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Filing State Income Tax Return

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Filing State Income Tax Return

Filing state income tax return 1. Filing state income tax return   Traditional IRAs Table of Contents What's New for 2013 What's New for 2014 Introduction Who Can Open a Traditional IRA?What Is Compensation? When Can a Traditional IRA Be Opened? How Can a Traditional IRA Be Opened?Individual Retirement Account Individual Retirement Annuity Individual Retirement Bonds Simplified Employee Pension (SEP) Employer and Employee Association Trust Accounts Required Disclosures How Much Can Be Contributed?Limit. Filing state income tax return When repayment contributions can be made. Filing state income tax return No deduction. Filing state income tax return Reserve component. Filing state income tax return Figuring your IRA deduction. Filing state income tax return Reporting the repayment. Filing state income tax return Example. Filing state income tax return General Limit Kay Bailey Hutchison Spousal IRA Limit Filing Status Less Than Maximum Contributions More Than Maximum Contributions When Can Contributions Be Made? How Much Can You Deduct?Kay Bailey Hutchison Spousal IRA. Filing state income tax return Are You Covered by an Employer Plan? Limit if Covered by Employer Plan Reporting Deductible Contributions Nondeductible Contributions Examples — Worksheet for Reduced IRA Deduction for 2013 What if You Inherit an IRA?Treating it as your own. Filing state income tax return Can You Move Retirement Plan Assets?Transfers to Roth IRAs from other retirement plans. Filing state income tax return Trustee-to-Trustee Transfer Rollovers Transfers Incident To Divorce Converting From Any Traditional IRA Into a Roth IRA Recharacterizations When Can You Withdraw or Use Assets?Contributions Returned Before Due Date of Return When Must You Withdraw Assets? (Required Minimum Distributions)IRA Owners IRA Beneficiaries Which Table Do You Use To Determine Your Required Minimum Distribution? What Age(s) Do You Use With the Table(s)? Miscellaneous Rules for Required Minimum Distributions Are Distributions Taxable?January 2013 QCDs treated as made in 2012. Filing state income tax return 2013 Reporting. Filing state income tax return Additional reporting requirements if you made the election to treat a January 2013 QCD as made in 2012. Filing state income tax return One-time transfer. Filing state income tax return Testing period rules apply. Filing state income tax return More information. Filing state income tax return Distributions Fully or Partly Taxable Figuring the Nontaxable and Taxable Amounts Recognizing Losses on Traditional IRA Investments Other Special IRA Distribution Situations Reporting and Withholding Requirements for Taxable Amounts What Acts Result in Penalties or Additional Taxes?Prohibited Transactions Investment in Collectibles Excess Contributions Early Distributions Excess Accumulations (Insufficient Distributions) Reporting Additional Taxes What's New for 2013 Traditional IRA contribution and deduction limit. Filing state income tax return  The contribution limit to your traditional IRA for 2013 will be increased to the smaller of the following amounts: $5,500, or Your taxable compensation for the year. Filing state income tax return If you were age 50 or older before 2014, the most that can be contributed to your traditional IRA for 2013 will be the smaller of the following amounts: $6,500, or Your taxable compensation for the year. Filing state income tax return For more information, see How Much Can Be Contributed? in this chapter. Filing state income tax return Modified AGI limit for traditional IRA contributions increased. Filing state income tax return  For 2013, if you were covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $95,000 but less than $115,000 for a married couple filing a joint return or a qualifying widow(er), More than $59,000 but less than $69,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Filing state income tax return If you either lived with your spouse or file a joint return, and your spouse was covered by a retirement plan at work, but you were not, your deduction is phased out if your modified AGI is more than $178,000 but less than $188,000. Filing state income tax return If your modified AGI is $188,000 or more, you cannot take a deduction for contributions to a traditional IRA. Filing state income tax return See How Much Can You Deduct? in this chapter. Filing state income tax return Net Investment Income Tax. Filing state income tax return  For purposes of the Net Investment Income Tax (NIIT), net investment income does not include distributions from a qualified retirement plan (for example, 401(a), 403(a), 403(b), 457(b) plans, and IRAs). Filing state income tax return However, these distributions are taken into account when determining the modified adjusted gross income threshold. Filing state income tax return Distributions from a nonqualified retirement plan are included in net investment income. Filing state income tax return See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information. Filing state income tax return What's New for 2014 Modified AGI limit for traditional IRA contributions increased. Filing state income tax return  For 2014, if you are covered by a retirement plan at work, your deduction for contributions to a traditional IRA is reduced (phased out) if your modified AGI is: More than $96,000 but less than $116,000 for a married couple filing a joint return or a qualifying widow(er), More than $60,000 but less than $70,000 for a single individual or head of household, or Less than $10,000 for a married individual filing a separate return. Filing state income tax return If you either live with your spouse or file a joint return, and your spouse is covered by a retirement plan at work, but you are not, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Filing state income tax return If your modified AGI is $191,000 or more, you cannot take a deduction for contributions to a traditional IRA. Filing state income tax return Introduction This chapter discusses the original IRA. Filing state income tax return In this publication the original IRA (sometimes called an ordinary or regular IRA) is referred to as a “traditional IRA. Filing state income tax return ” A traditional IRA is any IRA that is not a Roth IRA or a SIMPLE IRA. Filing state income tax return The following are two advantages of a traditional IRA: You may be able to deduct some or all of your contributions to it, depending on your circumstances. Filing state income tax return Generally, amounts in your IRA, including earnings and gains, are not taxed until they are distributed. Filing state income tax return Who Can Open a Traditional IRA? You can open and make contributions to a traditional IRA if: You (or, if you file a joint return, your spouse) received taxable compensation during the year, and You were not age 70½ by the end of the year. Filing state income tax return You can have a traditional IRA whether or not you are covered by any other retirement plan. Filing state income tax return However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan. Filing state income tax return See How Much Can You Deduct , later. Filing state income tax return Both spouses have compensation. Filing state income tax return   If both you and your spouse have compensation and are under age 70½, each of you can open an IRA. Filing state income tax return You cannot both participate in the same IRA. Filing state income tax return If you file a joint return, only one of you needs to have compensation. Filing state income tax return What Is Compensation? Generally, compensation is what you earn from working. Filing state income tax return For a summary of what compensation does and does not include, see Table 1-1. Filing state income tax return Compensation includes all of the items discussed next (even if you have more than one type). Filing state income tax return Wages, salaries, etc. Filing state income tax return   Wages, salaries, tips, professional fees, bonuses, and other amounts you receive for providing personal services are compensation. Filing state income tax return The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). Filing state income tax return Scholarship and fellowship payments are compensation for IRA purposes only if shown in box 1 of Form W-2. Filing state income tax return Commissions. Filing state income tax return   An amount you receive that is a percentage of profits or sales price is compensation. Filing state income tax return Self-employment income. Filing state income tax return   If you are self-employed (a sole proprietor or a partner), compensation is the net earnings from your trade or business (provided your personal services are a material income-producing factor) reduced by the total of: The deduction for contributions made on your behalf to retirement plans, and The deduction allowed for the deductible part of your self-employment taxes. Filing state income tax return   Compensation includes earnings from self-employment even if they are not subject to self-employment tax because of your religious beliefs. Filing state income tax return Self-employment loss. Filing state income tax return   If you have a net loss from self-employment, do not subtract the loss from your salaries or wages when figuring your total compensation. Filing state income tax return Alimony and separate maintenance. Filing state income tax return   For IRA purposes, compensation includes any taxable alimony and separate maintenance payments you receive under a decree of divorce or separate maintenance. Filing state income tax return Nontaxable combat pay. Filing state income tax return   If you were a member of the U. Filing state income tax return S. Filing state income tax return Armed Forces, compensation includes any nontaxable combat pay you received. Filing state income tax return This amount should be reported in box 12 of your 2013 Form W-2 with code Q. Filing state income tax return Table 1-1. Filing state income tax return Compensation for Purposes of an IRA Includes . Filing state income tax return . Filing state income tax return . Filing state income tax return Does not include . Filing state income tax return . Filing state income tax return . Filing state income tax return   earnings and profits from property. Filing state income tax return wages, salaries, etc. Filing state income tax return     interest and dividend income. Filing state income tax return commissions. Filing state income tax return     pension or annuity income. Filing state income tax return self-employment income. Filing state income tax return     deferred compensation. Filing state income tax return alimony and separate maintenance. Filing state income tax return     income from certain  partnerships. Filing state income tax return nontaxable combat pay. Filing state income tax return     any amounts you exclude from income. Filing state income tax return     What Is Not Compensation? Compensation does not include any of the following items. Filing state income tax return Earnings and profits from property, such as rental income, interest income, and dividend income. Filing state income tax return Pension or annuity income. Filing state income tax return Deferred compensation received (compensation payments postponed from a past year). Filing state income tax return Income from a partnership for which you do not provide services that are a material income-producing factor. Filing state income tax return Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b. Filing state income tax return Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs. Filing state income tax return When Can a Traditional IRA Be Opened? You can open a traditional IRA at any time. Filing state income tax return However, the time for making contributions for any year is limited. Filing state income tax return See When Can Contributions Be Made , later. Filing state income tax return How Can a Traditional IRA Be Opened? You can open different kinds of IRAs with a variety of organizations. Filing state income tax return You can open an IRA at a bank or other financial institution or with a mutual fund or life insurance company. Filing state income tax return You can also open an IRA through your stockbroker. Filing state income tax return Any IRA must meet Internal Revenue Code requirements. Filing state income tax return The requirements for the various arrangements are discussed below. Filing state income tax return Kinds of traditional IRAs. Filing state income tax return   Your traditional IRA can be an individual retirement account or annuity. Filing state income tax return It can be part of either a simplified employee pension (SEP) or an employer or employee association trust account. Filing state income tax return Individual Retirement Account An individual retirement account is a trust or custodial account set up in the United States for the exclusive benefit of you or your beneficiaries. Filing state income tax return The account is created by a written document. Filing state income tax return The document must show that the account meets all of the following requirements. Filing state income tax return The trustee or custodian must be a bank, a federally insured credit union, a savings and loan association, or an entity approved by the IRS to act as trustee or custodian. Filing state income tax return The trustee or custodian generally cannot accept contributions of more than the deductible amount for the year. Filing state income tax return However, rollover contributions and employer contributions to a simplified employee pension (SEP) can be more than this amount. Filing state income tax return Contributions, except for rollover contributions, must be in cash. Filing state income tax return See Rollovers , later. Filing state income tax return You must have a nonforfeitable right to the amount at all times. Filing state income tax return Money in your account cannot be used to buy a life insurance policy. Filing state income tax return Assets in your account cannot be combined with other property, except in a common trust fund or common investment fund. Filing state income tax return You must start receiving distributions by April 1 of the year following the year in which you reach age 70½. Filing state income tax return See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Filing state income tax return Individual Retirement Annuity You can open an individual retirement annuity by purchasing an annuity contract or an endowment contract from a life insurance company. Filing state income tax return An individual retirement annuity must be issued in your name as the owner, and either you or your beneficiaries who survive you are the only ones who can receive the benefits or payments. Filing state income tax return An individual retirement annuity must meet all the following requirements. Filing state income tax return Your entire interest in the contract must be nonforfeitable. Filing state income tax return The contract must provide that you cannot transfer any portion of it to any person other than the issuer. Filing state income tax return There must be flexible premiums so that if your compensation changes, your payment can also change. Filing state income tax return This provision applies to contracts issued after November 6, 1978. Filing state income tax return The contract must provide that contributions cannot be more than the deductible amount for an IRA for the year, and that you must use any refunded premiums to pay for future premiums or to buy more benefits before the end of the calendar year after the year in which you receive the refund. Filing state income tax return Distributions must begin by April 1 of the year following the year in which you reach age 70½. Filing state income tax return See When Must You Withdraw Assets? (Required Minimum Distributions) , later. Filing state income tax return Individual Retirement Bonds The sale of individual retirement bonds issued by the federal government was suspended after April 30, 1982. Filing state income tax return The bonds have the following features. Filing state income tax return They stop earning interest when you reach age 70½. Filing state income tax return If you die, interest will stop 5 years after your death, or on the date you would have reached age 70½, whichever is earlier. Filing state income tax return You cannot transfer the bonds. Filing state income tax return If you cash (redeem) the bonds before the year in which you reach age 59½, you may be subject to a 10% additional tax. Filing state income tax return See Age 59½ Rule under Early Distributions, later. Filing state income tax return You can roll over redemption proceeds into IRAs. Filing state income tax return Simplified Employee Pension (SEP) A simplified employee pension (SEP) is a written arrangement that allows your employer to make deductible contributions to a traditional IRA (a SEP IRA) set up for you to receive such contributions. Filing state income tax return Generally, distributions from SEP IRAs are subject to the withdrawal and tax rules that apply to traditional IRAs. Filing state income tax return See Publication 560 for more information about SEPs. Filing state income tax return Employer and Employee Association Trust Accounts Your employer or your labor union or other employee association can set up a trust to provide individual retirement accounts for employees or members. Filing state income tax return The requirements for individual retirement accounts apply to these traditional IRAs. Filing state income tax return Required Disclosures The trustee or issuer (sometimes called the sponsor) of your traditional IRA generally must give you a disclosure statement at least 7 days before you open your IRA. Filing state income tax return However, the sponsor does not have to give you the statement until the date you open (or purchase, if earlier) your IRA, provided you are given at least 7 days from that date to revoke the IRA. Filing state income tax return The disclosure statement must explain certain items in plain language. Filing state income tax return For example, the statement should explain when and how you can revoke the IRA, and include the name, address, and telephone number of the person to receive the notice of cancellation. Filing state income tax return This explanation must appear at the beginning of the disclosure statement. Filing state income tax return If you revoke your IRA within the revocation period, the sponsor must return to you the entire amount you paid. Filing state income tax return The sponsor must report on the appropriate IRS forms both your contribution to the IRA (unless it was made by a trustee-to-trustee transfer) and the amount returned to you. Filing state income tax return These requirements apply to all sponsors. Filing state income tax return How Much Can Be Contributed? There are limits and other rules that affect the amount that can be contributed to a traditional IRA. Filing state income tax return These limits and rules are explained below. Filing state income tax return Community property laws. Filing state income tax return   Except as discussed later under Kay Bailey Hutchison Spousal IRA Limit , each spouse figures his or her limit separately, using his or her own compensation. Filing state income tax return This is the rule even in states with community property laws. Filing state income tax return Brokers' commissions. Filing state income tax return   Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit. Filing state income tax return For information about whether you can deduct brokers' commissions, see Brokers' commissions , later, under How Much Can You Deduct. Filing state income tax return Trustees' fees. Filing state income tax return   Trustees' administrative fees are not subject to the contribution limit. Filing state income tax return For information about whether you can deduct trustees' fees, see Trustees' fees , later, under How Much Can You Deduct. Filing state income tax return Qualified reservist repayments. Filing state income tax return   If you were a member of a reserve component and you were ordered or called to active duty after September 11, 2001, you may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined later under Early Distributions) you received. Filing state income tax return You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. Filing state income tax return To be eligible to make these repayment contributions, you must have received a qualified reservist distribution from an IRA or from a section 401(k) or 403(b) plan or a similar arrangement. Filing state income tax return Limit. Filing state income tax return   Your qualified reservist repayments cannot be more than your qualified reservist distributions, explained under Early Distributions , later. Filing state income tax return When repayment contributions can be made. Filing state income tax return   You cannot make these repayment contributions later than the date that is 2 years after your active duty period ends. Filing state income tax return No deduction. Filing state income tax return   You cannot deduct qualified reservist repayments. Filing state income tax return Reserve component. Filing state income tax return   The term “reserve component” means the: Army National Guard of the United States, Army Reserve, Naval Reserve, Marine Corps Reserve, Air National Guard of the United States, Air Force Reserve, Coast Guard Reserve, or Reserve Corps of the Public Health Service. Filing state income tax return Figuring your IRA deduction. Filing state income tax return   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Filing state income tax return Reporting the repayment. Filing state income tax return   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606. Filing state income tax return Example. Filing state income tax return   In 2013, your IRA contribution limit is $5,500. Filing state income tax return However, because of your filing status and AGI, the limit on the amount you can deduct is $3,500. Filing state income tax return You can make a nondeductible contribution of $2,000 ($5,500 - $3,500). Filing state income tax return In an earlier year you received a $3,000 qualified reservist distribution, which you would like to repay this year. Filing state income tax return   For 2013, you can contribute a total of $8,500 to your IRA. Filing state income tax return This is made up of the maximum deductible contribution of $3,500; a nondeductible contribution of $2,000; and a $3,000 qualified reservist repayment. Filing state income tax return You contribute the maximum allowable for the year. Filing state income tax return Since you are making a nondeductible contribution ($2,000) and a qualified reservist repayment ($3,000), you must file Form 8606 with your return and include $5,000 ($2,000 + $3,000) on line 1 of Form 8606. Filing state income tax return The qualified reservist repayment is not deductible. Filing state income tax return Contributions on your behalf to a traditional IRA reduce your limit for contributions to a Roth IRA. Filing state income tax return See chapter 2 for information about Roth IRAs. Filing state income tax return General Limit For 2013, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,500 ($6,500 if you are age 50 or older), or Your taxable compensation (defined earlier) for the year. Filing state income tax return Note. Filing state income tax return This limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Filing state income tax return This is the most that can be contributed regardless of whether the contributions are to one or more traditional IRAs or whether all or part of the contributions are nondeductible. Filing state income tax return (See Nondeductible Contributions , later. Filing state income tax return ) Qualified reservist repayments do not affect this limit. Filing state income tax return Examples. Filing state income tax return George, who is 34 years old and single, earns $24,000 in 2013. Filing state income tax return His IRA contributions for 2013 are limited to $5,500. Filing state income tax return Danny, an unmarried college student working part time, earns $3,500 in 2013. Filing state income tax return His IRA contributions for 2013 are limited to $3,500, the amount of his compensation. Filing state income tax return More than one IRA. Filing state income tax return   If you have more than one IRA, the limit applies to the total contributions made on your behalf to all your traditional IRAs for the year. Filing state income tax return Annuity or endowment contracts. Filing state income tax return   If you invest in an annuity or endowment contract under an individual retirement annuity, no more than $5,500 ($6,500 if you are age 50 or older) can be contributed toward its cost for the tax year, including the cost of life insurance coverage. Filing state income tax return If more than this amount is contributed, the annuity or endowment contract is disqualified. Filing state income tax return Kay Bailey Hutchison Spousal IRA Limit For 2013, if you file a joint return and your taxable compensation is less than that of your spouse, the most that can be contributed for the year to your IRA is the smaller of the following two amounts: $5,500 ($6,500 if you are age 50 or older), or The total compensation includible in the gross income of both you and your spouse for the year, reduced by the following two amounts. Filing state income tax return Your spouse's IRA contribution for the year to a traditional IRA. Filing state income tax return Any contributions for the year to a Roth IRA on behalf of your spouse. Filing state income tax return This means that the total combined contributions that can be made for the year to your IRA and your spouse's IRA can be as much as $11,000 ($12,000 if only one of you is age 50 or older or $13,000 if both of you are age 50 or older). Filing state income tax return Note. Filing state income tax return This traditional IRA limit is reduced by any contributions to a section 501(c)(18) plan (generally, a pension plan created before June 25, 1959, that is funded entirely by employee contributions). Filing state income tax return Example. Filing state income tax return Kristin, a full-time student with no taxable compensation, marries Carl during the year. Filing state income tax return Neither of them was age 50 by the end of 2013. Filing state income tax return For the year, Carl has taxable compensation of $30,000. Filing state income tax return He plans to contribute (and deduct) $5,500 to a traditional IRA. Filing state income tax return If he and Kristin file a joint return, each can contribute $5,500 to a traditional IRA. Filing state income tax return This is because Kristin, who has no compensation, can add Carl's compensation, reduced by the amount of his IRA contribution ($30,000 − $5,500 = $24,500), to her own compensation (-0-) to figure her maximum contribution to a traditional IRA. Filing state income tax return In her case, $5,500 is her contribution limit, because $5,500 is less than $24,500 (her compensation for purposes of figuring her contribution limit). Filing state income tax return Filing Status Generally, except as discussed earlier under Kay Bailey Hutchison Spousal IRA Limit , your filing status has no effect on the amount of allowable contributions to your traditional IRA. Filing state income tax return However, if during the year either you or your spouse was covered by a retirement plan at work, your deduction may be reduced or eliminated, depending on your filing status and income. Filing state income tax return See How Much Can You Deduct , later. Filing state income tax return Example. Filing state income tax return Tom and Darcy are married and both are 53. Filing state income tax return They both work and each has a traditional IRA. Filing state income tax return Tom earned $3,800 and Darcy earned $48,000 in 2013. Filing state income tax return Because of the Kay Bailey Hutchison Spousal IRA limit rule, even though Tom earned less than $6,500, they can contribute up to $6,500 to his IRA for 2013 if they file a joint return. Filing state income tax return They can contribute up to $6,500 to Darcy's IRA. Filing state income tax return If they file separate returns, the amount that can be contributed to Tom's IRA is limited by his earned income, $3,800. Filing state income tax return Less Than Maximum Contributions If contributions to your traditional IRA for a year were less than the limit, you cannot contribute more after the due date of your return for that year to make up the difference. Filing state income tax return Example. Filing state income tax return Rafael, who is 40, earns $30,000 in 2013. Filing state income tax return Although he can contribute up to $5,500 for 2013, he contributes only $3,000. Filing state income tax return After April 15, 2014, Rafael cannot make up the difference between his actual contributions for 2013 ($3,000) and his 2013 limit ($5,500). Filing state income tax return He cannot contribute $2,500 more than the limit for any later year. Filing state income tax return More Than Maximum Contributions If contributions to your IRA for a year were more than the limit, you can apply the excess contribution in one year to a later year if the contributions for that later year are less than the maximum allowed for that year. Filing state income tax return However, a penalty or additional tax may apply. Filing state income tax return See Excess Contributions , later, under What Acts Result in Penalties or Additional Taxes. Filing state income tax return When Can Contributions Be Made? As soon as you open your traditional IRA, contributions can be made to it through your chosen sponsor (trustee or other administrator). Filing state income tax return Contributions must be in the form of money (cash, check, or money order). Filing state income tax return Property cannot be contributed. Filing state income tax return Although property cannot be contributed, your IRA may invest in certain property. Filing state income tax return For example, your IRA may purchase shares of stock. Filing state income tax return For other restrictions on the use of funds in your IRA, see Prohibited Transactions , later in this chapter. Filing state income tax return You may be able to transfer or roll over certain property from one retirement plan to another. Filing state income tax return See the discussion of rollovers and other transfers later in this chapter under Can You Move Retirement Plan Assets . Filing state income tax return You can make a contribution to your IRA by having your income tax refund (or a portion of your refund), if any, paid directly to your traditional IRA, Roth IRA, or SEP IRA. Filing state income tax return For details, see the instructions for your income tax return or Form 8888, Allocation of Refund (Including Savings Bond Purchases). Filing state income tax return Contributions can be made to your traditional IRA for each year that you receive compensation and have not reached age 70½. Filing state income tax return For any year in which you do not work, contributions cannot be made to your IRA unless you receive alimony, nontaxable combat pay, military differential pay, or file a joint return with a spouse who has compensation. Filing state income tax return See Who Can Open a Traditional IRA , earlier. Filing state income tax return Even if contributions cannot be made for the current year, the amounts contributed for years in which you did qualify can remain in your IRA. Filing state income tax return Contributions can resume for any years that you qualify. Filing state income tax return Contributions must be made by due date. Filing state income tax return   Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Filing state income tax return For most people, this means that contributions for 2013 must be made by April 15, 2014, and contributions for 2014 must be made by April 15, 2015. Filing state income tax return Age 70½ rule. Filing state income tax return   Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year. Filing state income tax return   You attain age 70½ on the date that is 6 calendar months after the 70th anniversary of your birth. Filing state income tax return If you were born on or before June 30, 1943, you cannot contribute for 2013 or any later year. Filing state income tax return Designating year for which contribution is made. Filing state income tax return   If an amount is contributed to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. Filing state income tax return If you do not tell the sponsor which year it is for, the sponsor can assume, and report to the IRS, that the contribution is for the current year (the year the sponsor received it). Filing state income tax return Filing before a contribution is made. Filing state income tax return    You can file your return claiming a traditional IRA contribution before the contribution is actually made. Filing state income tax return Generally, the contribution must be made by the due date of your return, not including extensions. Filing state income tax return Contributions not required. Filing state income tax return   You do not have to contribute to your traditional IRA for every tax year, even if you can. Filing state income tax return How Much Can You Deduct? Generally, you can deduct the lesser of: The contributions to your traditional IRA for the year, or The general limit (or the Kay Bailey Hutchison Spousal IRA limit, if applicable) explained earlier under How Much Can Be Contributed . Filing state income tax return However, if you or your spouse was covered by an employer retirement plan, you may not be able to deduct this amount. Filing state income tax return See Limit if Covered by Employer Plan , later. Filing state income tax return You may be able to claim a credit for contributions to your traditional IRA. Filing state income tax return For more information, see chapter 4. Filing state income tax return Trustees' fees. Filing state income tax return   Trustees' administrative fees that are billed separately and paid in connection with your traditional IRA are not deductible as IRA contributions. Filing state income tax return However, they may be deductible as a miscellaneous itemized deduction on Schedule A (Form 1040). Filing state income tax return For information about miscellaneous itemized deductions, see Publication 529, Miscellaneous Deductions. Filing state income tax return Brokers' commissions. Filing state income tax return   These commissions are part of your IRA contribution and, as such, are deductible subject to the limits. Filing state income tax return Full deduction. Filing state income tax return   If neither you nor your spouse was covered for any part of the year by an employer retirement plan, you can take a deduction for total contributions to one or more of your traditional IRAs of up to the lesser of: $5,500 ($6,500 if you are age 50 or older), or 100% of your compensation. Filing state income tax return   This limit is reduced by any contributions made to a 501(c)(18) plan on your behalf. Filing state income tax return Kay Bailey Hutchison Spousal IRA. Filing state income tax return   In the case of a married couple with unequal compensation who file a joint return, the deduction for contributions to the traditional IRA of the spouse with less compensation is limited to the lesser of: $5,500 ($6,500 if the spouse with the lower compensation is age 50 or older), or The total compensation includible in the gross income of both spouses for the year reduced by the following three amounts. Filing state income tax return The IRA deduction for the year of the spouse with the greater compensation. Filing state income tax return Any designated nondeductible contribution for the year made on behalf of the spouse with the greater compensation. Filing state income tax return Any contributions for the year to a Roth IRA on behalf of the spouse with the greater compensation. Filing state income tax return   This limit is reduced by any contributions to a section 501(c)(18) plan on behalf of the spouse with the lesser compensation. Filing state income tax return Note. Filing state income tax return If you were divorced or legally separated (and did not remarry) before the end of the year, you cannot deduct any contributions to your spouse's IRA. Filing state income tax return After a divorce or legal separation, you can deduct only the contributions to your own IRA. Filing state income tax return Your deductions are subject to the rules for single individuals. Filing state income tax return Covered by an employer retirement plan. Filing state income tax return   If you or your spouse was covered by an employer retirement plan at any time during the year for which contributions were made, your deduction may be further limited. Filing state income tax return This is discussed later under Limit if Covered by Employer Plan . Filing state income tax return Limits on the amount you can deduct do not affect the amount that can be contributed. Filing state income tax return Are You Covered by an Employer Plan? The Form W-2 you receive from your employer has a box used to indicate whether you were covered for the year. Filing state income tax return The “Retirement Plan” box should be checked if you were covered. Filing state income tax return Reservists and volunteer firefighters should also see Situations in Which You Are Not Covered , later. Filing state income tax return If you are not certain whether you were covered by your employer's retirement plan, you should ask your employer. Filing state income tax return Federal judges. Filing state income tax return   For purposes of the IRA deduction, federal judges are covered by an employer plan. Filing state income tax return For Which Year(s) Are You Covered? Special rules apply to determine the tax years for which you are covered by an employer plan. Filing state income tax return These rules differ depending on whether the plan is a defined contribution plan or a defined benefit plan. Filing state income tax return Tax year. Filing state income tax return   Your tax year is the annual accounting period you use to keep records and report income and expenses on your income tax return. Filing state income tax return For almost all people, the tax year is the calendar year. Filing state income tax return Defined contribution plan. Filing state income tax return   Generally, you are covered by a defined contribution plan for a tax year if amounts are contributed or allocated to your account for the plan year that ends with or within that tax year. Filing state income tax return However, also see Situations in Which You Are Not Covered , later. Filing state income tax return   A defined contribution plan is a plan that provides for a separate account for each person covered by the plan. Filing state income tax return In a defined contribution plan, the amount to be contributed to each participant's account is spelled out in the plan. Filing state income tax return The level of benefits actually provided to a participant depends on the total amount contributed to that participant's account and any earnings and losses on those contributions. Filing state income tax return Types of defined contribution plans include profit-sharing plans, stock bonus plans, and money purchase pension plans. Filing state income tax return Example. Filing state income tax return Company A has a money purchase pension plan. Filing state income tax return Its plan year is from July 1 to June 30. Filing state income tax return The plan provides that contributions must be allocated as of June 30. Filing state income tax return Bob, an employee, leaves Company A on December 31, 2012. Filing state income tax return The contribution for the plan year ending on June 30, 2013, is made February 15, 2014. Filing state income tax return Because an amount is contributed to Bob's account for the plan year, Bob is covered by the plan for his 2013 tax year. Filing state income tax return   A special rule applies to certain plans in which it is not possible to determine if an amount will be contributed to your account for a given plan year. Filing state income tax return If, for a plan year, no amounts have been allocated to your account that are attributable to employer contributions, employee contributions, or forfeitures, by the last day of the plan year, and contributions are discretionary for the plan year, you are not covered for the tax year in which the plan year ends. Filing state income tax return If, after the plan year ends, the employer makes a contribution for that plan year, you are covered for the tax year in which the contribution is made. Filing state income tax return Example. Filing state income tax return Mickey was covered by a profit-sharing plan and left the company on December 31, 2012. Filing state income tax return The plan year runs from July 1 to June 30. Filing state income tax return Under the terms of the plan, employer contributions do not have to be made, but if they are made, they are contributed to the plan before the due date for filing the company's tax return. Filing state income tax return Such contributions are allocated as of the last day of the plan year, and allocations are made to the accounts of individuals who have any service during the plan year. Filing state income tax return As of June 30, 2013, no contributions were made that were allocated to the June 30, 2013, plan year, and no forfeitures had been allocated within the plan year. Filing state income tax return In addition, as of that date, the company was not obligated to make a contribution for such plan year and it was impossible to determine whether or not a contribution would be made for the plan year. Filing state income tax return On December 31, 2013, the company decided to contribute to the plan for the plan year ending June 30, 2013. Filing state income tax return That contribution was made on February 15, 2014. Filing state income tax return Mickey is an active participant in the plan for his 2014 tax year but not for his 2013 tax year. Filing state income tax return No vested interest. Filing state income tax return   If an amount is allocated to your account for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the account. Filing state income tax return Defined benefit plan. Filing state income tax return   If you are eligible to participate in your employer's defined benefit plan for the plan year that ends within your tax year, you are covered by the plan. Filing state income tax return This rule applies even if you: Declined to participate in the plan, Did not make a required contribution, or Did not perform the minimum service required to accrue a benefit for the year. Filing state income tax return   A defined benefit plan is any plan that is not a defined contribution plan. Filing state income tax return In a defined benefit plan, the level of benefits to be provided to each participant is spelled out in the plan. Filing state income tax return The plan administrator figures the amount needed to provide those benefits and those amounts are contributed to the plan. Filing state income tax return Defined benefit plans include pension plans and annuity plans. Filing state income tax return Example. Filing state income tax return Nick, an employee of Company B, is eligible to participate in Company B's defined benefit plan, which has a July 1 to June 30 plan year. Filing state income tax return Nick leaves Company B on December 31, 2012. Filing state income tax return Because Nick is eligible to participate in the plan for its year ending June 30, 2013, he is covered by the plan for his 2013 tax year. Filing state income tax return No vested interest. Filing state income tax return   If you accrue a benefit for a plan year, you are covered by that plan even if you have no vested interest in (legal right to) the accrual. Filing state income tax return Situations in Which You Are Not Covered Unless you are covered by another employer plan, you are not covered by an employer plan if you are in one of the situations described below. Filing state income tax return Social security or railroad retirement. Filing state income tax return   Coverage under social security or railroad retirement is not coverage under an employer retirement plan. Filing state income tax return Benefits from previous employer's plan. Filing state income tax return   If you receive retirement benefits from a previous employer's plan, you are not covered by that plan. Filing state income tax return Reservists. Filing state income tax return   If the only reason you participate in a plan is because you are a member of a reserve unit of the Armed Forces, you may not be covered by the plan. Filing state income tax return You are not covered by the plan if both of the following conditions are met. Filing state income tax return The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Filing state income tax return You did not serve more than 90 days on active duty during the year (not counting duty for training). Filing state income tax return Volunteer firefighters. Filing state income tax return   If the only reason you participate in a plan is because you are a volunteer firefighter, you may not be covered by the plan. Filing state income tax return You are not covered by the plan if both of the following conditions are met. Filing state income tax return The plan you participate in is established for its employees by: The United States, A state or political subdivision of a state, or An instrumentality of either (a) or (b) above. Filing state income tax return Your accrued retirement benefits at the beginning of the year will not provide more than $1,800 per year at retirement. Filing state income tax return Limit if Covered by Employer Plan As discussed earlier, the deduction you can take for contributions made to your traditional IRA depends on whether you or your spouse was covered for any part of the year by an employer retirement plan. Filing state income tax return Your deduction is also affected by how much income you had and by your filing status. Filing state income tax return Your deduction may also be affected by social security benefits you received. Filing state income tax return Reduced or no deduction. Filing state income tax return   If either you or your spouse was covered by an employer retirement plan, you may be entitled to only a partial (reduced) deduction or no deduction at all, depending on your income and your filing status. Filing state income tax return   Your deduction begins to decrease (phase out) when your income rises above a certain amount and is eliminated altogether when it reaches a higher amount. Filing state income tax return These amounts vary depending on your filing status. Filing state income tax return   To determine if your deduction is subject to the phaseout, you must determine your modified adjusted gross income (AGI) and your filing status, as explained later under Deduction Phaseout . Filing state income tax return Once you have determined your modified AGI and your filing status, you can use Table 1-2 or Table 1-3 to determine if the phaseout applies. Filing state income tax return Social Security Recipients Instead of using Table 1-2 or Table 1-3 and Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, later, complete the worksheets in Appendix B of this publication if, for the year, all of the following apply. Filing state income tax return You received social security benefits. Filing state income tax return You received taxable compensation. Filing state income tax return Contributions were made to your traditional IRA. Filing state income tax return You or your spouse was covered by an employer retirement plan. Filing state income tax return Use the worksheets in Appendix B to figure your IRA deduction, your nondeductible contribution, and the taxable portion, if any, of your social security benefits. Filing state income tax return Appendix B includes an example with filled-in worksheets to assist you. Filing state income tax return Table 1-2. Filing state income tax return Effect of Modified AGI1 on Deduction if You Are Covered by a Retirement Plan at Work If you are covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Filing state income tax return IF your filing status is . Filing state income tax return . Filing state income tax return . Filing state income tax return AND your modified adjusted gross income (modified AGI) is . Filing state income tax return . Filing state income tax return . Filing state income tax return THEN you can take . Filing state income tax return . Filing state income tax return . Filing state income tax return single or head of household $59,000 or less a full deduction. Filing state income tax return more than $59,000 but less than $69,000 a partial deduction. Filing state income tax return $69,000 or more no deduction. Filing state income tax return married filing jointly or  qualifying widow(er) $95,000 or less a full deduction. Filing state income tax return more than $95,000 but less than $115,000 a partial deduction. Filing state income tax return $115,000 or more no deduction. Filing state income tax return married filing separately2 less than $10,000 a partial deduction. Filing state income tax return $10,000 or more no deduction. Filing state income tax return 1 Modified AGI (adjusted gross income). Filing state income tax return See Modified adjusted gross income (AGI) , later. Filing state income tax return  2 If you did not live with your spouse at any time during the year, your filing status is considered Single for this purpose (therefore, your IRA deduction is determined under the “Single” filing status). Filing state income tax return Table 1-3. Filing state income tax return Effect of Modified AGI1 on Deduction if You Are NOT Covered by a Retirement Plan at Work If you are not covered by a retirement plan at work, use this table to determine if your modified AGI affects the amount of your deduction. Filing state income tax return IF your filing status is . Filing state income tax return . Filing state income tax return . Filing state income tax return AND your modified adjusted gross income (modified AGI) is . Filing state income tax return . Filing state income tax return . Filing state income tax return THEN you can take . Filing state income tax return . Filing state income tax return . Filing state income tax return single, head of household, or qualifying widow(er) any amount a full deduction. Filing state income tax return married filing jointly or separately with a spouse who is not covered by a plan at work any amount a full deduction. Filing state income tax return married filing jointly with a spouse who is covered by a plan at work $178,000 or less a full deduction. Filing state income tax return more than $178,000 but less than $188,000 a partial deduction. Filing state income tax return $188,000 or more no deduction. Filing state income tax return married filing separately with a spouse who is covered by a plan at work2 less than $10,000 a partial deduction. Filing state income tax return $10,000 or more no deduction. Filing state income tax return 1 Modified AGI (adjusted gross income). Filing state income tax return See Modified adjusted gross income (AGI) , later. Filing state income tax return  2 You are entitled to the full deduction if you did not live with your spouse at any time during the year. Filing state income tax return For 2014, if you are not covered by a retirement plan at work and you are married filing jointly with a spouse who is covered by a plan at work, your deduction is phased out if your modified AGI is more than $181,000 but less than $191,000. Filing state income tax return If your AGI is $191,000 or more, you cannot take a deduction for a contribution to a traditional IRA. Filing state income tax return Deduction Phaseout The amount of any reduction in the limit on your IRA deduction (phaseout) depends on whether you or your spouse was covered by an employer retirement plan. Filing state income tax return Covered by a retirement plan. Filing state income tax return   If you are covered by an employer retirement plan and you did not receive any social security retirement benefits, your IRA deduction may be reduced or eliminated depending on your filing status and modified AGI, as shown in Table 1-2. Filing state income tax return For 2014, if you are covered by a retirement plan at work, your IRA deduction will not be reduced (phased out) unless your modified AGI is: More than $60,000 but less than $70,000 for a single individual (or head of household), More than $96,000 but less than $116,000 for a married couple filing a joint return (or a qualifying widow(er)), or Less than $10,000 for a married individual filing a separate return. Filing state income tax return If your spouse is covered. Filing state income tax return   If you are not covered by an employer retirement plan, but your spouse is, and you did not receive any social security benefits, your IRA deduction may be reduced or eliminated entirely depending on your filing status and modified AGI as shown in Table 1-3. Filing state income tax return Filing status. Filing state income tax return   Your filing status depends primarily on your marital status. Filing state income tax return For this purpose, you need to know if your filing status is single or head of household, married filing jointly or qualifying widow(er), or married filing separately. Filing state income tax return If you need more information on filing status, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Filing state income tax return Lived apart from spouse. Filing state income tax return   If you did not live with your spouse at any time during the year and you file a separate return, your filing status, for this purpose, is single. Filing state income tax return Modified adjusted gross income (AGI). Filing state income tax return   You can use Worksheet 1-1 to figure your modified AGI. Filing state income tax return If you made contributions to your IRA for 2013 and received a distribution from your IRA in 2013, see Both contributions for 2013 and distributions in 2013 , later. Filing state income tax return    Do not assume that your modified AGI is the same as your compensation. Filing state income tax return Your modified AGI may include income in addition to your compensation (discussed earlier) such as interest, dividends, and income from IRA distributions. Filing state income tax return Form 1040. Filing state income tax return   If you file Form 1040, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Filing state income tax return IRA deduction. Filing state income tax return Student loan interest deduction. Filing state income tax return Tuition and fees deduction. Filing state income tax return Domestic production activities deduction. Filing state income tax return Foreign earned income exclusion. Filing state income tax return Foreign housing exclusion or deduction. Filing state income tax return Exclusion of qualified savings bond interest shown on Form 8815. Filing state income tax return Exclusion of employer-provided adoption benefits shown on Form 8839. Filing state income tax return This is your modified AGI. Filing state income tax return Form 1040A. Filing state income tax return   If you file Form 1040A, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Filing state income tax return IRA deduction. Filing state income tax return Student loan interest deduction. Filing state income tax return Tuition and fees deduction. Filing state income tax return Exclusion of qualified savings bond interest shown on Form 8815. Filing state income tax return This is your modified AGI. Filing state income tax return Form 1040NR. Filing state income tax return   If you file Form 1040NR, refigure the amount on the page 1 “adjusted gross income” line without taking into account any of the following amounts. Filing state income tax return IRA deduction. Filing state income tax return Student loan interest deduction. Filing state income tax return Domestic production activities deduction. Filing state income tax return Exclusion of qualified savings bond interest shown on Form 8815. Filing state income tax return Exclusion of employer-provided adoption benefits shown on Form 8839. Filing state income tax return This is your modified AGI. Filing state income tax return Income from IRA distributions. Filing state income tax return   If you received distributions in 2013 from one or more traditional IRAs and your traditional IRAs include only deductible contributions, the distributions are fully taxable and are included in your modified AGI. Filing state income tax return Both contributions for 2013 and distributions in 2013. Filing state income tax return   If all three of the following apply, any IRA distributions you received in 2013 may be partly tax free and partly taxable. Filing state income tax return You received distributions in 2013 from one or more traditional IRAs, You made contributions to a traditional IRA for 2013, and Some of those contributions may be nondeductible contributions. Filing state income tax return (See Nondeductible Contributions and Worksheet 1-2, later. Filing state income tax return ) If this is your situation, you must figure the taxable part of the traditional IRA distribution before you can figure your modified AGI. Filing state income tax return To do this, you can use Worksheet 1-5, later. Filing state income tax return   If at least one of the above does not apply, figure your modified AGI using Worksheet 1-1, later. Filing state income tax return How To Figure Your Reduced IRA Deduction If you or your spouse is covered by an employer retirement plan and you did not receive any social security benefits, you can figure your reduced IRA deduction by using Worksheet 1-2. Filing state income tax return Figuring Your Reduced IRA Deduction for 2013. Filing state income tax return The Instructions for Form 1040, Form 1040A, and Form 1040NR include similar worksheets that you can use instead of the worksheet in this publication. Filing state income tax return If you or your spouse is covered by an employer retirement plan, and you received any social security benefits, see Social Security Recipients , earlier. Filing state income tax return Note. Filing state income tax return If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Filing state income tax return Worksheet 1-1. Filing state income tax return Figuring Your Modified AGI Use this worksheet to figure your modified AGI for traditional IRA purposes. Filing state income tax return 1. Filing state income tax return Enter your adjusted gross income (AGI) from Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37, figured without taking into account the amount from Form 1040, line 32; Form 1040A, line 17; or Form 1040NR, line 32 1. Filing state income tax return   2. Filing state income tax return Enter any student loan interest deduction from Form 1040, line 33; Form 1040A, line 18; or Form 1040NR, line 33 2. Filing state income tax return   3. Filing state income tax return Enter any tuition and fees deduction from Form 1040, line 34, or Form 1040A, line 19 3. Filing state income tax return   4. Filing state income tax return Enter any domestic production activities deduction from Form 1040, line 35, or Form 1040NR, line 34 4. Filing state income tax return   5. Filing state income tax return Enter any foreign earned income exclusion and/or housing exclusion from Form 2555, line 45, or Form 2555-EZ, line 18 5. Filing state income tax return   6. Filing state income tax return Enter any foreign housing deduction from Form 2555, line 50 6. Filing state income tax return   7. Filing state income tax return Enter any excludable savings bond interest from Form 8815, line 14 7. Filing state income tax return   8. Filing state income tax return Enter any excluded employer-provided adoption benefits from Form 8839, line 28 8. Filing state income tax return   9. Filing state income tax return Add lines 1 through 8. Filing state income tax return This is your Modified AGI for traditional IRA purposes 9. Filing state income tax return   Reporting Deductible Contributions If you file Form 1040, enter your IRA deduction on line 32 of that form. Filing state income tax return If you file Form 1040A, enter your IRA deduction on line 17 of that form. Filing state income tax return If you file Form 1040NR, enter your IRA deduction on line 32 of that form. Filing state income tax return You cannot deduct IRA contributions on Form 1040EZ or Form 1040NR-EZ. Filing state income tax return Self-employed. Filing state income tax return   If you are self-employed (a sole proprietor or partner) and have a SIMPLE IRA, enter your deduction for allowable plan contributions on Form 1040, line 28. Filing state income tax return If you file Form 1040NR, enter your deduction on line 28 of that form. Filing state income tax return Nondeductible Contributions Although your deduction for IRA contributions may be reduced or eliminated, contributions can be made to your IRA of up to the general limit or, if it applies, the Kay Bailey Hutchison Spousal IRA limit. Filing state income tax return The difference between your total permitted contributions and your IRA deduction, if any, is your nondeductible contribution. Filing state income tax return Example. Filing state income tax return Tony is 29 years old and single. Filing state income tax return In 2013, he was covered by a retirement plan at work. Filing state income tax return His salary is $62,000. Filing state income tax return His modified AGI is $70,000. Filing state income tax return Tony makes a $5,500 IRA contribution for 2013. Filing state income tax return Because he was covered by a retirement plan and his modified AGI is above $69,000, he cannot deduct his $5,500 IRA contribution. Filing state income tax return He must designate this contribution as a nondeductible contribution by reporting it on Form 8606. Filing state income tax return Repayment of reservist distributions. Filing state income tax return   Nondeductible contributions may include repayments of qualified reservist distributions. Filing state income tax return For more information, see Qualified reservist repayments under How Much Can Be Contributed, earlier. Filing state income tax return Form 8606. Filing state income tax return   To designate contributions as nondeductible, you must file Form 8606. Filing state income tax return (See the filled-in Forms 8606 in this chapter. Filing state income tax return )   You do not have to designate a contribution as nondeductible until you file your tax return. Filing state income tax return When you file, you can even designate otherwise deductible contributions as nondeductible contributions. Filing state income tax return   You must file Form 8606 to report nondeductible contributions even if you do not have to file a tax return for the year. Filing state income tax return    A Form 8606 is not used for the year that you make a rollover from a qualified retirement plan to a traditional IRA and the rollover includes nontaxable amounts. Filing state income tax return In those situations, a Form 8606 is completed for the year you take a distribution from that IRA. Filing state income tax return See Form 8606 under Distributions Fully or Partly Taxable, later. Filing state income tax return Failure to report nondeductible contributions. Filing state income tax return   If you do not report nondeductible contributions, all of the contributions to your traditional IRA will be treated like deductible contributions when withdrawn. Filing state income tax return All distributions from your IRA will be taxed unless you can show, with satisfactory evidence, that nondeductible contributions were made. Filing state income tax return Penalty for overstatement. Filing state income tax return   If you overstate the amount of nondeductible contributions on your Form 8606 for any tax year, you must pay a penalty of $100 for each overstatement, unless it was due to reasonable cause. Filing state income tax return Penalty for failure to file Form 8606. Filing state income tax return   You will have to pay a $50 penalty if you do not file a required Form 8606, unless you can prove that the failure was due to reasonable cause. Filing state income tax return Tax on earnings on nondeductible contributions. Filing state income tax return   As long as contributions are within the contribution limits, none of the earnings or gains on contributions (deductible or nondeductible) will be taxed until they are distributed. Filing state income tax return Cost basis. Filing state income tax return   You will have a cost basis in your traditional IRA if you made any nondeductible contributions. Filing state income tax return Your cost basis is the sum of the nondeductible contributions to your IRA minus any withdrawals or distributions of nondeductible contributions. Filing state income tax return    Commonly, distributions from your traditional IRAs will include both taxable and nontaxable (cost basis) amounts. Filing state income tax return See Are Distributions Taxable, later, for more information. Filing state income tax return Recordkeeping. Filing state income tax return There is a recordkeeping worksheet, Appendix A. Filing state income tax return Summary Record of Traditional IRA(s) for 2013 , that you can use to keep a record of deductible and nondeductible IRA contributions. Filing state income tax return Examples — Worksheet for Reduced IRA Deduction for 2013 The following examples illustrate the use of Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013. Filing state income tax return Example 1. Filing state income tax return For 2013, Tom and Betty file a joint return on Form 1040. Filing state income tax return They are both 39 years old. Filing state income tax return They are both employed and Tom is covered by his employer's retirement plan. Filing state income tax return Tom's salary is $59,000 and Betty's is $32,555. Filing state income tax return They each have a traditional IRA and their combined modified AGI, which includes $5,000 interest and dividend income, is $96,555. Filing state income tax return Because their modified AGI is between $95,000 and $115,000 and Tom is covered by an employer plan, Tom is subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Filing state income tax return For 2013, Tom contributed $5,500 to his IRA and Betty contributed $5,500 to hers. Filing state income tax return Even though they file a joint return, they must use separate worksheets to figure the IRA deduction for each of them. Filing state income tax return Tom can take a deduction of only $5,080. Filing state income tax return He can choose to treat the $5,080 as either deductible or nondeductible contributions. Filing state income tax return He can either leave the $420 ($5,500 − $5,080) of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Filing state income tax return He decides to treat the $5,080 as deductible contributions and leave the $420 of nondeductible contributions in his IRA. Filing state income tax return Using Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, Tom figures his deductible and nondeductible amounts as shown on Worksheet 1-2. Filing state income tax return Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated. Filing state income tax return Betty figures her IRA deduction as follows. Filing state income tax return Betty can treat all or part of her contributions as either deductible or nondeductible. Filing state income tax return This is because her $5,500 contribution for 2013 is not subject to the deduction phaseout discussed earlier under Limit if Covered by Employer Plan . Filing state income tax return She does not need to use Worksheet 1-2, Figuring Your Reduced IRA Deduction for 2013, because their modified AGI is not within the phaseout range that applies. Filing state income tax return Betty decides to treat her $5,500 IRA contributions as deductible. Filing state income tax return The IRA deductions of $5,080 and $5,500 on the joint return for Tom and Betty total $10,580. Filing state income tax return Example 2. Filing state income tax return For 2013, Ed and Sue file a joint return on Form 1040. Filing state income tax return They are both 39 years old. Filing state income tax return Ed is covered by his employer's retirement plan. Filing state income tax return Ed's salary is $45,000. Filing state income tax return Sue had no compensation for the year and did not contribute to an IRA. Filing state income tax return Sue is not covered by an employer plan. Filing state income tax return Ed contributed $5,500 to his traditional IRA and $5,500 to a traditional IRA for Sue (a Kay Bailey Hutchison Spousal IRA). Filing state income tax return Their combined modified AGI, which includes $2,000 interest and dividend income and a large capital gain from the sale of stock, is $180,555. Filing state income tax return Because the combined modified AGI is $115,000 or more, Ed cannot deduct any of the contribution to his traditional IRA. Filing state income tax return He can either leave the $5,500 of nondeductible contributions in his IRA or withdraw them by April 15, 2014. Filing state income tax return Sue figures her IRA deduction as shown on Worksheet 1-2. Filing state income tax return Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated. Filing state income tax return Worksheet 1-2. Filing state income tax return Figuring Your Reduced IRA Deduction for 2013 (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Filing state income tax return ) Note. Filing state income tax return If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Filing state income tax return IF you . Filing state income tax return . Filing state income tax return . Filing state income tax return AND your  filing status is . Filing state income tax return . Filing state income tax return . Filing state income tax return AND your modified AGI is over . Filing state income tax return . Filing state income tax return . Filing state income tax return THEN enter on  line 1 below . Filing state income tax return . Filing state income tax return . Filing state income tax return       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Filing state income tax return Enter applicable amount from table above 1. Filing state income tax return   2. Filing state income tax return Enter your modified AGI (that of both spouses, if married filing jointly) 2. Filing state income tax return     Note. Filing state income tax return If line 2 is equal to or more than the amount on line 1, stop here. Filing state income tax return  Your IRA contributions are not deductible. Filing state income tax return See Nondeductible Contributions , earlier. Filing state income tax return     3. Filing state income tax return Subtract line 2 from line 1. Filing state income tax return If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Filing state income tax return You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Filing state income tax return   4. Filing state income tax return Multiply line 3 by the percentage below that applies to you. Filing state income tax return If the result is not a multiple of $10, round it to the next highest multiple of $10. Filing state income tax return (For example, $611. Filing state income tax return 40 is rounded to $620. Filing state income tax return ) However, if the result is less than $200, enter $200. Filing state income tax return         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Filing state income tax return 5% (. Filing state income tax return 275) (by 32. Filing state income tax return 5% (. Filing state income tax return 325) if you are age 50 or older). Filing state income tax return All others, multiply line 3 by 55% (. Filing state income tax return 55) (by 65% (. Filing state income tax return 65) if you are age 50 or older). Filing state income tax return 4. Filing state income tax return   5. Filing state income tax return Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Filing state income tax return If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Filing state income tax return If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Filing state income tax return   6. Filing state income tax return Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Filing state income tax return If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Filing state income tax return 6. Filing state income tax return   7. Filing state income tax return IRA deduction. Filing state income tax return Compare lines 4, 5, and 6. Filing state income tax return Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Filing state income tax return If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Filing state income tax return   8. Filing state income tax return Nondeductible contribution. Filing state income tax return Subtract line 7 from line 5 or 6, whichever is smaller. Filing state income tax return  Enter the result here and on line 1 of your Form 8606 8. Filing state income tax return   Worksheet 1-2. Filing state income tax return Figuring Your Reduced IRA Deduction for 2013—Example 1 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Filing state income tax return ) Note. Filing state income tax return If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Filing state income tax return IF you . Filing state income tax return . Filing state income tax return . Filing state income tax return AND your  filing status is . Filing state income tax return . Filing state income tax return . Filing state income tax return AND your modified AGI is over . Filing state income tax return . Filing state income tax return . Filing state income tax return THEN enter on  line 1 below . Filing state income tax return . Filing state income tax return . Filing state income tax return       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Filing state income tax return Enter applicable amount from table above 1. Filing state income tax return 115,000 2. Filing state income tax return Enter your modified AGI (that of both spouses, if married filing jointly) 2. Filing state income tax return 96,555   Note. Filing state income tax return If line 2 is equal to or more than the amount on line 1, stop here. Filing state income tax return  Your IRA contributions are not deductible. Filing state income tax return See Nondeductible Contributions , earlier. Filing state income tax return     3. Filing state income tax return Subtract line 2 from line 1. Filing state income tax return If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Filing state income tax return You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Filing state income tax return 18,445 4. Filing state income tax return Multiply line 3 by the percentage below that applies to you. Filing state income tax return If the result is not a multiple of $10, round it to the next highest multiple of $10. Filing state income tax return (For example, $611. Filing state income tax return 40 is rounded to $620. Filing state income tax return ) However, if the result is less than $200, enter $200. Filing state income tax return         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Filing state income tax return 5% (. Filing state income tax return 275) (by 32. Filing state income tax return 5% (. Filing state income tax return 325) if you are age 50 or older). Filing state income tax return All others, multiply line 3 by 55% (. Filing state income tax return 55) (by 65% (. Filing state income tax return 65) if you are age 50 or older). Filing state income tax return 4. Filing state income tax return 5,080 5. Filing state income tax return Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Filing state income tax return If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Filing state income tax return If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Filing state income tax return 59,000 6. Filing state income tax return Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Filing state income tax return If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Filing state income tax return 6. Filing state income tax return 5,500 7. Filing state income tax return IRA deduction. Filing state income tax return Compare lines 4, 5, and 6. Filing state income tax return Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Filing state income tax return If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Filing state income tax return 5,080 8. Filing state income tax return Nondeductible contribution. Filing state income tax return Subtract line 7 from line 5 or 6, whichever is smaller. Filing state income tax return  Enter the result here and on line 1 of your Form 8606 8. Filing state income tax return 420 Worksheet 1-2. Filing state income tax return Figuring Your Reduced IRA Deduction for 2013—Example 2 Illustrated (Use only if you or your spouse is covered by an employer plan and your modified AGI falls between the two amounts shown below for your coverage situation and filing status. Filing state income tax return ) Note. Filing state income tax return If you were married and both you and your spouse contributed to IRAs, figure your deduction and your spouse's deduction separately. Filing state income tax return IF you . Filing state income tax return . Filing state income tax return . Filing state income tax return AND your  filing status is . Filing state income tax return . Filing state income tax return . Filing state income tax return AND your modified AGI is over . Filing state income tax return . Filing state income tax return . Filing state income tax return THEN enter on  line 1 below . Filing state income tax return . Filing state income tax return . Filing state income tax return       are covered by an employer plan single or head of household $59,000 $69,000     married filing jointly or qualifying widow(er) $95,000 $115,000     married filing separately $0 $10,000     are not covered by an employer plan, but your spouse is covered married filing jointly $178,000 $188,000     married filing separately $0 $10,000     1. Filing state income tax return Enter applicable amount from table above 1. Filing state income tax return 188,000 2. Filing state income tax return Enter your modified AGI (that of both spouses, if married filing jointly) 2. Filing state income tax return 180,555   Note. Filing state income tax return If line 2 is equal to or more than the amount on line 1, stop here. Filing state income tax return  Your IRA contributions are not deductible. Filing state income tax return See Nondeductible Contributions , earlier. Filing state income tax return     3. Filing state income tax return Subtract line 2 from line 1. Filing state income tax return If line 3 is $10,000 or more ($20,000 or more if married filing jointly or qualifying widow(er) and you are covered by an employer plan), stop here. Filing state income tax return You can take a full IRA deduction for contributions of up to $5,500 ($6,500 if you are age 50 or older) or 100% of your (and if married filing jointly, your spouse's) compensation, whichever is less 3. Filing state income tax return 7,445 4. Filing state income tax return Multiply line 3 by the percentage below that applies to you. Filing state income tax return If the result is not a multiple of $10, round it to the next highest multiple of $10. Filing state income tax return (For example, $611. Filing state income tax return 40 is rounded to $620. Filing state income tax return ) However, if the result is less than $200, enter $200. Filing state income tax return         Married filing jointly or qualifying widow(er) and you are covered by an employer plan, multiply line 3 by 27. Filing state income tax return 5% (. Filing state income tax return 275) (by 32. Filing state income tax return 5% (. Filing state income tax return 325) if you are age 50 or older). Filing state income tax return All others, multiply line 3 by 55% (. Filing state income tax return 55) (by 65% (. Filing state income tax return 65) if you are age 50 or older). Filing state income tax return 4. Filing state income tax return 4,100 5. Filing state income tax return Enter your compensation minus any deductions on Form 1040 or Form 1040NR, line 27 (deductible part of self-employment tax) and line 28 (self-employed SEP, SIMPLE, and qualified plans). Filing state income tax return If you are filing a joint return and your compensation is less than your spouse's, include your spouse's compensation reduced by his or her traditional IRA and Roth IRA contributions for this year. Filing state income tax return If you file Form 1040 or Form 1040NR, do not reduce your compensation by any losses from self-employment 5. Filing state income tax return 39,500 6. Filing state income tax return Enter contributions made, or to be made, to your IRA for 2013, but do not enter more than $5,500 ($6,500 if you are age 50 or older). Filing state income tax return If contributions are more than $5,500 ($6,500 if you are age 50 or older), see Excess Contributions , later. Filing state income tax return 6. Filing state income tax return 5,500 7. Filing state income tax return IRA deduction. Filing state income tax return Compare lines 4, 5, and 6. Filing state income tax return Enter the smallest amount (or a smaller amount if you choose) here and on the Form 1040, 1040A, or 1040NR line for your IRA, whichever applies. Filing state income tax return If line 6 is more than line 7 and you want to make a nondeductible contribution, go to line 8 7. Filing state income tax return 4,100 8. Filing state income tax return Nondeductible contribution. Filing state income tax return Subtract line 7 from line 5 or 6, whichever is smaller. Filing state income tax return  Enter the result here and on line 1 of your Form 8606 8. Filing state income tax return 1,400 What if You Inherit an IRA? If you inherit a traditional IRA, you are called a beneficiary. Filing state income tax return A beneficiary can be any person or entity the owner chooses to receive the benefits of the IRA after he or she dies. Filing state income tax return Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. Filing state income tax return Inherited from spouse. Filing state income tax return   If you inherit a traditional IRA from your spouse, you generally have the following three choices. Filing state income tax return You can: Treat it as your own IRA by designating yourself as the account owner. Filing state income tax return Treat it as your own by rolling it over into your IRA, or to the extent it is taxable, into a: Qualified employer plan, Qualified employee annuity plan (section 403(a) plan), Tax-sheltered annuity plan (s
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Make a Complaint About a Tax Return Preparer

Most paid tax return preparers are professional, honest and provide excellent service to their clients. The IRS is committed to investigating those who do not meet these standards. For example:

  • Failing to sign tax returns they prepare
  • Failing to use a Preparer Tax Identification Number or using an invalid PTIN
  • Failing to provide clients a copy of their tax return
  • Failing to return a client's records
  • Preparing tax returns with a client's last pay stub
  • Creating false exemptions or dependents
  • Creating false expenses, deductions or credits
  • Creating or omitting income
  • Using an incorrect filing status
  • Altering documents
  • Embezzling a client's refund
  • Using off-the-shelf software or IRS Free File instead of professional software
  • Falsely claiming to be an attorney, certified public accountant, enrolled agent, enrolled retirement plan agent, or enrolled actuary

If you have a complaint, report it on Form 14157, Complaint: Tax Return Preparer. Complete the form and mail it to:
 
Internal Revenue Service
Attn: Return Preparer Office
401 W. Peachtree Street NW
Mail Stop 421-D
Atlanta, GA 30308
 
IRS Tax Tip 2014-07 provides tips on choosing a tax preparer.

Page Last Reviewed or Updated: 11-Feb-2014

The Filing State Income Tax Return

Filing state income tax return Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. Filing state income tax return Stock. Filing state income tax return Options. Filing state income tax return Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). Filing state income tax return What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. Filing state income tax return Fair market value. Filing state income tax return   Fair market value (FMV) is the price that property would sell for on the open market. Filing state income tax return It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. Filing state income tax return If you put a restriction on the use of property you donate, the FMV must reflect that restriction. Filing state income tax return Example 1. Filing state income tax return If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. Filing state income tax return Usually, such items are worth far less than what you paid for them. Filing state income tax return Example 2. Filing state income tax return If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. Filing state income tax return Factors. Filing state income tax return   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. Filing state income tax return These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. Filing state income tax return   These factors are discussed later. Filing state income tax return Also, see Table 1 for a summary of questions to ask as you consider each factor. Filing state income tax return Date of contribution. Filing state income tax return   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. Filing state income tax return Stock. Filing state income tax return   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. Filing state income tax return If the certificate is mailed and received through the regular mail, it is the date of mailing. Filing state income tax return If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. Filing state income tax return Options. Filing state income tax return   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. Filing state income tax return The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. Filing state income tax return Example. Filing state income tax return You grant an option to a local university, which is a qualified organization, to buy real property. Filing state income tax return Under the option, the university could buy the property at any time during a 2-year period for $40,000. Filing state income tax return The FMV of the property on the date the option is granted is $50,000. Filing state income tax return In the following tax year, the university exercises the option. Filing state income tax return The FMV of the property on the date the option is exercised is $55,000. Filing state income tax return Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. Filing state income tax return Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. Filing state income tax return Usually it is not that simple. Filing state income tax return Using such formulas, etc. Filing state income tax return , seldom results in an acceptable determination of FMV. Filing state income tax return There is no single formula that always applies when determining the value of property. Filing state income tax return This is not to say that a valuation is only guesswork. Filing state income tax return You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. Filing state income tax return For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. Filing state income tax return When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. Filing state income tax return On the other hand, it may be an antique, the value of which could not be determined by using any formula. Filing state income tax return Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. Filing state income tax return However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. Filing state income tax return The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. Filing state income tax return Example. Filing state income tax return Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. Filing state income tax return The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. Filing state income tax return The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. Filing state income tax return Tom gave the gems to a qualified charity 13 months after buying them. Filing state income tax return The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. Filing state income tax return The best evidence of FMV depends on actual transactions and not on some artificial estimate. Filing state income tax return The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. Filing state income tax return Terms of the purchase or sale. Filing state income tax return   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. Filing state income tax return These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. Filing state income tax return Rate of increase or decrease in value. Filing state income tax return   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. Filing state income tax return For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. Filing state income tax return Example. Filing state income tax return Bill Brown bought a painting for $10,000. Filing state income tax return Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. Filing state income tax return The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. Filing state income tax return Arm's-length offer. Filing state income tax return   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. Filing state income tax return To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. Filing state income tax return Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. Filing state income tax return Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. Filing state income tax return The weight to be given to each sale depends on the following. Filing state income tax return The degree of similarity between the property sold and the donated property. Filing state income tax return The time of the sale—whether it was close to the valuation date. Filing state income tax return The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. Filing state income tax return The conditions of the market in which the sale was made—whether unusually inflated or deflated. Filing state income tax return The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. Filing state income tax return Example 1. Filing state income tax return Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. Filing state income tax return The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. Filing state income tax return The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. Filing state income tax return Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. Filing state income tax return At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. Filing state income tax return The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. Filing state income tax return Example 2. Filing state income tax return The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. Filing state income tax return The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. Filing state income tax return The principal and interest on the note would not be due for 12 years. Filing state income tax return According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. Filing state income tax return She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. Filing state income tax return At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. Filing state income tax return The difference between the two prices was solely at the discretion of the buyer. Filing state income tax return The promoter was a willing seller for $10,000. Filing state income tax return Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. Filing state income tax return Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. Filing state income tax return However, there must be a reasonable relationship between the replacement cost and the FMV. Filing state income tax return The replacement cost is the amount it would cost to replace the donated item on the valuation date. Filing state income tax return Often there is no relationship between the replacement cost and the FMV. Filing state income tax return If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. Filing state income tax return To determine the replacement cost of the donated property, find the “estimated replacement cost new. Filing state income tax return ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. Filing state income tax return You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. Filing state income tax return ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. Filing state income tax return For an expert's opinion to deserve much weight, the facts must support the opinion. Filing state income tax return For additional information, see Appraisals, later. Filing state income tax return Table 1. Filing state income tax return Factors That Affect FMV IF the factor you are considering is. Filing state income tax return . Filing state income tax return . Filing state income tax return THEN you should ask these questions. Filing state income tax return . Filing state income tax return . Filing state income tax return     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. Filing state income tax return Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. Filing state income tax return When you rely on sales of comparable property, the sales must have been made in an open market. Filing state income tax return If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. Filing state income tax return For example, liquidation sale prices usually do not indicate the FMV. Filing state income tax return Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. Filing state income tax return Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. Filing state income tax return However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. Filing state income tax return The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. Filing state income tax return Example. Filing state income tax return You give a rare, old book to your former college. Filing state income tax return The book is a third edition and is in poor condition because of a missing back cover. Filing state income tax return You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. Filing state income tax return Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. Filing state income tax return Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. Filing state income tax return Future Events You may not consider unexpected events happening after your donation of property in making the valuation. Filing state income tax return You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. Filing state income tax return Example. Filing state income tax return You give farmland to a qualified charity. Filing state income tax return The transfer provides that your mother will have the right to all income and full use of the property for her life. Filing state income tax return Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. Filing state income tax return You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. Filing state income tax return Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. Filing state income tax return Example. Filing state income tax return You give all your rights in a successful patent to your favorite charity. Filing state income tax return Your records show that before the valuation date there were three stages in the patent's history of earnings. Filing state income tax return First, there was rapid growth in earnings when the invention was introduced. Filing state income tax return Then, there was a period of high earnings when the invention was being exploited. Filing state income tax return Finally, there was a decline in earnings when competing inventions were introduced. Filing state income tax return The entire history of earnings may be relevant in estimating the future earnings. Filing state income tax return However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. Filing state income tax return The market conditions at those times do not represent the condition of the market at the valuation date. Filing state income tax return What is most significant is the trend of decline in earnings up to the valuation date. Filing state income tax return For more information about donations of patents, see Patents, later. Filing state income tax return Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. Filing state income tax return For information on appraisals, see Appraisals, later. Filing state income tax return Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. Filing state income tax return Such used property may have little or no market value because of its worn condition. Filing state income tax return It may be out of style or no longer useful. Filing state income tax return You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. Filing state income tax return A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Filing state income tax return See Deduction over $500 for certain clothing or household items, later. Filing state income tax return If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. Filing state income tax return Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. Filing state income tax return Valuation of items of clothing does not lend itself to fixed formulas or methods. Filing state income tax return The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. Filing state income tax return You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. Filing state income tax return An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. Filing state income tax return See Deduction over $500 for certain clothing or household items, later. Filing state income tax return For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. Filing state income tax return Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. Filing state income tax return The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. Filing state income tax return If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. Filing state income tax return The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. Filing state income tax return Sentimental personal value has no effect on FMV. Filing state income tax return But if the jewelry was owned by a famous person, its value might increase. Filing state income tax return Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. Filing state income tax return Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. Filing state income tax return Art valued at $20,000 or more. Filing state income tax return   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. Filing state income tax return For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. Filing state income tax return Art valued at $50,000 or more. Filing state income tax return   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. Filing state income tax return You must request the statement before filing the tax return that reports the donation. Filing state income tax return Your request must include the following. Filing state income tax return A copy of a qualified appraisal of the item. Filing state income tax return See Qualified Appraisal, later. Filing state income tax return A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. Filing state income tax return Add $250 for each item in excess of three. Filing state income tax return A completed Form 8283, Section B. Filing state income tax return The location of the IRS territory that has examination responsibility for your return. Filing state income tax return If your request lacks essential information, you will be notified and given 30 days to provide the missing information. Filing state income tax return   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. Filing state income tax return O. Filing state income tax return Box 27720 McPherson Station Washington, DC 20038 Refunds. Filing state income tax return   You can withdraw your request for a Statement of Value at any time before it is issued. Filing state income tax return However, the IRS will not refund the user fee if you do. Filing state income tax return   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. Filing state income tax return Authenticity. Filing state income tax return   The authenticity of the donated art must be determined by the appraiser. Filing state income tax return Physical condition. Filing state income tax return   Important items in the valuation of antiques and art are physical condition and extent of restoration. Filing state income tax return These have a significant effect on the value and must be fully reported in an appraisal. Filing state income tax return An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. Filing state income tax return Art appraisers. Filing state income tax return   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. Filing state income tax return Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. Filing state income tax return Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. Filing state income tax return They can report more recent comparable sales to support their opinion. Filing state income tax return   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. Filing state income tax return It lists museums both by state and by category. Filing state income tax return   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. Filing state income tax return The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. Filing state income tax return You may be able to find a qualified appraiser on the Internet. Filing state income tax return You may also contact associations of dealers for guidance. Filing state income tax return Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. Filing state income tax return Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. Filing state income tax return Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. Filing state income tax return Reference material. Filing state income tax return   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. Filing state income tax return When using one of these price guides, you must use the current edition at the date of contribution. Filing state income tax return However, these sources are not always reliable indicators of FMV and should be supported by other evidence. Filing state income tax return   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. Filing state income tax return The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. Filing state income tax return The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. Filing state income tax return If you are donating a valuable collection, you should get an appraisal. Filing state income tax return If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. Filing state income tax return Stamp collections. Filing state income tax return   Most libraries have catalogs or other books that report the publisher's estimate of values. Filing state income tax return Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. Filing state income tax return Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. Filing state income tax return Coin collections. Filing state income tax return   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. Filing state income tax return Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. Filing state income tax return Another important factor is the coin's condition. Filing state income tax return For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. Filing state income tax return   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. Filing state income tax return Books. Filing state income tax return   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. Filing state income tax return This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. Filing state income tax return Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. Filing state income tax return Modest value of collection. Filing state income tax return   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. Filing state income tax return   A book that is very old, or very rare, is not necessarily valuable. Filing state income tax return There are many books that are very old or rare, but that have little or no market value. Filing state income tax return Condition of book. Filing state income tax return   The condition of a book may have a great influence on its value. Filing state income tax return Collectors are interested in items that are in fine, or at least good, condition. Filing state income tax return When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. Filing state income tax return Other factors. Filing state income tax return   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). Filing state income tax return Collectors usually want first editions of books. Filing state income tax return However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. Filing state income tax return Manuscripts, autographs, diaries, and similar items. Filing state income tax return   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. Filing state income tax return The writings of unknowns also may be of value if they are of unusual historical or literary importance. Filing state income tax return Determining the value of such material is difficult. Filing state income tax return For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. Filing state income tax return The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. Filing state income tax return Signatures. Filing state income tax return   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. Filing state income tax return But complete sets of the signatures of U. Filing state income tax return S. Filing state income tax return presidents are in demand. Filing state income tax return Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. Filing state income tax return Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. Filing state income tax return Prices are reported for each make, model, and year. Filing state income tax return These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. Filing state income tax return The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. Filing state income tax return But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. Filing state income tax return These publications are sometimes available from public libraries or at a bank, credit union, or finance company. Filing state income tax return You can also find pricing information about used cars on the Internet. Filing state income tax return An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. Filing state income tax return However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. Filing state income tax return The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. Filing state income tax return Example. Filing state income tax return You donate a used car in poor condition to a local high school for use by students studying car repair. Filing state income tax return A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. Filing state income tax return However, the guide shows the price for a private party sale of the car is only $750. Filing state income tax return The FMV of the car is considered to be no more than $750. Filing state income tax return Boats. Filing state income tax return   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. Filing state income tax return More information. Filing state income tax return   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. Filing state income tax return This rule applies if the claimed value of the donated vehicle is more than $500. Filing state income tax return In certain cases, you can deduct the vehicle's FMV. Filing state income tax return For details, see Publication 526. Filing state income tax return Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. Filing state income tax return For more information, see Publication 526. Filing state income tax return Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. Filing state income tax return However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. Filing state income tax return Generally, this means your deduction is the lesser of the property's FMV or its basis. Filing state income tax return For details, see Publication 526. Filing state income tax return Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. Filing state income tax return See Date of contribution, earlier, under What Is Fair Market Value (FMV). Filing state income tax return Selling prices on valuation date. Filing state income tax return   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. Filing state income tax return For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. Filing state income tax return You get the average price by adding $11 and $9 and dividing the sum by 2. Filing state income tax return No sales on valuation date. Filing state income tax return   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. Filing state income tax return Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. Filing state income tax return Example. Filing state income tax return   On the day you gave stock to a qualified organization, there were no sales of the stock. Filing state income tax return Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. Filing state income tax return The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. Filing state income tax return   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. Filing state income tax return This applies if these prices are published in a generally available listing or publication of general circulation. Filing state income tax return If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. Filing state income tax return See also Unavailable prices or closely held corporation, later. Filing state income tax return Bid and asked prices on valuation date. Filing state income tax return   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. Filing state income tax return Example. Filing state income tax return Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. Filing state income tax return The FMV is $15, the average price between the bid and asked prices. Filing state income tax return No prices on valuation date. Filing state income tax return   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. Filing state income tax return Both dates must be within a reasonable period. Filing state income tax return Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. Filing state income tax return Example. Filing state income tax return On the day you gave stock to a qualified organization, no prices were available. Filing state income tax return Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. Filing state income tax return The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. Filing state income tax return   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. Filing state income tax return Large blocks of stock. Filing state income tax return   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. Filing state income tax return On the other hand, market forces may exist that will afford higher prices for large blocks of stock. Filing state income tax return Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. Filing state income tax return Unavailable prices or closely held corporation. Filing state income tax return   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. Filing state income tax return For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. Filing state income tax return For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. Filing state income tax return Other factors. Filing state income tax return   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. Filing state income tax return For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. Filing state income tax return   You should keep complete financial and other information on which the valuation is based. Filing state income tax return This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. Filing state income tax return Restricted securities. Filing state income tax return   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. Filing state income tax return These restricted securities usually trade at a discount in relation to freely traded securities. Filing state income tax return   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. Filing state income tax return Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. Filing state income tax return The appraiser must be thoroughly trained in the application of appraisal principles and theory. Filing state income tax return In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. Filing state income tax return The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. Filing state income tax return The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. Filing state income tax return In general, there are three main approaches to the valuation of real estate. Filing state income tax return An appraisal may require the combined use of two or three methods rather than one method only. Filing state income tax return 1. Filing state income tax return Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. Filing state income tax return The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. Filing state income tax return If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. Filing state income tax return , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. Filing state income tax return For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. Filing state income tax return The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. Filing state income tax return Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. Filing state income tax return Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. Filing state income tax return 2. Filing state income tax return Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. Filing state income tax return The key elements are the determination of the income to be capitalized and the rate of capitalization. Filing state income tax return 3. Filing state income tax return Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. Filing state income tax return Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. Filing state income tax return Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. Filing state income tax return Generally, this method serves to support the value determined from other methods. Filing state income tax return When the replacement cost method is applied to improved realty, the land and improvements are valued separately. Filing state income tax return The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. Filing state income tax return This cost represents the total cost of labor and material, overhead, and profit. Filing state income tax return After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. Filing state income tax return Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. Filing state income tax return The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. Filing state income tax return The value of the goodwill of the business should also be taken into consideration. Filing state income tax return You should keep complete financial and other information on which you base the valuation. Filing state income tax return This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. Filing state income tax return Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. Filing state income tax return The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. Filing state income tax return To determine present value, you must know the applicable interest rate and use actuarial tables. Filing state income tax return Interest rate. Filing state income tax return   The applicable interest rate varies. Filing state income tax return It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. Filing state income tax return The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. Filing state income tax return You can call the IRS office at 1-800-829-1040 to obtain this rate. Filing state income tax return Actuarial tables. Filing state income tax return   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. Filing state income tax return   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). Filing state income tax return Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. Filing state income tax return For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. Filing state income tax return   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. Filing state income tax return Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. Filing state income tax return You can download Publications 1457 and 1458 from www. Filing state income tax return irs. Filing state income tax return gov. Filing state income tax return In addition, they are available for purchase via the website of the U. Filing state income tax return S. Filing state income tax return Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. Filing state income tax return O. Filing state income tax return Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. Filing state income tax return 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. Filing state income tax return 664-4(e), and other transfers in Regulation 20. Filing state income tax return 2031-7(d)(6). Filing state income tax return Special factors. Filing state income tax return   If you need a special factor for an actual transaction, you can request a letter ruling. Filing state income tax return Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. Filing state income tax return Also include copies of the relevant instruments. Filing state income tax return IRS charges a user fee for providing special factors. Filing state income tax return   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. Filing state income tax return R. Filing state income tax return B. Filing state income tax return 1. Filing state income tax return Revenue Procedure 2006-1 is available at www. Filing state income tax return irs. Filing state income tax return gov/irb/2006-01_IRB/ar06. Filing state income tax return html. Filing state income tax return   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. Filing state income tax return Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. Filing state income tax return But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. Filing state income tax return If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. Filing state income tax return Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. Filing state income tax return However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. Filing state income tax return Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. Filing state income tax return To determine this value, you must know the FMV of the property on the date of the contribution. Filing state income tax return Multiply this value by the appropriate factor. Filing state income tax return Publications 1457 and 1458 contain these factors. Filing state income tax return You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). Filing state income tax return You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. Filing state income tax return See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. Filing state income tax return You can download Publication 1459 from www. Filing state income tax return irs. Filing state income tax return gov. Filing state income tax return For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. Filing state income tax return If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. Filing state income tax return This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. Filing state income tax return Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. Filing state income tax return For more information, see section 1. Filing state income tax return 170A-12 of the Income Tax Regulations. Filing state income tax return Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. Filing state income tax return It must extend over the entire term of your interest in the property. Filing state income tax return For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. Filing state income tax return You can claim a deduction for the contribution if you do not have any other interest in the property. Filing state income tax return To figure the value of a contribution involving a partial interest, see Publication 1457. Filing state income tax return If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. Filing state income tax return Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. Filing state income tax return Qualified organization. Filing state income tax return   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. Filing state income tax return , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. Filing state income tax return The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. Filing state income tax return Conservation purposes. Filing state income tax return   Your contribution must be made only for one of the following conservation purposes. Filing state income tax return Preserving land areas for outdoor recreation by, or for the education of, the general public. Filing state income tax return Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. Filing state income tax return Preserving open space, including farmland and forest land, if it yields a significant public benefit. Filing state income tax return It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. Filing state income tax return Preserving a historically important land area or a certified historic structure. Filing state income tax return There must be some visual public access to the property. Filing state income tax return Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. Filing state income tax return Building in registered historic district. Filing state income tax return   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. Filing state income tax return The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. Filing state income tax return You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. Filing state income tax return If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. Filing state income tax return   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. Filing state income tax return See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. Filing state income tax return Qualified real property interest. Filing state income tax return   This is any of the following interests in real property. Filing state income tax return Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). Filing state income tax return A remainder interest. Filing state income tax return A restriction (granted in perpetuity) on the use that may be made of the real property. Filing state income tax return Valuation. Filing state income tax return   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. Filing state income tax return If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. Filing state income tax return If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. Filing state income tax return   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. Filing state income tax return If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. Filing state income tax return   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. Filing state income tax return If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. Filing state income tax return   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. Filing state income tax return You should also consider any zoning, conservation, or historical preservation laws that would restrict development. Filing state income tax return Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. Filing state income tax return Example. Filing state income tax return   You own 10 acres of farmland. Filing state income tax return Similar land in the area has an FMV of $2,000 an acre. Filing state income tax return However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. Filing state income tax return Your county wants to preserve open space and prevent further development in your area. Filing state income tax return   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. Filing state income tax return The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. Filing state income tax return More information. Filing state income tax return   For more information about qualified conservation contributions, see Publication 526. Filing state income tax return Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. Filing state income tax return (There is one exception, described next, for certain clothing and household items. Filing state income tax return ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. Filing state income tax return There are exceptions. Filing state income tax return See Deductions of More Than $5,000, later. Filing state income tax return The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. Filing state income tax return An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. Filing state income tax return The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. Filing state income tax return The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. Filing state income tax return The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. Filing state income tax return All facts associated with the donation must be considered. Filing state income tax return Deduction over $500 for certain clothing or household items. Filing state income tax return   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. Filing state income tax return See Household Goods and Used Clothing, earlier. Filing state income tax return Cost of appraisals. Filing state income tax return   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. Filing state income tax return However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. Filing state income tax return Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. Filing state income tax return There are exceptions, discussed later. Filing state income tax return You should keep the appraiser's report with your written records. Filing state income tax return Records are discussed in Publication 526. Filing state income tax return The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. Filing state income tax return For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. Filing state income tax return You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. Filing state income tax return Exceptions. Filing state income tax return   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. Filing state income tax return   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. Filing state income tax return Publicly traded securities. Filing state income tax return   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. Filing state income tax return Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. Filing state income tax return   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. Filing state income tax return   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. Filing state income tax return A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. Filing state income tax return   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. Filing state income tax return Bid and asked quotations are not taken into account. Filing state income tax return   The computation period is weekly during October through December and monthly during January through September. Filing state income tax return The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. Filing state income tax return Nonpublicly traded stock. Filing state income tax return   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. Filing state income tax return However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. Filing state income tax return Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. Filing state income tax return This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. Filing state income tax return If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. Filing state income tax return Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. Filing state income tax return You must also complete Form 8283, Section B, and attach it to your tax return. Filing state income tax return See Deductions of More Than $5,000, earlier. Filing state income tax return A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. Filing state income tax return 170A-13(c)(3) and Notice 2006-96, 2006-46 I. Filing state income tax return R. Filing state income tax return B. Filing state income tax return 902 (available at www. Filing state income tax return irs. Filing state income tax return gov/irb/2006-46_IRB/ar13. Filing state income tax return html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). Filing state income tax return You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. Filing state income tax return If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. Filing state income tax return Form 8283, Section B, must be attached to your tax return. Filing state income tax return Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. Filing state income tax return There are four exceptions. Filing state income tax return If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. Filing state income tax return See Paintings, Antiques, and Other Objects of Art, earlier. Filing state income tax return If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. Filing state income tax return See Deductions of More Than $500,000, earlier. Filing state income tax return If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. Filing state income tax return See Deduction over $500 for certain clothing or household items, earlier. Filing state income tax return If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. Filing state income tax return See Building in registered historic district, earlier. Filing state income tax return Prohibited appraisal fee. Filing state income tax return   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. Filing state income tax return If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. Filing state income tax return However, appraisals are not disqualified when an otherwise prohi