisputed possession. File federal and state taxes online for free Free tour. File federal and state taxes online for free   If you received a free tour from a travel agency for organizing a group of tourists, you must include its value in your income. File federal and state taxes online for free Report the fair market value of the tour on Form 1040, line 21, if you are not in the trade or business of organizing tours. File federal and state taxes online for free You cannot deduct your expenses in serving as the voluntary leader of the group at the group's request. File federal and state taxes online for free If you organize tours as a trade or business, report the tour's value on Schedule C or Schedule C-EZ (Form 1040). File federal and state taxes online for free Gambling winnings. File federal and state taxes online for free   You must include your gambling winnings in income on Form 1040, line 21. File federal and state taxes online for free If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. File federal and state taxes online for free Lotteries and raffles. File federal and state taxes online for free   Winnings from lotteries and raffles are gambling winnings. File federal and state taxes online for free In addition to cash winnings, you must include in your income the fair market value of bonds, cars, houses, and other noncash prizes. File federal and state taxes online for free    If you win a state lottery prize payable in installments, see Publication 525 for more information. File federal and state taxes online for free Form W-2G. File federal and state taxes online for free   You may have received a Form W-2G, Certain Gambling Winnings, showing the amount of your gambling winnings and any tax taken out of them. File federal and state taxes online for free Include the amount from box 1 on Form 1040, line 21. File federal and state taxes online for free Include the amount shown in box 4 on Form 1040, line 62, as federal income tax withheld. File federal and state taxes online for free Reporting winnings and recordkeeping. File federal and state taxes online for free   For more information on reporting gam
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Where to File Paper Tax Returns - With or Without a Payment

Where to File Tax Returns - Addresses Listed by Return Type
Where to file addresses listed by return type for use during calendar year 2013.

Where to File Certain Elections, Statements, Returns and Other Documents
This page provides up-to-date information on filing addresses for certain elections, statements, returns and other documents required by the Code of Federal Regulations (CFR) Title 26

Where to Send Non-Return Forms (Applications and Payments)
Where to send certain payments and applications other than tax returns. This page provides a quick guide for where to send certain non-return forms, applications, and payments.

Where to File - Tax Exempt and Government Entities
Where to file addresses for tax exempt and government entities.

Private Delivery Services (PDS)
Use these addresses ONLY IF you are using a private delivery service to send your returns to IRS. If you are not using a private delivery service, use the links above to find the correct mailing address to mail your return.

Page Last Reviewed or Updated: 13-Feb-2014

The File Federal And State Taxes Online For Free

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