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File Free State And Federal Taxes

File free state and federal taxes Publication 501 - Main Content Table of Contents Who Must FileSelf-employed persons. File free state and federal taxes Filing Requirements for Most Taxpayers Dependents Other Situations Who Should File Filing StatusMarital Status Single Married Filing Jointly Married Filing Separately Head of Household Qualifying Widow(er) With Dependent Child ExemptionsForm 1040EZ filers. File free state and federal taxes Form 1040A filers. File free state and federal taxes Form 1040 filers. File free state and federal taxes More information. File free state and federal taxes Personal Exemptions Exemptions for Dependents Qualifying Child Qualifying Relative Phaseout of Exemptions Social Security Numbers for DependentsBorn and died in 2013. File free state and federal taxes Taxpayer identification numbers for aliens. File free state and federal taxes Taxpayer identification numbers for adoptees. File free state and federal taxes Standard DeductionStandard Deduction Amount Standard Deduction for Dependents Who Should Itemize How To Get Tax HelpLow Income Taxpayer Clinics Who Must File If you are a U. File free state and federal taxes S. File free state and federal taxes citizen or resident alien, whether you must file a federal income tax return depends on your gross income, your filing status, your age, and whether you are a dependent. File free state and federal taxes For details, see Table 1 and Table 2. File free state and federal taxes You also must file if one of the situations described in Table 3 applies. File free state and federal taxes The filing requirements apply even if you owe no tax. File free state and federal taxes Table 1. File free state and federal taxes 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. File free state and federal taxes . File free state and federal taxes . File free state and federal taxes AND at the end of 2013 you were. File free state and federal taxes . File free state and federal taxes . File free state and federal taxes * THEN file a return if your gross income was at least. File free state and federal taxes . File free state and federal taxes . File free state and federal taxes ** single under 65  $10,000 65 or older $11,500 head of household under 65 $12,850 65 or older $14,350 married, filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married, filing separately any age  $3,900 qualifying widow(er) with dependent child under 65 $16,100 65 or older $17,300 * If you were born before January 2, 1949, you are considered to be 65 or older at the end of 2013. File free state and federal taxes ** Gross income means all income you receive in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). File free state and federal taxes Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013 or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). File free state and federal taxes If (a) or (b) applies, see the Form 1040 instructions to figure the taxable part of social security benefits you must include in gross income. File free state and federal taxes Gross income includes gains, but not losses, reported on Form 8949 or Schedule D. File free state and federal taxes Gross income from a business means, for example, the amount on Schedule C, line 7, or Schedule F, line 9. File free state and federal taxes But in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C, line 7, or Schedule F, line 9. File free state and federal taxes *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. File free state and federal taxes You may have to pay a penalty if you are required to file a return but fail to do so. File free state and federal taxes If you willfully fail to file a return, you may be subject to criminal prosecution. File free state and federal taxes For information on what form to use — Form 1040EZ, Form 1040A, or Form 1040 — see the instructions for your tax return. File free state and federal taxes Gross income. File free state and federal taxes    Gross income is all income you receive in the form of money, goods, property, and services that is not exempt from tax. File free state and federal taxes If you are married and live with your spouse in a community property state, half of any income defined by state law as community income may be considered yours. File free state and federal taxes For a list of community property states, see Community property states under Married Filing Separately, later. File free state and federal taxes Self-employed persons. File free state and federal taxes    If you are self-employed in a business that provides services (where products are not a factor), your gross income from that business is the gross receipts. File free state and federal taxes If you are self-employed in a business involving manufacturing, merchandising, or mining, your gross income from that business is the total sales minus the cost of goods sold. File free state and federal taxes In either case, you must add any income from investments and from incidental or outside operations or sources. File free state and federal taxes    You must file Form 1040 if you owe any self-employment tax. File free state and federal taxes Filing status. File free state and federal taxes    Your filing status generally depends on whether you are single or married. File free state and federal taxes Whether you are single or married is determined at the end of your tax year, which is December 31 for most taxpayers. File free state and federal taxes Filing status is discussed in detail later in this publication. File free state and federal taxes Age. File free state and federal taxes    Age is a factor in determining if you must file a return only if you are 65 or older at the end of your tax year. File free state and federal taxes For 2013, you are 65 or older if you were born before January 2, 1949. File free state and federal taxes Filing Requirements for Most Taxpayers You must file a return if your gross income for the year was at least the amount shown on the appropriate line in Table 1. File free state and federal taxes Dependents should see Table 2 instead. File free state and federal taxes Deceased Persons You must file an income tax return for a decedent (a person who died) if both of the following are true. File free state and federal taxes You are the surviving spouse, executor, administrator, or legal representative. File free state and federal taxes The decedent met the filing requirements described in this publication at the time of his or her death. File free state and federal taxes For more information, see Final Income Tax Return for Decedent — Form 1040 in Publication 559. File free state and federal taxes Table 2. File free state and federal taxes 2013 Filing Requirements for Dependents See Exemptions for Dependents to find out if you are a dependent. File free state and federal taxes If your parent (or someone else) can claim you as a dependent, use this table to see if you must file a return. File free state and federal taxes  In this table, unearned income includes taxable interest, ordinary dividends, and capital gain distributions. File free state and federal taxes It also includes unemployment compensation, taxable social security benefits, pensions, annuities, and distributions of unearned income from a trust. File free state and federal taxes Earned income includes salaries, wages, tips, professional fees, and taxable scholarship and fellowship grants. File free state and federal taxes Gross income is the total of your unearned and earned income. File free state and federal taxes If your gross income was $3,900 or more, you usually cannot be claimed as a dependent unless you are a qualifying child. File free state and federal taxes For details, see Exemptions for Dependents. File free state and federal taxes Single dependents—Were you either age 65 or older or blind? □ No. File free state and federal taxes You must file a return if any of the following apply. File free state and federal taxes Your unearned income was more than $1,000. File free state and federal taxes Your earned income was more than $6,100. File free state and federal taxes Your gross income was more than the larger of— $1,000, or Your earned income (up to $5,750) plus $350. File free state and federal taxes     □ Yes. File free state and federal taxes You must file a return if any of the following apply. File free state and federal taxes Your unearned income was more than $2,500 ($4,000 if 65 or older and blind). File free state and federal taxes Your earned income was more than $7,600 ($9,100 if 65 or older and blind). File free state and federal taxes Your gross income was more than the larger of—  $2,500 ($4,000 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,850 ($3,350 if 65 or older and blind). File free state and federal taxes     Married dependents—Were you either age 65 or older or blind? □ No. File free state and federal taxes You must file a return if any of the following apply. File free state and federal taxes Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. File free state and federal taxes Your unearned income was more than $1,000. File free state and federal taxes Your earned income was more than $6,100. File free state and federal taxes Your gross income was more than the larger of— $1,000, or Your earned income (up to $5,750 plus $350. File free state and federal taxes     □ Yes. File free state and federal taxes You must file a return if any of the following apply. File free state and federal taxes Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. File free state and federal taxes Your unearned income was more than $2,200 ($3,400 if 65 or older and blind). File free state and federal taxes Your earned income was more than $7,300 ($8,500 if 65 or older and blind). File free state and federal taxes Your gross income was more than the larger of— $2,200 ($3,400 if 65 or older and blind), or Your earned income (up to $5,750) plus $1,550 ($2,750 if 65 or older and blind). File free state and federal taxes     U. File free state and federal taxes S. File free state and federal taxes Citizens or Resident Aliens Living Abroad To determine whether you must file a return, include in your gross income any income you earned or received abroad, including any income you can exclude under the foreign earned income exclusion. File free state and federal taxes For more information on special tax rules that may apply to you, see Publication 54, Tax Guide for U. File free state and federal taxes S. File free state and federal taxes Citizens and Resident Aliens Abroad. File free state and federal taxes Residents of Puerto Rico If you are a U. File free state and federal taxes S. File free state and federal taxes citizen and also a bona fide resident of Puerto Rico, you generally must file a U. File free state and federal taxes S. File free state and federal taxes income tax return for any year in which you meet the income requirements. File free state and federal taxes This is in addition to any legal requirement you may have to file an income tax return with Puerto Rico. File free state and federal taxes If you are a bona fide resident of Puerto Rico for the whole year, your U. File free state and federal taxes S. File free state and federal taxes gross income does not include income from sources within Puerto Rico. File free state and federal taxes It does, however, include any income you received for your services as an employee of the United States or any U. File free state and federal taxes S. File free state and federal taxes agency. File free state and federal taxes If you receive income from Puerto Rican sources that is not subject to U. File free state and federal taxes S. File free state and federal taxes tax, you must reduce your standard deduction, which reduces the amount of income you can have before you must file a U. File free state and federal taxes S. File free state and federal taxes income tax return. File free state and federal taxes For more information, see Publication 570, Tax Guide for Individuals With Income From U. File free state and federal taxes S. File free state and federal taxes Possessions. File free state and federal taxes Individuals With Income From U. File free state and federal taxes S. File free state and federal taxes Possessions If you had income from Guam, the Commonwealth of the Northern Mariana Islands, American Samoa, or the U. File free state and federal taxes S. File free state and federal taxes Virgin Islands, special rules may apply when determining whether you must file a U. File free state and federal taxes S. File free state and federal taxes federal income tax return. File free state and federal taxes In addition, you may have to file a return with the individual possession government. File free state and federal taxes See Publication 570 for more information. File free state and federal taxes Dependents A person who is a dependent may still have to file a return. File free state and federal taxes It depends on his or her earned income, unearned income, and gross income. File free state and federal taxes For details, see Table 2. File free state and federal taxes A dependent must also file if one of the situations described in Table 3 applies. File free state and federal taxes Responsibility of parent. File free state and federal taxes    If a dependent child must file an income tax return but cannot file due to age or any other reason, a parent, guardian, or other legally responsible person must file it for the child. File free state and federal taxes If the child cannot sign the return, the parent or guardian must sign the child's name followed by the words “By (your signature), parent for minor child. File free state and federal taxes ” Earned income. File free state and federal taxes    Earned income includes salaries, wages, professional fees, and other amounts received as pay for work you actually perform. File free state and federal taxes Earned income (only for purposes of filing requirements and the standard deduction) also includes any part of a scholarship that you must include in your gross income. File free state and federal taxes See chapter 1 of Publication 970, Tax Benefits for Education, for more information on taxable and nontaxable scholarships. File free state and federal taxes Child's earnings. File free state and federal taxes    Amounts a child earns by performing services are included in his or her gross income and not the gross income of the parent. File free state and federal taxes This is true even if under local law the child's parent has the right to the earnings and may actually have received them. File free state and federal taxes But if the child does not pay the tax due on this income, the parent is liable for the tax. File free state and federal taxes Unearned income. File free state and federal taxes    Unearned income includes income such as interest, dividends, and capital gains. File free state and federal taxes Trust distributions of interest, dividends, capital gains, and survivor annuities are also considered unearned income. File free state and federal taxes Election to report child's unearned income on parent's return. File free state and federal taxes    You may be able to include your child's interest and dividend income on your tax return. File free state and federal taxes If you do this, your child will not have to file a return. File free state and federal taxes To make this election, all of the following conditions must be met. File free state and federal taxes Your child was under age 19 (or under age 24 if a student) at the end of 2013. File free state and federal taxes (A child born on January 1, 1995, is considered to be age 19 at the end of 2013; you cannot make the election for this child unless the child was a student. File free state and federal taxes Similarly, a child born on January 1, 1990, is considered to be age 24 at the end of 2013; you cannot make the election for this child. File free state and federal taxes ) Your child had gross income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). File free state and federal taxes The interest and dividend income was less than $10,000. File free state and federal taxes Your child is required to file a return for 2013 unless you make this election. File free state and federal taxes Your child does not file a joint return for 2013. File free state and federal taxes No estimated tax payment was made for 2013 and no 2012 overpayment was applied to 2013 under your child's name and social security number. File free state and federal taxes No federal income tax was withheld from your child's income under the backup withholding rules. File free state and federal taxes You are the parent whose return must be used when making the election to report your child's unearned income. File free state and federal taxes   For more information, see Form 8814 and Parent's Election To Report Child's Interest and Dividends in Publication 929. File free state and federal taxes Other Situations You may have to file a tax return even if your gross income is less than the amount shown in Table 1 or Table 2 for your filing status. File free state and federal taxes See Table 3 for those other situations when you must file. File free state and federal taxes Table 3. File free state and federal taxes Other Situations When You Must File a 2013 Return If any of the four conditions listed below applied to you for 2013, you must file a return. File free state and federal taxes 1. File free state and federal taxes You owe any special taxes, including any of the following. File free state and federal taxes   a. File free state and federal taxes Alternative minimum tax. File free state and federal taxes (See Form 6251. File free state and federal taxes )   b. File free state and federal taxes Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax-favored account. File free state and federal taxes (See Publication 590, Individual Retirement Arrangements (IRAs), and Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. File free state and federal taxes ) But if you are filing a return only because you owe this tax, you can file Form 5329 by itself. File free state and federal taxes   c. File free state and federal taxes Social security or Medicare tax on tips you did not report to your employer (see Publication 531, Reporting Tip Income) or on wages you received from an employer who did not withhold these taxes (see Form 8919). File free state and federal taxes   d. File free state and federal taxes Write-in taxes, including uncollected social security, Medicare, or railroad retirement tax on tips you reported to your employer or on group-term life insurance and additional tax on health savings accounts. File free state and federal taxes (See Publication 531, Publication 969, and the Form 1040 instructions for line 60. File free state and federal taxes )   e. File free state and federal taxes Household employment taxes. File free state and federal taxes But if you are filing a return only because you owe these taxes, you can file Schedule H (Form 1040) by itself. File free state and federal taxes   f. File free state and federal taxes Recapture taxes. File free state and federal taxes (See the Form 1040 instructions for lines 44, 59b, and 60. File free state and federal taxes ) 2. File free state and federal taxes You (or your spouse if filing jointly) received Archer MSA, Medicare Advantage MSA, or health savings account distributions. File free state and federal taxes 3. File free state and federal taxes You had net earnings from self-employment of at least $400. File free state and federal taxes (See Schedule SE (Form 1040) and its instructions. File free state and federal taxes ) 4. File free state and federal taxes You had wages of $108. File free state and federal taxes 28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. File free state and federal taxes (See Schedule SE (Form 1040) and its instructions. File free state and federal taxes ) Who Should File Even if you do not have to file, you should file a tax return if you can get money back. File free state and federal taxes For example, you should file if one of the following applies. File free state and federal taxes You had income tax withheld from your pay. File free state and federal taxes You made estimated tax payments for the year or had any of your overpayment for last year applied to this year's estimated tax. File free state and federal taxes You qualify for the earned income credit. File free state and federal taxes See Publication 596, Earned Income Credit (EIC), for more information. File free state and federal taxes You qualify for the additional child tax credit. File free state and federal taxes See the instructions for the tax form you file (Form 1040 or 1040A) for more information. File free state and federal taxes You qualify for the refundable American opportunity education credit. File free state and federal taxes See Form 8863, Education Credits. File free state and federal taxes You qualify for the health coverage tax credit. File free state and federal taxes For information about this credit, see Form 8885, Health Coverage Tax Credit. File free state and federal taxes You qualify for the credit for federal tax on fuels. File free state and federal taxes See Form 4136, Credit for Federal Tax Paid on Fuels. File free state and federal taxes Form 1099-B received. File free state and federal taxes    Even if you are not required to file a return, you should consider filing if all of the following apply. File free state and federal taxes You received a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions (or substitute statement). File free state and federal taxes The amount in box 2a of Form 1099-B (or substitute statement), when added to your other gross income, means you have to file a tax return because of the filing requirement in Table 1 or Table 2 that applies to you. File free state and federal taxes Box 3 of Form 1099-B (or substitute statement) is blank. File free state and federal taxes In this case, filing a return may keep you from getting a notice from the IRS. File free state and federal taxes Filing Status You must determine your filing status before you can determine whether you must file a tax return, your standard deduction (discussed later), and your tax. File free state and federal taxes You also use your filing status to determine whether you are eligible to claim certain other deductions and credits. File free state and federal taxes There are five filing statuses: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Widow(er) With Dependent Child. File free state and federal taxes If more than one filing status applies to you, choose the one that will give you the lowest tax. File free state and federal taxes Marital Status In general, your filing status depends on whether you are considered unmarried or married. File free state and federal taxes Unmarried persons. File free state and federal taxes    You are considered unmarried for the whole year if, on the last day of your tax year, you are unmarried or legally separated from your spouse under a divorce or separate maintenance decree. File free state and federal taxes   State law governs whether you are married or legally separated under a divorce or separate maintenance decree. File free state and federal taxes Divorced persons. File free state and federal taxes    If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year. File free state and federal taxes Divorce and remarriage. File free state and federal taxes    If you obtain a divorce for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to and do, in fact, remarry each other in the next tax year, you and your spouse must file as married individuals in both years. File free state and federal taxes Annulled marriages. File free state and federal taxes    If you obtain a court decree of annulment, which holds that no valid marriage ever existed, you are considered unmarried even if you filed joint returns for earlier years. File free state and federal taxes You must file amended returns (Form 1040X) claiming single or head of household status for all tax years that are affected by the annulment and not closed by the statute of limitations for filing a tax return. File free state and federal taxes Generally, for a credit or refund, you must file Form 1040X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. File free state and federal taxes If you filed your original tax return early (for example, March 1), your return is considered filed on the due date (generally April 15). File free state and federal taxes However, if you had an extension to file (for example, until October 15) but you filed earlier and we received it on July 1, your return is considered filed on July 1. File free state and federal taxes Head of household or qualifying widow(er) with dependent child. File free state and federal taxes    If you are considered unmarried, you may be able to file as a head of household or as a qualifying widow(er) with a dependent child. File free state and federal taxes See Head of Household and Qualifying Widow(er) With Dependent Child to see if you qualify. File free state and federal taxes Married persons. File free state and federal taxes    If you are considered married, you and your spouse can file a joint return or separate returns. File free state and federal taxes Considered married. File free state and federal taxes    You are considered married for the whole year if, on the last day of your tax year, you and your spouse meet any one of the following tests. File free state and federal taxes You are married and living together. File free state and federal taxes You are living together in a common law marriage recognized in the state where you now live or in the state where the common law marriage began. File free state and federal taxes You are married and living apart but not legally separated under a decree of divorce or separate maintenance. File free state and federal taxes You are separated under an interlocutory (not final) decree of divorce. File free state and federal taxes Same-sex marriage. File free state and federal taxes    For federal tax purposes, individuals of the same sex are married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. File free state and federal taxes The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. File free state and federal taxes However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not called a marriage under state (or foreign) law are not married for federal tax purposes. File free state and federal taxes   The word “state” as used here includes the District of Columbia, Puerto Rico, and U. File free state and federal taxes S. File free state and federal taxes territories and possessions. File free state and federal taxes It means any domestic jurisdiction that has the legal authority to sanction marriages. File free state and federal taxes The term “foreign country” means any foreign jurisdiction that has the legal authority to sanction marriages. File free state and federal taxes   If individuals of the same sex are married, they generally must use the married filing jointly or married filing separately filing status. File free state and federal taxes However, if they did not live together during the last 6 months of the year, one or both of them may be able to use the head of household filing status, as explained later. File free state and federal taxes   For more details, see Answers to Frequently Asked Questions For Individuals of the Same Sex Who Are Married Under State Law on IRS. File free state and federal taxes gov. File free state and federal taxes Spouse died during the year. File free state and federal taxes    If your spouse died during the year, you are considered married for the whole year for filing status purposes. File free state and federal taxes   If you did not remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. File free state and federal taxes For the next 2 years, you may be entitled to the special benefits described later under Qualifying Widow(er) With Dependent Child . File free state and federal taxes   If you remarried before the end of the tax year, you can file a joint return with your new spouse. File free state and federal taxes Your deceased spouse's filing status is married filing separately for that year. File free state and federal taxes Married persons living apart. File free state and federal taxes    If you live apart from your spouse and meet certain tests, you may be able to file as head of household even if you are not divorced or legally separated. File free state and federal taxes If you qualify to file as head of household instead of as married filing separately, your standard deduction will be higher. File free state and federal taxes Also, your tax may be lower, and you may be able to claim the earned income credit. File free state and federal taxes See Head of Household , later. File free state and federal taxes Single Your filing status is single if you are considered unmarried and you do not qualify for another filing status. File free state and federal taxes To determine your marital status, see Marital Status , earlier. File free state and federal taxes Widow(er). File free state and federal taxes    Your filing status may be single if you were widowed before January 1, 2013, and did not remarry before the end of 2013. File free state and federal taxes You may, however, be able to use another filing status that will give you a lower tax. File free state and federal taxes See Head of Household and Qualifying Widow(er) With Dependent Child , later, to see if you qualify. File free state and federal taxes How to file. File free state and federal taxes    You can file Form 1040. File free state and federal taxes If you have taxable income of less than $100,000, you may be able to file Form 1040A. File free state and federal taxes If, in addition, you have no dependents, are under 65 and not blind, and meet other requirements, you can file Form 1040EZ. File free state and federal taxes If you file Form 1040A or Form 1040, show your filing status as single by checking the box on line 1. File free state and federal taxes Use the Single column of the Tax Table, or Section A of the Tax Computation Worksheet, to figure your tax. File free state and federal taxes Married Filing Jointly You can choose married filing jointly as your filing status if you are considered married and both you and your spouse agree to file a joint return. File free state and federal taxes On a joint return, you and your spouse report your combined income and deduct your combined allowable expenses. File free state and federal taxes You can file a joint return even if one of you had no income or deductions. File free state and federal taxes If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. File free state and federal taxes Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses. File free state and federal taxes If you and your spouse each have income, you may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). File free state and federal taxes You can choose the method that gives the two of you the lower combined tax. File free state and federal taxes How to file. File free state and federal taxes    If you file as married filing jointly, you can use Form 1040. File free state and federal taxes If you and your spouse have taxable income of less than $100,000, you may be able to file Form 1040A. File free state and federal taxes If, in addition, you and your spouse have no dependents, are both under 65 and not blind, and meet other requirements, you can file Form 1040EZ. File free state and federal taxes If you file Form 1040 or Form 1040A, show this filing status by checking the box on line 2. File free state and federal taxes Use the Married filing jointly column of the Tax Table, or Section B of the Tax Computation Worksheet, to figure your tax. File free state and federal taxes Spouse died. File free state and federal taxes    If your spouse died during the year, you are considered married for the whole year and can choose married filing jointly as your filing status. File free state and federal taxes See Spouse died during the year , under Married persons, earlier. File free state and federal taxes   If your spouse died in 2014 before filing a 2013 return, you can choose married filing jointly as your filing status on your 2013 return. File free state and federal taxes Divorced persons. File free state and federal taxes    If you are divorced under a final decree by the last day of the year, you are considered unmarried for the whole year and you cannot choose married filing jointly as your filing status. File free state and federal taxes Filing a Joint Return Both you and your spouse must include all of your income, exemptions, and deductions on your joint return. File free state and federal taxes Accounting period. File free state and federal taxes    Both of you must use the same accounting period, but you can use different accounting methods. File free state and federal taxes Joint responsibility. File free state and federal taxes    Both of you may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. File free state and federal taxes This means that if one spouse does not pay the tax due, the other may have to. File free state and federal taxes Or, if one spouse does not report the correct tax, both spouses may be responsible for any additional taxes assessed by the IRS. File free state and federal taxes One spouse may be held responsible for all the tax due even if all the income was earned by the other spouse. File free state and federal taxes   You may want to file separately if: You believe your spouse is not reporting all of his or her income, or You do not want to be responsible for any taxes due if your spouse does not have enough tax withheld or does not pay enough estimated tax. File free state and federal taxes Divorced taxpayer. File free state and federal taxes    You may be held jointly and individually responsible for any tax, interest, and penalties due on a joint return filed before your divorce. File free state and federal taxes This responsibility may apply even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. File free state and federal taxes Relief from joint responsibility. File free state and federal taxes    In some cases, one spouse may be relieved of joint responsibility for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. File free state and federal taxes You can ask for relief no matter how small the liability. File free state and federal taxes   There are three types of relief available. File free state and federal taxes Innocent spouse relief. File free state and federal taxes Separation of liability (available only to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date the election for this relief is filed). File free state and federal taxes Equitable relief. File free state and federal taxes    You must file Form 8857, Request for Innocent Spouse Relief, to request relief from joint responsibility. File free state and federal taxes Publication 971, Innocent Spouse Relief, explains the kinds of relief and who may qualify for them. File free state and federal taxes Signing a joint return. File free state and federal taxes    For a return to be considered a joint return, both spouses generally must sign the return. File free state and federal taxes Spouse died before signing. File free state and federal taxes    If your spouse died before signing the return, the executor or administrator must sign the return for your spouse. File free state and federal taxes If neither you nor anyone else has been appointed as executor or administrator, you can sign the return for your spouse and enter “Filing as surviving spouse” in the area where you sign the return. File free state and federal taxes Spouse away from home. File free state and federal taxes    If your spouse is away from home, you should prepare the return, sign it, and send it to your spouse to sign so it can be filed on time. File free state and federal taxes Injury or disease prevents signing. File free state and federal taxes    If your spouse cannot sign because of injury or disease and tells you to sign for him or her, you can sign your spouse's name in the proper space on the return followed by the words “By (your name), Husband (or Wife). File free state and federal taxes ” Be sure to also sign in the space provided for your signature. File free state and federal taxes Attach a dated statement, signed by you, to the return. File free state and federal taxes The statement should include the form number of the return you are filing, the tax year, and the reason your spouse cannot sign, and should state that your spouse has agreed to your signing for him or her. File free state and federal taxes Signing as guardian of spouse. File free state and federal taxes    If you are the guardian of your spouse who is mentally incompetent, you can sign the return for your spouse as guardian. File free state and federal taxes Spouse in combat zone. File free state and federal taxes    You can sign a joint return for your spouse if your spouse cannot sign because he or she is serving in a combat zone (such as the Persian Gulf area, Serbia, Montenegro, Albania, or Afghanistan), even if you do not have a power of attorney or other statement. File free state and federal taxes Attach a signed statement to your return explaining that your spouse is serving in a combat zone. File free state and federal taxes For more information on special tax rules for persons who are serving in a combat zone, or who are in missing status as a result of serving in a combat zone, see Publication 3, Armed Forces' Tax Guide. File free state and federal taxes Other reasons spouse cannot sign. File free state and federal taxes    If your spouse cannot sign the joint return for any other reason, you can sign for your spouse only if you are given a valid power of attorney (a legal document giving you permission to act for your spouse). File free state and federal taxes Attach the power of attorney (or a copy of it) to your tax return. File free state and federal taxes You can use Form 2848. File free state and federal taxes Nonresident alien or dual-status alien. File free state and federal taxes    Generally, a married couple cannot file a joint return if either one is a nonresident alien at any time during the tax year. File free state and federal taxes However, if one spouse was a nonresident alien or dual-status alien who was married to a U. File free state and federal taxes S. File free state and federal taxes citizen or resident alien at the end of the year, the spouses can choose to file a joint return. File free state and federal taxes If you do file a joint return, you and your spouse are both treated as U. File free state and federal taxes S. File free state and federal taxes residents for the entire tax year. File free state and federal taxes See chapter 1 of Publication 519. File free state and federal taxes Married Filing Separately You can choose married filing separately as your filing status if you are married. File free state and federal taxes This filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return. File free state and federal taxes If you and your spouse do not agree to file a joint return, you must use this filing status unless you qualify for head of household status, discussed later. File free state and federal taxes You may be able to choose head of household filing status if you are considered unmarried because you live apart from your spouse and meet certain tests (explained later, under Head of Household ). File free state and federal taxes This can apply to you even if you are not divorced or legally separated. File free state and federal taxes If you qualify to file as head of household, instead of as married filing separately, your tax may be lower, you may be able to claim the earned income credit and certain other credits, and your standard deduction will be higher. File free state and federal taxes The head of household filing status allows you to choose the standard deduction even if your spouse chooses to itemize deductions. File free state and federal taxes See Head of Household , later, for more information. File free state and federal taxes You will generally pay more combined tax on separate returns than you would on a joint return for the reasons listed under Special Rules, later. File free state and federal taxes However, unless you are required to file separately, you should figure your tax both ways (on a joint return and on separate returns). File free state and federal taxes This way you can make sure you are using the filing status that results in the lowest combined tax. File free state and federal taxes When figuring the combined tax of a married couple, you may want to consider state taxes as well as federal taxes. File free state and federal taxes How to file. File free state and federal taxes    If you file a separate return, you generally report only your own income, exemptions, credits, and deductions. File free state and federal taxes You can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another person. File free state and federal taxes   You can file Form 1040. File free state and federal taxes If your taxable income is less than $100,000, you may be able to file Form 1040A. File free state and federal taxes Select this filing status by checking the box on line 3 of either form. File free state and federal taxes Enter your spouse's full name and SSN or ITIN in the spaces provided. File free state and federal taxes If your spouse does not have and is not required to have an SSN or ITIN, enter “NRA” in the space for your spouse's SSN. File free state and federal taxes Use the Married filing separately column of the Tax Table or Section C of the Tax Computation Worksheet to figure your tax. File free state and federal taxes Special Rules If you choose married filing separately as your filing status, the following special rules apply. File free state and federal taxes Because of these special rules, you usually pay more tax on a separate return than if you use another filing status you qualify for. File free state and federal taxes Your tax rate generally is higher than on a joint return. File free state and federal taxes Your exemption amount for figuring the alternative minimum tax is half that allowed on a joint return. File free state and federal taxes You cannot take the credit for child and dependent care expenses in most cases, and the amount you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 on a joint return). File free state and federal taxes If you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. File free state and federal taxes See Joint Return Test in Publication 503, Child and Dependent Care Expenses, for more information. File free state and federal taxes You cannot take the earned income credit. File free state and federal taxes You cannot take the exclusion or credit for adoption expenses in most cases. File free state and federal taxes You cannot take the education credits (the American opportunity credit and lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction. File free state and federal taxes You cannot exclude any interest income from qualified U. File free state and federal taxes S. File free state and federal taxes savings bonds you used for higher education expenses. File free state and federal taxes If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You must include in income a greater percentage (up to 85%) of any social security or equivalent railroad retirement benefits you received. File free state and federal taxes The following credits and deductions are reduced at income levels half those for a joint return: The child tax credit, The retirement savings contributions credit, The deduction for personal exemptions, and Itemized deductions. File free state and federal taxes Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). File free state and federal taxes If your spouse itemizes deductions, you cannot claim the standard deduction. File free state and federal taxes If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return. File free state and federal taxes Adjusted gross income (AGI) limits. File free state and federal taxes    If your AGI on a separate return is lower than it would have been on a joint return, you may be able to deduct a larger amount for certain deductions that are limited by AGI, such as medical expenses. File free state and federal taxes Individual retirement arrangements (IRAs). File free state and federal taxes    You may not be able to deduct all or part of your contributions to a traditional IRA if you or your spouse were covered by an employee retirement plan at work during the year. File free state and federal taxes Your deduction is reduced or eliminated if your income is more than a certain amount. File free state and federal taxes This amount is much lower for married individuals who file separately and lived together at any time during the year. File free state and federal taxes For more information, see How Much Can You Deduct? in chapter 1 of Publication 590. File free state and federal taxes Rental activity losses. File free state and federal taxes    If you actively participated in a passive rental real estate activity that produced a loss, you generally can deduct the loss from your nonpassive income up to $25,000. File free state and federal taxes This is called a special allowance. File free state and federal taxes However, married persons filing separate returns who lived together at any time during the year cannot claim this special allowance. File free state and federal taxes Married persons filing separate returns who lived apart at all times during the year are each allowed a $12,500 maximum special allowance for losses from passive real estate activities. File free state and federal taxes See Rental Activities in Publication 925, Passive Activity and At-Risk Rules. File free state and federal taxes Community property states. File free state and federal taxes    If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin and file separately, your income may be considered separate income or community income for income tax purposes. File free state and federal taxes See Publication 555, Community Property. File free state and federal taxes Joint Return After Separate Returns You can change your filing status from a separate return to a joint return by filing an amended return using Form 1040X. File free state and federal taxes You generally can change to a joint return any time within 3 years from the due date of the separate return or returns. File free state and federal taxes This does not include any extensions. File free state and federal taxes A separate return includes a return filed by you or your spouse claiming married filing separately, single, or head of household filing status. File free state and federal taxes Separate Returns After Joint Return Once you file a joint return, you cannot choose to file separate returns for that year after the due date of the return. File free state and federal taxes Exception. File free state and federal taxes    A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. File free state and federal taxes The personal representative has 1 year from the due date (including extensions) of the return to make the change. File free state and federal taxes See Publication 559 for more information on filing income tax returns for a decedent. File free state and federal taxes Head of Household You may be able to file as head of household if you meet all the following requirements. File free state and federal taxes You are unmarried or considered unmarried on the last day of the year. File free state and federal taxes See Marital Status , earlier, and Considered Unmarried , later. File free state and federal taxes You paid more than half the cost of keeping up a home for the year. File free state and federal taxes A qualifying person lived with you in the home for more than half the year (except for temporary absences, such as school). File free state and federal taxes However, if the qualifying person is your dependent parent, he or she does not have to live with you. File free state and federal taxes See Special rule for parent , later, under Qualifying Person. File free state and federal taxes If you qualify to file as head of household, your tax rate usually will be lower than the rates for single or married filing separately. File free state and federal taxes You will also receive a higher standard deduction than if you file as single or married filing separately. File free state and federal taxes How to file. File free state and federal taxes    If you file as head of household, you can use Form 1040. File free state and federal taxes If you have taxable income of less than $100,000 and meet certain other conditions, you may be able to file Form 1040A. File free state and federal taxes Indicate your choice of this filing status by checking the box on line 4 of either form. File free state and federal taxes Use the Head of a household column of the Tax Table or Section D of the Tax Computation Worksheet to figure your tax. File free state and federal taxes Considered Unmarried To qualify for head of household status, you must be either unmarried or considered unmarried on the last day of the year. File free state and federal taxes You are considered unmarried on the last day of the tax year if you meet all the following tests. File free state and federal taxes You file a separate return (defined earlier under Joint Return After Separate Returns ). File free state and federal taxes You paid more than half the cost of keeping up your home for the tax year. File free state and federal taxes Your spouse did not live in your home during the last 6 months of the tax year. File free state and federal taxes Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. File free state and federal taxes See Temporary absences , later. File free state and federal taxes Your home was the main home of your child, stepchild, or foster child for more than half the year. File free state and federal taxes (See Home of qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year. File free state and federal taxes ) You must be able to claim an exemption for the child. File free state and federal taxes However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rules described later in Children of divorced or separated parents (or parents who live apart) under Qualifying Child or in Support Test for Children of Divorced or Separated Parents (or Parents Who Live Apart) under Qualifying Relative. File free state and federal taxes The general rules for claiming an exemption for a dependent are explained later under Exemptions for Dependents . File free state and federal taxes If you were considered married for part of the year and lived in a community property state (listed earlier under Married Filing Separately), special rules may apply in determining your income and expenses. File free state and federal taxes See Publication 555 for more information. File free state and federal taxes Nonresident alien spouse. File free state and federal taxes    You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. File free state and federal taxes However, your spouse is not a qualifying person for head of household purposes. File free state and federal taxes You must have another qualifying person and meet the other tests to be eligible to file as a head of household. File free state and federal taxes Choice to treat spouse as resident. File free state and federal taxes    You are considered married if you choose to treat your spouse as a resident alien. File free state and federal taxes See chapter 1 of Publication 519. File free state and federal taxes Keeping Up a Home To qualify for head of household status, you must pay more than half of the cost of keeping up a home for the year. File free state and federal taxes You can determine whether you paid more than half of the cost of keeping up a home by using Worksheet 1. File free state and federal taxes Worksheet 1. File free state and federal taxes Cost of Keeping Up a Home         Amount You  Paid Total  Cost Property taxes $ $ Mortgage interest expense     Rent     Utility charges     Repairs/maintenance     Property insurance     Food consumed on the premises     Other household expenses     Totals $ $       Minus total amount you paid   ()       Amount others paid   $       If the total amount you paid is more than the amount others paid, you meet the requirement of paying more than half the cost of keeping up the home. File free state and federal taxes Costs you include. File free state and federal taxes    Include in the cost of keeping up a home expenses such as rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. File free state and federal taxes   If you used payments you received under Temporary Assistance for Needy Families (TANF) or other public assistance programs to pay part of the cost of keeping up your home, you cannot count them as money you paid. File free state and federal taxes However, you must include them in the total cost of keeping up your home to figure if you paid over half the cost. File free state and federal taxes Costs you do not include. File free state and federal taxes    Do not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation. File free state and federal taxes Also, do not include the rental value of a home you own or the value of your services or those of a member of your household. File free state and federal taxes Qualifying Person See Table 4 to see who is a qualifying person. File free state and federal taxes Any person not described in Table 4 is not a qualifying person. File free state and federal taxes Example 1—child. File free state and federal taxes Your unmarried son lived with you all year and was 18 years old at the end of the year. File free state and federal taxes He did not provide more than half of his own support and does not meet the tests to be a qualifying child of anyone else. File free state and federal taxes As a result, he is your qualifying child (see Qualifying Child , later) and, because he is single, your qualifying person for head of household purposes. File free state and federal taxes Example 2—child who is not qualifying person. File free state and federal taxes The facts are the same as in Example 1 except your son was 25 years old at the end of the year and his gross income was $5,000. File free state and federal taxes Because he does not meet the age test (explained later under Qualifying Child), your son is not your qualifying child. File free state and federal taxes Because he does not meet the gross income test (explained later under Qualifying Relative), he is not your qualifying relative. File free state and federal taxes As a result, he is not your qualifying person for head of household purposes. File free state and federal taxes Example 3—girlfriend. File free state and federal taxes Your girlfriend lived with you all year. File free state and federal taxes Even though she may be your qualifying relative if the gross income and support tests (explained later) are met, she is not your qualifying person for head of household purposes because she is not related to you in one of the ways listed under Relatives who do not have to live with you . File free state and federal taxes See Table 4. File free state and federal taxes Example 4—girlfriend's child. File free state and federal taxes The facts are the same as in Example 3 except your girlfriend's 10-year-old son also lived with you all year. File free state and federal taxes He is not your qualifying child and, because he is your girlfriend's qualifying child, he is not your qualifying relative (see Not a Qualifying Child Test , later). File free state and federal taxes As a result, he is not your qualifying person for head of household purposes. File free state and federal taxes Home of qualifying person. File free state and federal taxes    Generally, the qualifying person must live with you for more than half of the year. File free state and federal taxes Special rule for parent. File free state and federal taxes    If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. File free state and federal taxes However, you must be able to claim an exemption for your father or mother. File free state and federal taxes Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. File free state and federal taxes   You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. File free state and federal taxes Death or birth. File free state and federal taxes    You may be eligible to file as head of household even if the qualifying person who qualifies you for this filing status is born or dies during the year. File free state and federal taxes To qualify you for head of household filing status, the qualifying person (as defined in Table 4) must be one of the following. File free state and federal taxes Your qualifying child or qualifying relative who lived with you for more than half the part of the year he or she was alive. File free state and federal taxes Your parent for whom you paid, for the entire part of the year he or she was alive, more than half the cost of keeping up the home he or she lived in. File free state and federal taxes Example. File free state and federal taxes You are unmarried. File free state and federal taxes Your mother, for whom you can claim an exemption, lived in an apartment by herself. File free state and federal taxes She died on September 2. File free state and federal taxes The cost of the upkeep of her apartment for the year until her death was $6,000. File free state and federal taxes You paid $4,000 and your brother paid $2,000. File free state and federal taxes Your brother made no other payments towards your mother's support. File free state and federal taxes Your mother had no income. File free state and federal taxes Because you paid more than half of the cost of keeping up your mother's apartment from January 1 until her death, and you can claim an exemption for her, you can file as a head of household. File free state and federal taxes Temporary absences. File free state and federal taxes    You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. File free state and federal taxes It must be reasonable to assume the absent person will return to the home after the temporary absence. File free state and federal taxes You must continue to keep up the home during the absence. File free state and federal taxes Kidnapped child. File free state and federal taxes    You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. File free state and federal taxes You can claim head of household filing status if all the following statements are true. File free state and federal taxes The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. File free state and federal taxes In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. File free state and federal taxes You would have qualified for head of household filing status if the child had not been kidnapped. File free state and federal taxes   This treatment applies for all years until the earliest of: The year the child is returned, The year there is a determination that the child is dead, or The year the child would have reached age 18. File free state and federal taxes Qualifying Widow(er) With Dependent Child If your spouse died in 2013, you can use married filing jointly as your filing status for 2013 if you otherwise qualify to use that status. File free state and federal taxes The year of death is the last year for which you can file jointly with your deceased spouse. File free state and federal taxes See Married Filing Jointly , earlier. File free state and federal taxes You may be eligible to use qualifying widow(er) with dependent child as your filing status for 2 years following the year your spouse died. File free state and federal taxes For example, if your spouse died in 2012 and you have not remarried, you may be able to use this filing status for 2013 and 2014. File free state and federal taxes The rules for using this filing status are explained in detail here. File free state and federal taxes This filing status entitles you to use joint return tax rates and the highest standard deduction amount (if you do not itemize deductions). File free state and federal taxes It does not entitle you to file a joint return. File free state and federal taxes How to file. File free state and federal taxes    If you file as a qualifying widow(er) with dependent child, you can use Form 1040. File free state and federal taxes If you also have taxable income of less than $100,000 and meet certain other conditions, you may be able to file Form 1040A. File free state and federal taxes Check the box on line 5 of either form. File free state and federal taxes Use the Married filing jointly column of the Tax Table or Section B of the Tax Computation Worksheet to figure your tax. File free state and federal taxes Table 4. File free state and federal taxes Who Is a Qualifying Person Qualifying You To File as Head of Household?1 See the text of this publication for the other requirements you must meet to claim head of household filing status. File free state and federal taxes IF the person is your . File free state and federal taxes . File free state and federal taxes . File free state and federal taxes   AND . File free state and federal taxes . File free state and federal taxes . File free state and federal taxes   THEN that person is . File free state and federal taxes . File free state and federal taxes . File free state and federal taxes qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2   he or she is single   a qualifying person, whether or not you can claim an exemption for the person. File free state and federal taxes   he or she is married and you can claim an exemption for him or her   a qualifying person. File free state and federal taxes   he or she is married and you cannot claim an exemption for him or her   not a qualifying person. File free state and federal taxes 3 qualifying relative4 who is your father or mother   you can claim an exemption for him or her5   a qualifying person. File free state and federal taxes 6   you cannot claim an exemption for him or her   not a qualifying person. File free state and federal taxes qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests). File free state and federal taxes   he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you , later, and you can claim an exemption for him or her5   a qualifying person. File free state and federal taxes   he or she did not live with you more than half the year   not a qualifying person. File free state and federal taxes   he or she is not related to you in one of the ways listed under Relatives who do not have to live with you , later, and is your qualifying relative only because he or she lived with you all year as a member of your household   not a qualifying person. File free state and federal taxes   you cannot claim an exemption for him or her   not a qualifying person. File free state and federal taxes 1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. File free state and federal taxes 2 The term “qualifying child” is defined under Exemptions for Dependents, later. File free state and federal taxes Note: If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of divorced or separated parents (or parents who live apart) under Qualifying Child, later. File free state and federal taxes If you are the custodial parent and those rules apply, the child generally is your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. File free state and federal taxes 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. File free state and federal taxes 4 The term “qualifying relative” is defined under Exemptions for Dependents, later. File free state and federal taxes 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. File free state and federal taxes See Multiple Support Agreement . File free state and federal taxes 6 See Special rule for parent . File free state and federal taxes Eligibility rules. File free state and federal taxes    You are eligible to file your 2013 return as a qualifying widow(er) with dependent child if you meet all the following tests. File free state and federal taxes You were entitled to file a joint return with your spouse for the year your spouse died. File free state and federal taxes It does not matter whether you actually filed a joint return. File free state and federal taxes Your spouse died in 2011 or 2012 and you did not remarry before the end of 2013. File free state and federal taxes You have a child or stepchild for whom you can claim an exemption. File free state and federal taxes This does not include a foster child. File free state and federal taxes This child lived in your home all year, except for temporary absences. File free state and federal taxes See Temporary absences , earlier, under Head of Household. File free state and federal taxes There are also exceptions, described later, for a child who was born or died during the year and for a kidnapped child. File free state and federal taxes You paid more than half the cost of keeping up a home for the year. File free state and federal taxes See Keeping Up a Home , earlier, under Head of Household. File free state and federal taxes Example. File free state and federal taxes John's wife died in 2011. File free state and federal taxes John has not remarried. File free state and federal taxes He has continued during 2012 and 2013 to keep up a home for himself and his child, who lives with him and for whom he can claim an exemption. File free state and federal taxes For 2011 he was entitled to file a joint return for himself and his deceased wife. File free state and federal taxes For 2012 and 2013, he can file as a qualifying widower with a dependent child. File free state and federal taxes After 2013, he can file as head of household if he qualifies. File free state and federal taxes Death or birth. File free state and federal taxes    You may be eligible to file as a qualifying widow(er) with dependent child if the child who qualifies you for this filing status is born or dies during the year. File free state and federal taxes You must have provided more than half of the cost of keeping up a home that was the child's main home during the entire part of the year he or she was alive. File free state and federal taxes Kidnapped child. File free state and federal taxes    You may be eligible to file as a qualifying widow(er) with dependent child even if the child who qualifies you for this filing status has been kidnapped. File free state and federal taxes You can claim qualifying widow(er) with dependent child filing status if all the following statements are true. File free state and federal taxes The child is presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. File free state and federal taxes In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. File free state and federal taxes You would have qualified for qualifying widow(er) with dependent child filing status if the child had not been kidnapped. File free state and federal taxes As mentioned earlier, this filing status is available for only 2 years following the year your spouse died. File free state and federal taxes Exemptions Exemptions reduce your taxable income. File free state and federal taxes You can deduct $3,900 for each exemption you claim in 2013. File free state and federal taxes If you are entitled to two exemptions for 2013, you can deduct $7,800 ($3,900 × 2). File free state and federal taxes But you may lose the benefit of part or all of your exemptions if your adjusted gross income is above a certain amount. File free state and federal taxes See Phaseout of Exemptions , later. File free state and federal taxes Types of exemptions. File free state and federal taxes    There are two types of exemptions you may be able to take: Personal exemptions for yourself and your spouse, and Exemptions for dependents (dependency exemptions). File free state and federal taxes While each is worth the same amount ($3,900 for 2013), different rules, discussed later, apply to each type. File free state and federal taxes Dependent cannot claim a personal exemption. File free state and federal taxes    If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim a personal exemption on his or her own tax return. File free state and federal taxes How to claim exemptions. File free state and federal taxes    How you claim an exemption on your tax return depends on which form you file. File free state and federal taxes Form 1040EZ filers. File free state and federal taxes    If you file Form 1040EZ, the exemption amount is combined with the standard deduction and entered on line 5. File free state and federal taxes Form 1040A filers. File free state and federal taxes    If you file Form 1040A, complete lines 6a through 6d. File free state and federal taxes The total number of exemptions you can claim is the total in the box on line 6d. File free state and federal taxes Also complete line 26. File free state and federal taxes Form 1040 filers. File free state and federal taxes    If you file Form 1040, complete lines 6a through 6d. File free state and federal taxes The total number of exemptions you can claim is the total in the box on line 6d. File free state and federal taxes Also complete line 42. File free state and federal taxes If your adjusted gross income is more than $150,000, see Phaseout of Exemptions , later. File free state and federal taxes U. File free state and federal taxes S. File free state and federal taxes citizen or resident alien. File free state and federal taxes    If you are a U. File free state and federal taxes S. File free state and federal taxes citizen, U. File free state and federal taxes S. File free state and federal taxes resident alien, U. File free state and federal taxes S. File free state and federal taxes national (defined later) or a resident of Canada or Mexico, you may qualify for any of the exemptions discussed here. File free state and federal taxes Nonresident aliens. File free state and federal taxes    Generally, if you are a nonresident alien (other than a resident of Canada or Mexico, or certain residents of India or Korea), you can qualify for only one personal exemption for yourself. File free state and federal taxes You cannot claim exemptions for a spouse or dependents. File free state and federal taxes   These restrictions do not apply if you are a nonresident alien married to a U. File free state and federal taxes S. File free state and federal taxes citizen or resident alien and have chosen to be treated as a resident of the United States. File free state and federal taxes More information. File free state and federal taxes    For more information on exemptions if you are a nonresident alien, see chapter 5 in Publication 519. File free state and federal taxes Dual-status taxpayers. File free state and federal taxes    If you have been both a nonresident alien and a resident alien in the same tax year, you should see Publication 519 for information on determining your exemptions. File free state and federal taxes Personal Exemptions You are generally allowed one exemption for yourself. File free state and federal taxes If you are married, you may be allowed one exemption for your spouse. File free state and federal taxes These are called personal exemptions. File free state and federal taxes Your Own Exemption You can take one exemption for yourself unless you can be claimed as a dependent by another taxpayer. File free state and federal taxes If another taxpayer is entitled to claim you as a dependent, you cannot take an exemption for yourself even if the other taxpayer does not actually claim you as a dependent. File free state and federal taxes Your Spouse's Exemption Your spouse is never considered your dependent. File free state and federal taxes Joint return. File free state and federal taxes    On a joint return, you can claim one exemption for yourself and one for your spouse. File free state and federal taxes Separate return. File free state and federal taxes    If you file a separate return, you can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. File free state and federal taxes This is true even if the other taxpayer does not actually claim your spouse as a dependent. File free state and federal taxes You can claim an exemption for your spouse even if he or she is a nonresident alien; in that case, your spouse must have no gross income for U. File free state and federal taxes S. File free state and federal taxes tax purposes and satisfy the other conditions listed above. File free state and federal taxes Head of household. File free state and federal taxes    If you qualify for head of household filing status because you are considered unmarried, you can claim an exemption for your spouse if the conditions described in the preceding paragraph are satisfied. File free state and federal taxes   To claim the exemption for your spouse, check the box on line 6b of Form 1040 or Form 1040A and enter the name of your spouse in the space to the right of the box. File free state and federal taxes Enter the SSN or ITIN of your spouse in the space provided at the top of Form 1040 or Form 1040A. File free state and federal taxes Death of spouse. File free state and federal taxes    If your spouse died during the year and you file a joint return for yourself and your deceased spouse, you generally can claim your spouse's exemption under the rules just explained in Joint return . File free state and federal taxes If you file a separate return for the year, you may be able to claim your spouse's exemption under the rules just described in Separate return . File free state and federal taxes   If you remarried during the year, you cannot take an exemption for your deceased spouse. File free state and federal taxes   If you are a surviving spouse without gross income and you remarry in the year your spouse died, you can be claimed as an exemption on both the final separate return of your deceased spouse and the separate return of your new spouse for that year. File free state and federal taxes If you file a joint return with your new spouse, you can be claimed as an exemption only on that return. File free state and federal taxes Divorced or separated spouse. File free state and federal taxes    If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. File free state and federal taxes This rule applies even if you provided all of your former spouse's support. File free state and federal taxes Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. File free state and federal taxes You can claim an exemption for a dependent even if your dependent files a return. File free state and federal taxes The term “dependent” means: A qualifying child, or A qualifying relative. File free state and federal taxes The terms “ qualifying child ” and “ qualifying relative ” are defined later. File free state and federal taxes You can claim an exemption for a qualifying child or qualifying relative only if these three tests are met. File free state and federal taxes Dependent taxpayer test. File free state and federal taxes Joint return test. File free state and federal taxes Citizen or resident test. File free state and federal taxes These three tests are explained in detail later. File free state and federal taxes All the requirements for claiming an exemption for a dependent are summarized in Table 5. File free state and federal taxes Table 5. File free state and federal taxes Overview of the Rules for Claiming an Exemption for a Dependent This table is only an overview of the rules. File free state and federal taxes For details, see the rest of this publication. File free state and federal taxes You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. File free state and federal taxes   You cannot claim a married person who files a joint return as a dependent unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid. File free state and federal taxes   You cannot claim a person as a dependent unless that person is a U. File free state and federal taxes S. File free state and federal taxes citizen, U. File free state and federal taxes S. File free state and federal taxes resident alien, U. File free state and federal taxes S. File free state and federal taxes national, or a resident of Canada or Mexico. File free state and federal taxes 1  You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. File free state and federal taxes   Tests To Be a Qualifying Child Tests To Be a Qualifying Relative The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. File free state and federal taxes   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled. File free state and federal taxes   The child must have lived with you for more than half of the year. File free state and federal taxes 2  The child must not have provided more than half of his or her own support for the year. File free state and federal taxes   The child is not filing a joint return for the year (unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid). File free state and federal taxes  If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. File free state and federal taxes See the Special Rule for Qualifying Child of More Than One Person described later to find out which person is the person entitled to claim the child as a qualifying child. File free state and federal taxes The person cannot be your qualifying child or the qualifying child of any other taxpayer. File free state and federal taxes   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you , or (b) must live with you all year as a member of your household2 (and your relationship must not violate local law). File free state and federal taxes   The person's gross income for the year must be less than $3,900. File free state and federal taxes 3  You must provide more than half of the person's total support for the year. File free state and federal taxes 4  1 There is an exception for certain adopted children. File free state and federal taxes 2 There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. File free state and federal taxes 3 There is an exception if the person is disabled and has income from a sheltered workshop. File free state and federal taxes 4 There are exceptions for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. File free state and federal taxes Dependent not allowed a personal exemption. File free state and federal taxes If you can claim an exemption for your dependent, the dependent cannot claim his or her own personal exemption on his or her own tax return. File free state and federal taxes This is true even if you do not claim the dependent's exemption on your return. File free state and federal taxes It is also true if the dependent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. File free state and federal taxes Housekeepers, maids, or servants. File free state and federal taxes    If these people work for you, you cannot claim exemptions for them. File free state and federal taxes Child tax credit. File free state and federal taxes    You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. File free state and federal taxes For more information, see the instructions for the tax form you file (Form 1040 or 1040A). File free state and federal taxes Dependent Taxpayer Test If you can be claimed as a dependent by another person, you cannot claim anyone else as a dependent. File free state and federal taxes Even if you have a qualifying child or qualifying relative, you cannot claim that person as a dependent. File free state and federal taxes If you are filing a joint return and your spouse can be claimed as a dependent by someone else, you and your spouse cannot claim any dependents on your joint return. File free state and federal taxes Joint Return Test You generally cannot claim a married person as a dependent if he or she files a joint return. File free state and federal taxes Exception. File free state and federal taxes    You can claim an exemption for a person who files a joint return if that person and his or her spouse file the joint return only to claim a refund of income tax withheld or estimated tax paid. File free state and federal taxes Example 1—child files joint return. File free state and federal taxes You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. File free state and federal taxes He earned $25,000 for the year. File free state and federal taxes The couple files a joint return. File free state and federal taxes You cannot take an exemption for your daughter. File free state and federal taxes Example 2—child files joint return only as claim for refund of withheld tax. File free state and federal taxes Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. File free state and federal taxes Neither is required to file a tax return. File free state and federal taxes They do not have a child. File free state and federal taxes Taxes were taken out of their pay so they file a joint return only to get a refund of the withheld taxes. File free state and federal taxes The exception to the joint return test applies, so you are not disqualified from claiming an exemption for each of them just because they file a joint return. File free state and federal taxes You can claim exemptions for each of them if all the other tests to do so are met. File free state and federal taxes Example 3—child files joint return to claim American opportunity credit. File free state and federal taxes The facts are the same as in Example 2 except no taxes were taken out of your son's pay. File free state and federal taxes He and his wife are not required to file a tax return. File free state and federal taxes However, they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. File free state and federal taxes Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income
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The File Free State And Federal Taxes

File free state and federal taxes 4. File free state and federal taxes   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. File free state and federal taxes However, the information shown on the filled-in forms is not from any actual person or scenario. File free state and federal taxes Example 1—Mortgage loan modification. File free state and federal taxes    In 2007, Nancy Oak bought a main home for $435,000. File free state and federal taxes Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. File free state and federal taxes The loan was secured by the home. File free state and federal taxes The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. File free state and federal taxes In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. File free state and federal taxes    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. File free state and federal taxes The FMV of Nancy's home at the time of the refinancing was $500,000. File free state and federal taxes Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. File free state and federal taxes After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. File free state and federal taxes   In 2013, Nancy was unable to make her mortgage loan payments. File free state and federal taxes On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. File free state and federal taxes Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. File free state and federal taxes   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. File free state and federal taxes Identifiable event code "F" appears in box 6. File free state and federal taxes This box shows the reason the creditor has filed Form 1099-C. File free state and federal taxes To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. File free state and federal taxes Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. File free state and federal taxes   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. File free state and federal taxes Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. File free state and federal taxes Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. File free state and federal taxes Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). File free state and federal taxes   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. File free state and federal taxes Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). File free state and federal taxes Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. File free state and federal taxes You can see Nancy's Form 1099-C and a portion of her Form 1040 below. File free state and federal taxes Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. File free state and federal taxes Please click the link to view the image. File free state and federal taxes Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. File free state and federal taxes Please click the link to view the image. File free state and federal taxes Form 1040, U. File free state and federal taxes S. File free state and federal taxes Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. File free state and federal taxes Please click the link to view the image. File free state and federal taxes Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. File free state and federal taxes    In 2005, John and Mary Elm bought a main home for $335,000. File free state and federal taxes John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. File free state and federal taxes The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. File free state and federal taxes   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. File free state and federal taxes Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. File free state and federal taxes   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. File free state and federal taxes Identifiable event code "D" appears in box 6. File free state and federal taxes This box shows the reason the creditor has filed Form 1099-C. File free state and federal taxes In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. File free state and federal taxes In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. File free state and federal taxes Their sample Form 1099-C is shown on this page. File free state and federal taxes   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). File free state and federal taxes However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. File free state and federal taxes   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). File free state and federal taxes Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. File free state and federal taxes Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. File free state and federal taxes As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. File free state and federal taxes Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. File free state and federal taxes Thus, John and Mary leave line 10b of Form 982 blank. File free state and federal taxes   John and Mary must also determine whether they have a gain or loss from the foreclosure. File free state and federal taxes John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. File free state and federal taxes Because this loss relates to their home, it is a nondeductible loss. File free state and federal taxes   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. File free state and federal taxes John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. File free state and federal taxes Please click the link to view the image. File free state and federal taxes Form 1099-C, Cancellation of Debt Table 1-1. File free state and federal taxes Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. File free state and federal taxes Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). File free state and federal taxes Otherwise, go to Part 2. File free state and federal taxes 1. File free state and federal taxes Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. File free state and federal taxes 00 2. File free state and federal taxes Enter the fair market value of the transferred property $290,000. File free state and federal taxes 00 3. File free state and federal taxes Ordinary income from the cancellation of debt upon foreclosure or repossession. File free state and federal taxes * Subtract line 2 from line 1. File free state and federal taxes If less than zero, enter zero. File free state and federal taxes Next, go to Part 2 $ 25,000. File free state and federal taxes 00 Part 2. File free state and federal taxes Gain or loss from foreclosure or repossession. File free state and federal taxes   4. File free state and federal taxes Enter the smaller of line 1 or line 2. File free state and federal taxes If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. File free state and federal taxes 00 5. File free state and federal taxes Enter any proceeds you received from the foreclosure sale   6. File free state and federal taxes Add line 4 and line 5 $290,000. File free state and federal taxes 00 7. File free state and federal taxes Enter the adjusted basis of the transferred property $335,000. File free state and federal taxes 00 8. File free state and federal taxes Gain or loss from foreclosure or repossession. File free state and federal taxes Subtract line 7 from line 6 ($ 45,000. File free state and federal taxes 00) * The income may not be taxable. File free state and federal taxes See chapter 1 for more details. File free state and federal taxes Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. File free state and federal taxes Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. File free state and federal taxes Credit card debt $ 5,500 2. File free state and federal taxes Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. File free state and federal taxes Car and other vehicle loans $ 4. File free state and federal taxes Medical bills owed $ 5. File free state and federal taxes Student loans $ 6. File free state and federal taxes Accrued or past-due mortgage interest $ 7. File free state and federal taxes Accrued or past-due real estate taxes $ 8. File free state and federal taxes Accrued or past-due utilities (water, gas, electric) $ 9. File free state and federal taxes Accrued or past-due child care costs $ 10. File free state and federal taxes Federal or state income taxes remaining due (for prior tax years) $ 11. File free state and federal taxes Judgments $ 12. File free state and federal taxes Business debts (including those owed as a sole proprietor or partner) $ 13. File free state and federal taxes Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. File free state and federal taxes Other liabilities (debts) not included above $ 15. File free state and federal taxes Total liabilities immediately before the cancellation. File free state and federal taxes Add lines 1 through 14. File free state and federal taxes $ 320,500 Part II. File free state and federal taxes Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. File free state and federal taxes Cash and bank account balances $ 6,000 17. File free state and federal taxes Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. File free state and federal taxes Cars and other vehicles $ 19. File free state and federal taxes Computers $ 20. File free state and federal taxes Household goods and furnishings (for example, appliances, electronics, furniture, etc. File free state and federal taxes ) $ 21. File free state and federal taxes Tools $ 22. File free state and federal taxes Jewelry $ 23. File free state and federal taxes Clothing $ 24. File free state and federal taxes Books $ 25. File free state and federal taxes Stocks and bonds $ 26. File free state and federal taxes Investments in coins, stamps, paintings, or other collectibles $ 27. File free state and federal taxes Firearms, sports, photographic, and other hobby equipment $ 28. File free state and federal taxes Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. File free state and federal taxes Interest in a pension plan $ 30. File free state and federal taxes Interest in education accounts $ 31. File free state and federal taxes Cash value of life insurance $ 32. File free state and federal taxes Security deposits with landlords, utilities, and others $ 33. File free state and federal taxes Interests in partnerships $ 34. File free state and federal taxes Value of investment in a business $ 35. File free state and federal taxes Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. File free state and federal taxes Other assets not included above $ 37. File free state and federal taxes FMV of total assets immediately before the cancellation. File free state and federal taxes Add lines 16 through 36. File free state and federal taxes $ 309,000 Part III. File free state and federal taxes Insolvency 38. File free state and federal taxes Amount of Insolvency. File free state and federal taxes Subtract line 37 from line 15. File free state and federal taxes If zero or less, you are not insolvent. File free state and federal taxes $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. File free state and federal taxes Please click the link to view the image. File free state and federal taxes Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. File free state and federal taxes    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. File free state and federal taxes Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. File free state and federal taxes Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. File free state and federal taxes   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. File free state and federal taxes The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. File free state and federal taxes On December 26, 2013, the lender canceled the remaining debt. File free state and federal taxes Kathy and Frank have no tax attributes other than basis of personal-use property. File free state and federal taxes   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). File free state and federal taxes Identifiable event code "D" appears in box 6. File free state and federal taxes This box shows the reason the creditor has filed Form 1099-C. File free state and federal taxes Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. File free state and federal taxes Kathy and Frank are filing a joint return for 2013. File free state and federal taxes   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. File free state and federal taxes Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). File free state and federal taxes Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. File free state and federal taxes Because this loss relates to their home, it is a nondeductible loss. File free state and federal taxes   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. File free state and federal taxes Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. File free state and federal taxes Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. File free state and federal taxes The household furnishings originally cost $30,000. File free state and federal taxes The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. File free state and federal taxes Kathy and Frank had no adjustments to the cost basis of the car. File free state and federal taxes Kathy and Frank had no other assets or liabilities at the time of the cancellation. File free state and federal taxes Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). File free state and federal taxes   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. File free state and federal taxes Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). File free state and federal taxes Kathy and Frank had no other assets or liabilities at that time. File free state and federal taxes Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. File free state and federal taxes   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. File free state and federal taxes The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. File free state and federal taxes The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. File free state and federal taxes Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. File free state and federal taxes Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). File free state and federal taxes This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. File free state and federal taxes   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. File free state and federal taxes Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. File free state and federal taxes Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. File free state and federal taxes Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). File free state and federal taxes   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. File free state and federal taxes Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. File free state and federal taxes Thus, Kathy and Frank leave line 10b of Form 982 blank. File free state and federal taxes However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. File free state and federal taxes As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. File free state and federal taxes Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). File free state and federal taxes Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. File free state and federal taxes Kathy and Frank reduce the basis in the car by $14,956. File free state and federal taxes 52 ($43,000 x $16,000/$46,000). File free state and federal taxes And they reduce the basis in the household furnishings by $28,043. File free state and federal taxes 48 ($43,000 x $30,000/$46,000). File free state and federal taxes   Following are Kathy and Frank's sample forms and worksheets. File free state and federal taxes Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. File free state and federal taxes Please click the link to view the image. File free state and federal taxes Form 1099-C, Cancellation of Debt Table 1-1. File free state and federal taxes Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. File free state and federal taxes Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). File free state and federal taxes Otherwise, go to Part 2. File free state and federal taxes 1. File free state and federal taxes Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. File free state and federal taxes 00 2. File free state and federal taxes Enter the fair market value of the transferred property $1,750,000. File free state and federal taxes 00 3. File free state and federal taxes Ordinary income from the cancellation of debt upon foreclosure or repossession. File free state and federal taxes * Subtract line 2 from line 1. File free state and federal taxes If less than zero, enter zero. File free state and federal taxes Next, go to Part 2 $0. File free state and federal taxes 00 Part 2. File free state and federal taxes Gain or loss from foreclosure or repossession. File free state and federal taxes   4. File free state and federal taxes Enter the smaller of line 1 or line 2. File free state and federal taxes If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. File free state and federal taxes $1,750,000. File free state and federal taxes 00 5. File free state and federal taxes Enter any proceeds you received from the foreclosure sale   6. File free state and federal taxes Add line 4 and line 5 $1,750,000. File free state and federal taxes 00 7. File free state and federal taxes Enter the adjusted basis of the transferred property $3,000,000. File free state and federal taxes 00 8. File free state and federal taxes Gain or loss from foreclosure or repossession. File free state and federal taxes Subtract line 7 from line 6 ($1,250,000. File free state and federal taxes 00) * The income may not be taxable. File free state and federal taxes See chapter 1 for more details. File free state and federal taxes    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. File free state and federal taxes Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. File free state and federal taxes Credit card debt $ 18,000 2. File free state and federal taxes Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. File free state and federal taxes Car and other vehicle loans $ 4. File free state and federal taxes Medical bills owed $ 5. File free state and federal taxes Student loans $ 6. File free state and federal taxes Accrued or past-due mortgage interest $ 7. File free state and federal taxes Accrued or past-due real estate taxes $ 8. File free state and federal taxes Accrued or past-due utilities (water, gas, electric) $ 9. File free state and federal taxes Accrued or past-due child care costs $ 10. File free state and federal taxes Federal or state income taxes remaining due (for prior tax years) $ 11. File free state and federal taxes Judgments $ 12. File free state and federal taxes Business debts (including those owed as a sole proprietor or partner) $ 13. File free state and federal taxes Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. File free state and federal taxes Other liabilities (debts) not included above $ 15. File free state and federal taxes Total liabilities immediately before the cancellation. File free state and federal taxes Add lines 1 through 14. File free state and federal taxes $ 768,000 Part II. File free state and federal taxes Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. File free state and federal taxes Cash and bank account balances $ 15,000 17. File free state and federal taxes Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. File free state and federal taxes Cars and other vehicles $ 10,000 19. File free state and federal taxes Computers $ 20. File free state and federal taxes Household goods and furnishings (for example, appliances, electronics, furniture, etc. File free state and federal taxes ) $ 17,000 21. File free state and federal taxes Tools $ 22. File free state and federal taxes Jewelry $ 23. File free state and federal taxes Clothing $ 24. File free state and federal taxes Books $ 25. File free state and federal taxes Stocks and bonds $ 26. File free state and federal taxes Investments in coins, stamps, paintings, or other collectibles $ 27. File free state and federal taxes Firearms, sports, photographic, and other hobby equipment $ 28. File free state and federal taxes Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. File free state and federal taxes Interest in a pension plan $ 30. File free state and federal taxes Interest in education accounts $ 31. File free state and federal taxes Cash value of life insurance $ 32. File free state and federal taxes Security deposits with landlords, utilities, and others $ 33. File free state and federal taxes Interests in partnerships $ 34. File free state and federal taxes Value of investment in a business $ 35. File free state and federal taxes Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. File free state and federal taxes Other assets not included above $ 37. File free state and federal taxes FMV of total assets immediately before the cancellation. File free state and federal taxes Add lines 16 through 36. File free state and federal taxes $ 42,000 Part III. File free state and federal taxes Insolvency 38. File free state and federal taxes Amount of Insolvency. File free state and federal taxes Subtract line 37 from line 15. File free state and federal taxes If zero or less, you are not insolvent. File free state and federal taxes $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. File free state and federal taxes Please click the link to view the image. File free state and federal taxes Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications