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Free tax preparation sites Publication 3 - Main Content Table of Contents Gross IncomeForeign Source Income Military Spouses Residency Relief Act (MSRRA) Community Property Form W-2 Codes Adjustments to IncomeArmed Forces Reservists Individual Retirement Arrangements Moving Expenses Combat Zone ExclusionCombat Zone Serving in a Combat Zone Amount of Exclusion Alien StatusResident Aliens Nonresident Aliens Dual-Status Aliens Sale of HomePeriod of suspension. Free tax preparation sites Qualified official extended duty. Free tax preparation sites ForeclosuresLump Sum Portion of Settlement Payment. Free tax preparation sites Interest Payment on Lump Sum Portion of Settlement Payment. Free tax preparation sites Lost Equity Portion of Settlement Payment. Free tax preparation sites The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Free tax preparation sites Interest Payment on Lost Equity Portion of Settlement Payment. Free tax preparation sites Itemized DeductionsEmployee Business Expenses Repayments CreditsFirst-Time Homebuyer Credit Child Tax Credit Earned Income Credit Credit for Excess Social Security Tax Withheld Forgiveness of Decedent's Tax LiabilityCombat Zone Related Forgiveness Terrorist or Military Action Related Forgiveness Claims for Tax Forgiveness Filing ReturnsSame-Sex Marriage Where To File When To File Signing Returns Extension of DeadlinesService That Qualifies for an Extension of Deadline Length of Extension Actions for Which Deadlines Are Extended Deferral of Payment Maximum Rate of Interest How To Get Tax HelpLow Income Taxpayer Clinics Gross Income Members of the Armed Forces receive many different types of pay and allowances. Free tax preparation sites Some are included in gross income while others are excluded from gross income. Free tax preparation sites Included items (Table 1) are subject to tax and must be reported on your tax return. Free tax preparation sites Excluded items (Table 2) are not subject to tax, but may have to be shown on your tax return. Free tax preparation sites For information on the exclusion of pay for service in a combat zone and other tax benefits for combat zone participants, see Combat Zone Exclusion and Extension of Deadlines , later. Free tax preparation sites Table 1. Free tax preparation sites Included Items These items are included in gross income, unless the pay is for service in a combat zone. Free tax preparation sites Basic pay • Active duty   Bonus pay • Career status   • Attendance at a designated service school     • Enlistment  • Officer   • Back wages     • Overseas extension   • CONUS COLA       • Reenlistment   • Drills         • Reserve training         • Training duty   Other pay  • Accrued leave          • High deployment per diem Special • Aviation career incentives      • Personal money allowances paid to pay • Career sea     high-ranking officers   • Diving duty      • Student loan repayment from programs   • Foreign duty (outside the 48 contiguous     such as the Department of Defense   states and the District of Columbia)     Educational Loan Repayment Program   • Foreign language proficiency     when year's service (requirement) is not   • Hardship duty     attributable to a combat zone   • Hostile fire or imminent danger         • Medical and dental officers   Incentive pay  • Submarine   • Nuclear-qualified officers      • Flight   • Optometry      • Hazardous duty   • Pharmacy      • High altitude/Low Opening (HALO)   • Special compensation for assistance with activities of daily living (SCAADL)         • Special duty assignment pay         • Veterinarian         • Voluntary Separation Incentive       Basic allowance for housing (BAH). Free tax preparation sites   You can still deduct mortgage interest and real estate taxes on your home if you pay these expenses with your BAH. Free tax preparation sites Table 2. Free tax preparation sites Excluded Items The exclusion for certain items applies whether the item is furnished in kind or is a reimbursement or allowance. Free tax preparation sites There is no exclusion for the personal use of a government-provided vehicle. Free tax preparation sites Combat  zone pay • Compensation for active service while in a combat zone Note: Limited amount for officers     • Housing and cost-of-living allowances abroad paid by the U. Free tax preparation sites S. Free tax preparation sites Government or by a foreign government         • OHA (Overseas Housing Allowance)                     Other pay • Defense counseling         • Disability, including payments received for injuries incurred as a direct result of a terrorist or military action         • Group-term life insurance   Moving • Dislocation   • Professional education   allowances • Military base realignment and   • ROTC educational and subsistence     closure benefit    allowances     (the exclusion is limited as   • State bonus pay for service in a     described above)   combat zone     • Move-in housing   • Survivor and retirement protection     • Moving household and   plan premiums     personal items   • Uniform allowances     • Moving trailers or mobile homes   • Uniforms furnished to enlisted     • Storage   personnel     • Temporary lodging and         temporary lodging expenses                 Travel • Annual round trip for dependent Death • Burial services   allowances students allowances • Death gratuity payments to     • Leave between consecutive   eligible survivors     overseas tours   • Travel of dependents to burial site     • Reassignment in a dependent         restricted status Family • Certain educational expenses for     • Transportation for you or your allowances dependents     dependents during ship overhaul   • Emergencies     or inactivation   • Evacuation to a place of safety     • Per diem   • Separation             In-kind military • Dependent-care assistance program Living • BAH (Basic Allowance for Housing)   benefits • Legal assistance allowances • BAS (Basic Allowance for Subsistence)     • Medical/dental care         • Commissary/exchange discounts         • Space-available travel on government aircraft           Death gratuity. Free tax preparation sites   Any death gratuity paid to a survivor of a member of the Armed Forces is excluded from gross income. Free tax preparation sites Differential wage payments. Free tax preparation sites   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and that represent all or a portion of the wages the individual would have received from the employer if the individual was performing services for the employer. Free tax preparation sites These amounts are taxable and cannot be excluded as combat pay. Free tax preparation sites Military base realignment and closure benefit. Free tax preparation sites   Payments made under the Homeowners Assistance Program (HAP) generally are excluded from income. Free tax preparation sites However, the excludable amount cannot be more than the maximum amount described in subsection (c) of 42 USC 3374 as in effect on November 6, 2009. Free tax preparation sites Any part of the payment that is more than this limit is included in gross income. Free tax preparation sites For more information about the HAP, see http://hap. Free tax preparation sites usace. Free tax preparation sites army. Free tax preparation sites mil/Overview. Free tax preparation sites html. Free tax preparation sites Qualified reservist distribution (QRD). Free tax preparation sites   A QRD is a distribution to an individual of all or part of the individual's balance in a cafeteria plan or health flexible spending arrangement if: The individual was a reservist who was ordered or called to active duty for more than 179 days or for an indefinite period, and The distribution is made no sooner than the date the reservist was ordered or called to active duty and no later than the last day reimbursements could otherwise be made under the arrangement for the plan year which includes the date of the order or the call to duty. Free tax preparation sites A QRD is included in gross income and is subject to employment taxes. Free tax preparation sites The employer must include the QRD (reduced by after-tax contributions to the health flexible spending arrangement) as wages on Form W-2, Wage and Tax Statement. Free tax preparation sites Thrift Savings Plan (TSP) distributions. Free tax preparation sites   If you participate in the Uniformed Services TSP and receive a distribution from your account, the distribution is generally included in your taxable income. Free tax preparation sites   If your contributions included tax-exempt combat zone pay, the part of the distribution attributable to those contributions is tax exempt. Free tax preparation sites However, the earnings on the tax-exempt portion of the distribution are taxable. Free tax preparation sites The TSP will provide a statement showing the taxable and non-taxable portions of the distribution. Free tax preparation sites Roth Thrift Savings Plan (TSP) balance. Free tax preparation sites   You may be able to contribute to a designated Roth Account through the TSP known as the Roth TSP. Free tax preparation sites Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. Free tax preparation sites Qualified distributions from a Roth TSP are not included in your income. Free tax preparation sites For more details, see Thrift Savings Accounts in Part II of Publication 721, Tax Guide to U. Free tax preparation sites S. Free tax preparation sites Civil Service Retirement Benefits. Free tax preparation sites State bonus payments. Free tax preparation sites   Bonus payments made by a state (or a political subdivision thereof) to a member or former member of the uniformed services of the United States or to a dependent of such member are considered combat pay (and therefore may not be taxable) if the payments are made only because of the member's service in a combat zone. Free tax preparation sites See Combat Zone , later, for a list of designated combat zones. Free tax preparation sites Foreign Source Income If you are a U. Free tax preparation sites S. Free tax preparation sites citizen with income from sources outside the United States (foreign income), you must report all of that income (except for amounts that U. Free tax preparation sites S. Free tax preparation sites law allows you to exclude) on your tax return. Free tax preparation sites This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or a Form 1099. Free tax preparation sites This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). Free tax preparation sites Certain taxpayers can exclude income earned in foreign countries. Free tax preparation sites For 2013, this exclusion amount can be as much as $97,600. Free tax preparation sites However, the foreign earned income exclusion does not apply to the wages and salaries of military and civilian employees of the U. Free tax preparation sites S. Free tax preparation sites Government. Free tax preparation sites Employees of the U. Free tax preparation sites S. Free tax preparation sites Government include those who work at United States Armed Forces exchanges, commissioned and noncommissioned officers' messes, Armed Forces motion picture services, and similar personnel. Free tax preparation sites Other foreign income earned by military personnel or their spouses may be eligible for the foreign earned income exclusion. Free tax preparation sites For more information on the exclusion, see Publication 54. Free tax preparation sites Residents of American Samoa may be able to exclude income from American Samoa. Free tax preparation sites This possession exclusion does not apply to wages and salaries of military and civilian employees of the U. Free tax preparation sites S. Free tax preparation sites Government. Free tax preparation sites If you need information on the possession exclusion, see Publication 570, Tax Guide for Individuals With Income From U. Free tax preparation sites S. Free tax preparation sites Possessions. Free tax preparation sites Military Spouses Residency Relief Act (MSRRA) If you are the civilian spouse of an active duty U. Free tax preparation sites S. Free tax preparation sites military servicemember and your domicile is the same as the servicemember's, you can choose to keep your prior residence or domicile for tax purposes when you accompany the servicemember spouse, who is relocating under military orders to a new duty station in one of the 50 states, the District of Columbia, or a U. Free tax preparation sites S. Free tax preparation sites possession. Free tax preparation sites See Publication 570 for more information. Free tax preparation sites Domicile. Free tax preparation sites   Your domicile is the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. Free tax preparation sites It is not always where you presently live. Free tax preparation sites Community Property The pay you earn as a member of the Armed Forces may be subject to community property laws depending on your marital status, your domicile, and the nature of the payment. Free tax preparation sites The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Free tax preparation sites Marital status. Free tax preparation sites   Community property rules apply to married persons whose domicile during the tax year was in a community property state. Free tax preparation sites The rules may affect your tax liability if you file separate returns or are divorced during the year. Free tax preparation sites Nevada, Washington, and California domestic partners. Free tax preparation sites   A registered domestic partner in Nevada, Washington, or California generally must report half the combined income of the individual and his or her domestic partner. Free tax preparation sites See Form 8958 and Publication 555, Community Property. Free tax preparation sites Nature of the payment. Free tax preparation sites   Active duty military pay is subject to community property laws. Free tax preparation sites Armed Forces retired or retainer pay may be subject to community property laws. Free tax preparation sites   For more information on community property laws, see Publication 555. Free tax preparation sites Form W-2 Codes Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. Free tax preparation sites Form W-2 also shows other amounts that you may find important in box 12. Free tax preparation sites The amounts shown in box 12 are generally preceded by a code. Free tax preparation sites A list of codes used in box 12 is shown, next. Free tax preparation sites Form W-2 Reference Guide for Box 12 Codes A Uncollected social security or RRTA J Nontaxable sick pay T Adoption benefits   tax on tips             K 20% excise tax on excess golden V Income from exercise of B Uncollected Medicare tax on tips   parachute payments   nonstatutory stock option(s)             C Taxable cost of group-term life L Substantiated employee business W Employer contributions (including   insurance over $50,000   expense reimbursements   employee contributions through a           cafeteria plan) to an employee's D Elective deferrals under a section M Uncollected social security or RRTA   health savings account (HSA)   401(k) cash or deferred arrangement   tax on taxable cost of group-term life       plan (including a SIMPLE 401(k)   insurance over $50,000 (former Y Deferrals under a section 409A   arrangement)   employees only)   nonqualified deferred           compensation plan E Elective deferrals under a section N Uncollected Medicare tax on taxable       403(b) salary reduction agreement   cost of group-term life insurance Z Income under section 409A on a       over $50,000 (former employees only)   nonqualified deferred F Elective deferrals under a section       compensation plan   408(k)(6) salary reduction SEP P Excludable moving expense           reimbursements paid directly to AA Designated Roth contributions G Elective deferrals and employer   employee   under a section 401(k) plan   contributions (including nonelective           deferrals) to a section 457(b) Q Nontaxable combat pay BB Designated Roth contributions   deferred compensation plan       under a section 403(b) plan     R Employer contributions to an Archer     H Elective deferrals to a section   MSA DD Cost of employer-sponsored   501(c)(18)(D) tax-exempt       health coverage   organization plan S Employee salary reduction contributions under a section 408(p) SIMPLE  EE  Designated Roth contributions under a governmental section 457(b) plan  Note. Free tax preparation sites For more information on these codes, see your Form(s) W-2. Free tax preparation sites Adjustments to Income Adjusted gross income is your total income minus certain adjustments. Free tax preparation sites The following adjustments are of particular interest to members of the Armed Forces. Free tax preparation sites Armed Forces Reservists If you are a member of a reserve component of the Armed Forces and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your unreimbursed travel expenses as an adjustment to income on line 24 of Form 1040, U. Free tax preparation sites S. Free tax preparation sites Individual Income Tax Return, rather than as a miscellaneous itemized deduction. Free tax preparation sites Include all unreimbursed expenses from the time you leave home until the time you return home. Free tax preparation sites The deduction is limited to the amount the federal government generally reimburses its employees for travel expenses. Free tax preparation sites For more information about this limit, see Per Diem and Car Allowances in chapter 6 of Publication 463. Free tax preparation sites Member of a reserve component. Free tax preparation sites   You are a member of a reserve component of the Armed Forces if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Free tax preparation sites How to report. Free tax preparation sites   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. Free tax preparation sites Then enter on Form 1040, line 24, the part of your expenses, up to the federal rate, included on Form 2106, line 10, or Form 2106-EZ, line 6, that is for reserve-related travel more than 100 miles from your home. Free tax preparation sites Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. Free tax preparation sites Example. Free tax preparation sites Captain Harris, a member of the Army Reserve, traveled to a location 220 miles from his home to perform his work in the reserves in April 2013. Free tax preparation sites He incurred $1,549 of unreimbursed expenses consisting of $249 for mileage (440 miles × 56. Free tax preparation sites 5 cents per mile), $300 for meals, and $1,000 for lodging. Free tax preparation sites He also had other deductible mileage expenses of $110 for several trips to a location 20 miles from his home. Free tax preparation sites Only 50% of his meal expenses are deductible. Free tax preparation sites He shows his total deductible travel expenses of $1,509 ($249 + $150 (50% of $300) + $1,000 + $110) on Form 2106, line 10. Free tax preparation sites He enters the $1,399 ($249 + $150 + $1,000) for travel over 100 miles from home on Form 1040, line 24. Free tax preparation sites He then subtracts that $1,399 from the amount on Form 2106, $1,509, and enters $110 on Schedule A (Form 1040), line 21. Free tax preparation sites Individual Retirement Arrangements Generally, you can deduct the lesser of the contributions to your traditional individual retirement arrangement (IRA) for the year or the general limit (or spousal IRA limit, if applicable). Free tax preparation sites However, if you or your spouse was covered by an employer-maintained retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. Free tax preparation sites The Form W-2 you or your spouse receives from an employer has a box used to indicate whether you were covered for the year. Free tax preparation sites The “Retirement plan” box should have a mark in it if you were covered. Free tax preparation sites For purposes of a deduction for contributions to a traditional IRA, Armed Forces members (including reservists on active duty for more than 90 days during the year) are considered covered by an employer-maintained retirement plan. Free tax preparation sites Individuals serving in the U. Free tax preparation sites S. Free tax preparation sites Armed Forces or in support of the U. Free tax preparation sites S. Free tax preparation sites Armed Forces in designated combat zones have additional time to make a qualified retirement contribution to an IRA. Free tax preparation sites For more information on this extension of deadline provision, see Extension of Deadlines , later. Free tax preparation sites For more information on IRAs, see Publication 590. Free tax preparation sites Combat Pay For IRA purposes, your compensation includes nontaxable combat pay. Free tax preparation sites This means that even though you do not have to include the combat pay in your gross income, you do include it in your compensation when figuring the limits on contributions and deductions of contributions to IRAs. Free tax preparation sites Qualified Reservist Distributions A qualified reservist distribution is defined below. Free tax preparation sites It is not subject to the 10% additional tax on early distributions from certain retirement plans. Free tax preparation sites Definition. Free tax preparation sites   A distribution you receive is a qualified reservist distribution if the following requirements are met. Free tax preparation sites You were ordered or called to active duty after September 11, 2001. Free tax preparation sites You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component (see Member of a reserve component , earlier, under Armed Forces Reservists. Free tax preparation sites ) The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement. Free tax preparation sites The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period. Free tax preparation sites Qualified Reservist Repayments You may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined earlier) you received. Free tax preparation sites 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. Free tax preparation sites You make these repayment contributions to an IRA, even if you received the qualified reservist distribution from a section 401(k) or 403(b) plan or a similar arrangement. Free tax preparation sites Limit. Free tax preparation sites   Your qualified reservist repayments cannot be more than your qualified reservist distributions. Free tax preparation sites When repayment contributions can be made. Free tax preparation sites   You cannot make these repayment contributions after the date that is 2 years after your active duty period ends. Free tax preparation sites No deduction. Free tax preparation sites   You cannot deduct qualified reservist repayments. Free tax preparation sites Figuring your IRA deduction. Free tax preparation sites   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. Free tax preparation sites Reporting the repayment. Free tax preparation sites   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606, Nondeductible IRAs. Free tax preparation sites Moving Expenses To deduct moving expenses, you generally must meet certain time and distance tests. Free tax preparation sites However, if you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet these tests. Free tax preparation sites You can deduct your unreimbursed moving expenses on Form 3903. Free tax preparation sites Permanent change of station. Free tax preparation sites   A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. Free tax preparation sites The move must occur within 1 year of ending your active duty or within the period allowed under the Joint Federal Travel Regulations. Free tax preparation sites Spouse and dependents. Free tax preparation sites   If you are the spouse or dependent of a member of the Armed Forces who deserts, is imprisoned, or dies, a permanent change of station for you includes a move to: The member's place of enlistment or induction, Your, or the member's, home of record, or A nearer point in the United States. Free tax preparation sites   If the military moves you to or from a different location than the member, the moves are treated as a single move to your new main job location. Free tax preparation sites Services or reimbursements provided by the government. Free tax preparation sites   Do not include in your income the value of moving and storage services provided by the government because of a permanent change of station. Free tax preparation sites Similarly, do not include in income amounts received as a dislocation allowance, temporary lodging expense, temporary lodging allowance, or move-in housing allowance. Free tax preparation sites   Generally, if the total reimbursements or allowances that you receive from the government because of the move are more than your actual moving expenses, the excess is included in your wages on Form W-2. Free tax preparation sites However, if any reimbursements or allowances (other than dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess still must be included in gross income on Form 1040, line 7. Free tax preparation sites   Use Form 3903 to deduct qualified expenses that exceed your reimbursements and allowances (including dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances that are excluded from gross income). Free tax preparation sites   If you must relocate and your spouse and dependents move to or from a different location, do not include in income reimbursements, allowances, or the value of moving and storage services provided by the government to move you and your spouse and dependents to and from the separate locations. Free tax preparation sites   Do not deduct any expenses for moving services that were provided by the government. Free tax preparation sites Also, do not deduct any expenses that were reimbursed by an allowance you did not include in income. Free tax preparation sites Deductible Moving Expenses If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. Free tax preparation sites You can deduct expenses (if not reimbursed or furnished in kind) for: Moving household goods and personal effects, and Travel. Free tax preparation sites Moving household goods and personal effects. Free tax preparation sites   You can deduct the expenses of moving your household goods and personal effects, including expenses for hauling a trailer, packing, crating, in-transit storage, and insurance. Free tax preparation sites You cannot deduct expenses for moving furniture or other goods you bought on the way from your old home to your new home. Free tax preparation sites Storing and insuring household goods and personal effects. Free tax preparation sites   You can include only the cost of storing and insuring your household goods and personal effects within any period of 30 consecutive days after the day these goods and effects are moved from your former home and before they are delivered to your new home. Free tax preparation sites Travel. Free tax preparation sites   You can deduct the expenses of traveling (including lodging but not meals) from your old home to your new home, including car expenses and air fare. Free tax preparation sites You can deduct as car expenses either: Your actual out-of-pocket expenses such as gas and oil, or The standard mileage rate of 24 cents a mile. Free tax preparation sites   You can add parking fees and tolls to the amount claimed under either method. Free tax preparation sites You cannot deduct any expenses for meals. Free tax preparation sites You cannot deduct the cost of unnecessary side trips or lavish and extravagant lodging. Free tax preparation sites Member of your household. Free tax preparation sites   A member of your household is anyone who has both your former home and your new home as his or her main home. Free tax preparation sites It does not include a tenant or employee unless you can claim that person as a dependent. Free tax preparation sites Foreign Moves A foreign move is a move from the United States or its possessions to a foreign country or from one foreign country to another foreign country. Free tax preparation sites A move from a foreign country to the United States or its possessions is not a foreign move. Free tax preparation sites For a foreign move, the deductible moving expenses described earlier are expanded to include the reasonable expenses of: Moving your household goods and personal effects to and from storage, and Storing these items for part or all of the time the new job location remains your main job location. Free tax preparation sites The new job location must be outside the United States. Free tax preparation sites Reporting Moving Expenses Figure moving expense deductions on Form 3903. Free tax preparation sites Carry the deduction from Form 3903 to Form 1040, line 26. Free tax preparation sites For more information, see Publication 521 and Form 3903. Free tax preparation sites Combat Zone Exclusion If you are a member of the U. Free tax preparation sites S. Free tax preparation sites Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. Free tax preparation sites This pay is generally referred to as “combat pay. Free tax preparation sites ” You do not actually need to show the exclusion on your tax return because income that qualifies for the combat zone exclusion is not included in the wages reported on your Form W-2. Free tax preparation sites (See Form W-2 , later. Free tax preparation sites ) The month for which you receive the pay must be a month in which you either served in a combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. Free tax preparation sites You do not have to receive the excluded pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. Free tax preparation sites If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income. Free tax preparation sites (Other officer personnel are discussed under Amount of Exclusion , later. Free tax preparation sites ) Active duty pay earned in any month you served in a combat zone. Free tax preparation sites Imminent danger/hostile fire pay. Free tax preparation sites A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. Free tax preparation sites Pay for accrued leave earned in any month you served in a combat zone. Free tax preparation sites The Department of Defense must determine that the unused leave was earned during that period. Free tax preparation sites Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. Free tax preparation sites The pay must be earned in a month you served in a combat zone. Free tax preparation sites Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone. Free tax preparation sites Student loan repayments. Free tax preparation sites If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. Free tax preparation sites If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. Free tax preparation sites For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion. Free tax preparation sites Retirement pay and pensions do not qualify for the combat zone exclusion. Free tax preparation sites Partial (month) service. Free tax preparation sites   If you serve in a combat zone for any part of one or more days during a particular month, you are entitled to an exclusion for that entire month. Free tax preparation sites Form W-2. Free tax preparation sites   The wages shown in box 1 of your 2013 Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. Free tax preparation sites If it does, you will need to get a corrected Form W-2 from your finance office. Free tax preparation sites   You cannot exclude as combat pay any wages shown in box 1 of Form W-2. Free tax preparation sites Combat Zone A combat zone is any area the President of the United States designates by Executive Order as an area in which the U. Free tax preparation sites S. Free tax preparation sites Armed Forces are engaging or have engaged in combat. Free tax preparation sites An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order. Free tax preparation sites Afghanistan area. Free tax preparation sites   By Executive Order No. Free tax preparation sites 13239, Afghanistan (and airspace above) was designated as a combat zone beginning September 19, 2001. Free tax preparation sites On December 14, 2001, the following countries were certified by the Department of Defense for combat zone tax benefits due to their direct support of military operations in the Afghanistan combat zone. Free tax preparation sites Djibouti. Free tax preparation sites Jordan. Free tax preparation sites Kyrgyzstan. Free tax preparation sites Pakistan. Free tax preparation sites Somalia. Free tax preparation sites Syria. Free tax preparation sites Tajikistan. Free tax preparation sites Uzbekistan. Free tax preparation sites Yemen. Free tax preparation sites The Philippines. Free tax preparation sites  Note. Free tax preparation sites For the Philippines only, the personnel must be deployed in conjunction with Operation Enduring Freedom supporting military operations in the Afghanistan combat zone. Free tax preparation sites The Kosovo area. Free tax preparation sites   By Executive Order No. Free tax preparation sites 13119, the following locations (including airspace above) were designated as a combat zone beginning March 24, 1999. Free tax preparation sites Federal Republic of Yugoslavia (Serbia/Montenegro). Free tax preparation sites Albania. Free tax preparation sites Kosovo. Free tax preparation sites The Adriatic Sea. Free tax preparation sites The Ionian Sea—north of the 39th parallel. Free tax preparation sites Note. Free tax preparation sites The combat zone designation for Montenegro and Kosovo (previously a province within Serbia) under Executive Order 13119 remains in force even though Montenegro and Kosovo became independent nations since EO 13119 was signed. Free tax preparation sites Arabian peninsula. Free tax preparation sites   By Executive Order No. Free tax preparation sites 12744, the following locations (and airspace above) were designated as a combat zone beginning January 17, 1991. Free tax preparation sites The Persian Gulf. Free tax preparation sites The Red Sea. Free tax preparation sites The Gulf of Oman. Free tax preparation sites The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude. Free tax preparation sites The Gulf of Aden. Free tax preparation sites The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates. Free tax preparation sites Jordan which is in direct support of the Arabian Peninsula. Free tax preparation sites Serving in a Combat Zone You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone. Free tax preparation sites Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. Free tax preparation sites If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes. Free tax preparation sites Hospitalized While Serving in a Combat Zone If you are hospitalized while serving in a combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary. Free tax preparation sites Example. Free tax preparation sites You are hospitalized for a specific disease in a combat zone where you have been serving for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. Free tax preparation sites The disease is presumed to have been incurred while you were serving in the combat zone. Free tax preparation sites On the other hand, if the incubation period of the disease is 1 year, the disease would not have been incurred while you were serving in the combat zone. Free tax preparation sites Hospitalized After Leaving a Combat Zone In some cases, the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left. Free tax preparation sites In that case, you can exclude military pay earned while you are hospitalized as a result of the wound, disease, or injury. Free tax preparation sites Example. Free tax preparation sites You were hospitalized for a specific disease 3 weeks after you left the combat zone. Free tax preparation sites The incubation period of the disease is from 2 to 4 weeks. Free tax preparation sites The disease is presumed to have been incurred while serving in the combat zone. Free tax preparation sites Nonqualifying Presence in Combat Zone None of the following types of military service qualify as service in a combat zone. Free tax preparation sites Presence in a combat zone while on leave from a duty station located outside the combat zone. Free tax preparation sites Passage over or through a combat zone during a trip between two points that are outside a combat zone. Free tax preparation sites Presence in a combat zone solely for your personal convenience. Free tax preparation sites Service Outside Combat Zone Considered Service in Combat Zone Military service outside a combat zone is considered to be performed in a combat zone if: The Department of Defense designates that the service is in direct support of military operations in the combat zone, and The service qualifies you for special military pay for duty subject to hostile fire or imminent danger. Free tax preparation sites Military pay received for this service will qualify for the combat zone exclusion if all of the requirements (other than service in a combat zone) are met and the pay is verifiable by reference to military pay records. Free tax preparation sites Amount of Exclusion If you are an enlisted member, warrant officer, or commissioned warrant officer and you serve in a combat zone during any part of a month, you can exclude all of your military pay for that month. Free tax preparation sites It should not be included in the wages reported on your Form W-2. Free tax preparation sites You also can exclude military pay earned while you are hospitalized as a result of wounds, disease, or injury incurred in the combat zone. Free tax preparation sites If you are hospitalized, you cannot exclude any military pay received for any month of service that begins more than 2 years after the end of combat activities in the combat zone. Free tax preparation sites Your hospitalization does not have to be in the combat zone. Free tax preparation sites If you are a commissioned officer (other than a commissioned warrant officer), you can exclude your pay according to the rules just discussed. Free tax preparation sites However, the amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. Free tax preparation sites Alien Status For tax purposes, an alien is an individual who is not a U. Free tax preparation sites S. Free tax preparation sites citizen. Free tax preparation sites An alien is in one of three categories: resident, nonresident, or dual-status. Free tax preparation sites Placement in the correct category is crucial in determining what income to report and what forms to file. Free tax preparation sites Under peacetime enlistment rules, you generally cannot enlist in the Armed Forces unless you are a citizen or have been legally admitted to the United States for permanent residence. Free tax preparation sites If you are an alien enlistee in the Armed Forces, you are probably a resident alien. Free tax preparation sites If, under an income tax treaty, you are considered a resident of a foreign country, see your base legal officer. Free tax preparation sites Other aliens who are in the United States only because of military assignments and who have a home outside the United States are nonresident aliens. Free tax preparation sites Guam and Puerto Rico have special rules. Free tax preparation sites Residents of those areas should contact their taxing authority with their questions. Free tax preparation sites Most members of the Armed Forces are U. Free tax preparation sites S. Free tax preparation sites citizens or resident aliens. Free tax preparation sites However, if you have questions about your alien status or the alien status of your dependents or spouse, you should read the information in the following paragraphs and see Publication 519. Free tax preparation sites Resident Aliens You are considered a resident alien of the United States for tax purposes if you meet either the “green card test” or the “substantial presence test” for the calendar year (January 1–December 31). Free tax preparation sites If you meet the substantial presence test for 2014, you did not meet either the green card test or the substantial presence test for 2012 or 2013, and you did not choose to be treated as a resident for part of 2012, you may be able to choose to be treated as a U. Free tax preparation sites S. Free tax preparation sites resident for part of 2013. Free tax preparation sites See First-Year Choice in Publication 519. Free tax preparation sites These tests are explained in Publication 519. Free tax preparation sites Generally, resident aliens are taxed on their worldwide income and file the same tax forms as U. Free tax preparation sites S. Free tax preparation sites citizens. Free tax preparation sites Treating nonresident alien spouse as resident alien. Free tax preparation sites   A nonresident alien spouse can be treated as a resident alien if all the following conditions are met. Free tax preparation sites One spouse is a U. Free tax preparation sites S. Free tax preparation sites citizen or resident alien at the end of the tax year. Free tax preparation sites That spouse is married to the nonresident alien at the end of the tax year. Free tax preparation sites You both choose to treat the nonresident alien spouse as a resident alien. Free tax preparation sites Making the choice. Free tax preparation sites   Both you and your spouse must sign a statement and attach it to your joint return for the first tax year for which the choice applies. Free tax preparation sites Include in the statement: A declaration that one spouse was a nonresident alien and the other was a U. Free tax preparation sites S. Free tax preparation sites citizen or resident alien on the last day of the year, A declaration that both spouses choose to be treated as U. Free tax preparation sites S. Free tax preparation sites residents for the entire tax year, and The name, address, and taxpayer identification number (social security number or individual taxpayer identification number) of each spouse. Free tax preparation sites If the nonresident alien spouse is not eligible to get a social security number, he or she should file Form W-7, Application for IRS Individual Taxpayer Identification Number. Free tax preparation sites    Once you make this choice, the nonresident alien spouse's worldwide income is subject to U. Free tax preparation sites S. Free tax preparation sites tax. Free tax preparation sites If the nonresident alien spouse has substantial foreign income, there may be no advantage to making this choice. Free tax preparation sites Ending the choice. Free tax preparation sites   Once you make this choice, it applies to all later years unless one of the following situations occurs. Free tax preparation sites You or your spouse revokes the choice. Free tax preparation sites You or your spouse dies. Free tax preparation sites You and your spouse become legally separated under a decree of divorce or separate maintenance. Free tax preparation sites The Internal Revenue Service ends the choice because you or your spouse kept inadequate records. Free tax preparation sites For specific details on these situations, see Publication 519. Free tax preparation sites   If the choice is ended for any of these reasons, neither spouse can make the choice for any later year. Free tax preparation sites Choice not made. Free tax preparation sites   If you and your nonresident alien spouse do not make this choice: You cannot file a joint return. Free tax preparation sites You can file as married filing separately, or head of household if you qualify. Free tax preparation sites You can claim an exemption for your nonresident alien spouse if he or she has no gross income for U. Free tax preparation sites S. Free tax preparation sites tax purposes and is not another taxpayer's dependent. Free tax preparation sites The nonresident alien spouse generally does not have to file a federal income tax return if he or she had no income from sources in the United States. Free tax preparation sites If a return has to be filed, see the next discussion. Free tax preparation sites The nonresident alien spouse is not eligible for the earned income credit if he or she has to file a return. Free tax preparation sites Nonresident Aliens If you are an alien who does not meet the requirements discussed earlier to be a resident alien, you are a nonresident alien. Free tax preparation sites If you are required to file a federal tax return, you must file either Form 1040NR, U. Free tax preparation sites S. Free tax preparation sites Nonresident Alien Income Tax Return, or Form 1040NR-EZ, U. Free tax preparation sites S. Free tax preparation sites Income Tax Return for Certain Nonresident Aliens With No Dependents. Free tax preparation sites See the form instructions for information on who must file and filing status. Free tax preparation sites If you are a nonresident alien, you generally must pay tax on income from sources in the United States. Free tax preparation sites Your income from conducting a trade or business in the United States is taxed at graduated U. Free tax preparation sites S. Free tax preparation sites tax rates. Free tax preparation sites Other income from U. Free tax preparation sites S. Free tax preparation sites sources is taxed at a flat 30% (or lower treaty) rate. Free tax preparation sites For example, dividends from a U. Free tax preparation sites S. Free tax preparation sites corporation paid to a nonresident alien generally are subject to a 30% (or lower treaty) rate. Free tax preparation sites Dual-Status Aliens You can be both a nonresident and resident alien during the same tax year. Free tax preparation sites This usually occurs in the year you arrive in or depart from the United States. Free tax preparation sites If you are a dual-status alien, you are taxed on income from all sources for the part of the year you are a resident alien. Free tax preparation sites Generally, for the part of the year you are a nonresident alien, you are taxed only on income from sources in the United States. Free tax preparation sites Sale of Home You may not have to pay tax on all or part of the gain from the sale of your main home. Free tax preparation sites Usually, your main home is the one you live in most of the time. Free tax preparation sites It can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. Free tax preparation sites You generally can exclude up to $250,000 of gain ($500,000, in most cases, if married filing a joint return) realized on the sale or exchange of a main home in 2013. Free tax preparation sites The exclusion is allowed each time you sell or exchange a main home, but generally not more than once every 2 years. Free tax preparation sites To be eligible, during the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years (the ownership test), and lived in the home as your main home for at least 2 years (the use test). Free tax preparation sites Exception to ownership and use tests. Free tax preparation sites   You can exclude gain, but the maximum amount of gain you can exclude will be reduced if you do not meet the ownership and use tests due to a move to a new permanent duty station. Free tax preparation sites 5-year test period suspended. Free tax preparation sites   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty as a member of the Armed Forces. Free tax preparation sites This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. Free tax preparation sites Example. Free tax preparation sites David bought and moved into a home in 2005. Free tax preparation sites He lived in it as his main home for 2½ years. Free tax preparation sites For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. Free tax preparation sites He then sold the home at a gain in 2013. Free tax preparation sites To meet the use test, David chooses to suspend the 5-year test period for the 6 years he was on qualifying official extended duty. Free tax preparation sites This means he can disregard those 6 years. Free tax preparation sites Therefore, David's 5-year test period consists of the 5 years before he went on qualifying official extended duty. Free tax preparation sites He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. Free tax preparation sites Period of suspension. Free tax preparation sites   The period of suspension cannot last more than 10 years. Free tax preparation sites You cannot suspend the 5-year period for more than one property at a time. Free tax preparation sites You can revoke your choice to suspend the 5-year period at any time. Free tax preparation sites Qualified official extended duty. Free tax preparation sites   You are on qualified official extended duty if you serve on extended duty either: At a duty station at least 50 miles from your main home, or While you live in Government quarters under Government orders. Free tax preparation sites   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. Free tax preparation sites Property used for rental or business. Free tax preparation sites   You may be able to exclude your gain from the sale of a home that you have used as a rental property or for business. Free tax preparation sites However, you must meet the ownership and use tests discussed in Publication 523. Free tax preparation sites Nonqualified use. Free tax preparation sites   If the sale of your main home results in a gain that is allocated to one or more period(s) of nonqualified use, you cannot exclude that gain from your income. Free tax preparation sites   Nonqualified use means any period after 2008 when neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions. Free tax preparation sites For example, a period of nonqualified use does not include any period (not to exceed a total of 10 years) during which you or your spouse is serving on qualified official extended duty. Free tax preparation sites Loss. Free tax preparation sites   You cannot deduct a loss from the sale of your main home. Free tax preparation sites More information. Free tax preparation sites   For more information, see Publication 523. Free tax preparation sites Foreclosures There may be tax consequences as a result of compensation payments for foreclosures. Free tax preparation sites Payments made for violations of the Service Members Civil Relief Act (SCRA). Free tax preparation sites   All service members who received a settlement payment reported on a Form 1099 may need to report the amount on their tax return. Free tax preparation sites Generally, you must include settlement payments in income. Free tax preparation sites However, the tax treatment of settlement payments will depend on the facts and circumstances. Free tax preparation sites Lump Sum Portion of Settlement Payment. Free tax preparation sites    Generally, you must include the lump sum payment in gross income. Free tax preparation sites In limited circumstances you may be able to exclude part or all of the lump sum payment from gross income. Free tax preparation sites For example, you may qualify to exclude part or all of the payment from gross income if you can show that the payment was made to reimburse specific nondeductible expenses (such as living expenses) you incurred because of the SCRA violation. Free tax preparation sites Interest Payment on Lump Sum Portion of Settlement Payment. Free tax preparation sites    You must include any interest on the lump sum portion of your settlement payment in your income. Free tax preparation sites Lost Equity Portion of Settlement Payment. Free tax preparation sites    If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. Free tax preparation sites You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. Free tax preparation sites In many cases, this gain may be excluded from income. Free tax preparation sites For more information on the rules for excluding all or part of any gain from the sale (including a foreclosure) of a main home, see Pub. Free tax preparation sites 523, Selling Your Home. Free tax preparation sites The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. Free tax preparation sites    To find rules for reporting gain or loss on the foreclosure of property that was not your main home, see Pub. Free tax preparation sites 544, Sales and Other Dispositions of Assets. Free tax preparation sites Interest Payment on Lost Equity Portion of Settlement Payment. Free tax preparation sites    You must include any interest on the lost equity portion of your settlement payment in your income. Free tax preparation sites Itemized Deductions To figure your taxable income, you must subtract either your standard deduction or your itemized deductions from adjusted gross income. Free tax preparation sites For information on the standard deduction, see Publication 501. Free tax preparation sites Itemized deductions are figured on Schedule A (Form 1040). Free tax preparation sites This chapter discusses miscellaneous itemized deductions of particular interest to members of the Armed Forces. Free tax preparation sites For information on other itemized deductions, see the publications listed below. Free tax preparation sites Publication 502, Medical and Dental Expenses. Free tax preparation sites Publication 526, Charitable Contributions. Free tax preparation sites Publication 547, Casualties, Disasters, and Thefts. Free tax preparation sites Publication 550, Investment Income and Expenses. Free tax preparation sites You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. Free tax preparation sites For information on deductions that are not subject to the 2% limit, see Publication 529. Free tax preparation sites Employee Business Expenses Deductible employee business expenses generally are miscellaneous itemized deductions subject to the 2% limit. Free tax preparation sites Certain employee business expenses are deductible as adjustments to income. Free tax preparation sites For information on many employee business expenses, see Publication 463. Free tax preparation sites Generally, you must file Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to claim these expenses. Free tax preparation sites You do not have to file Form 2106 or Form 2106-EZ if you are claiming only unreimbursed expenses for uniforms, professional society dues, and work-related educational expenses (all discussed later). Free tax preparation sites You can deduct these expenses directly on Schedule A (Form 1040). Free tax preparation sites Reimbursement. Free tax preparation sites   Generally, to receive advances, reimbursements, or other allowances from the government, you must adequately account for your expenses and return any excess reimbursement. Free tax preparation sites Your reimbursed expenses are not deductible. Free tax preparation sites   If your expenses are more than your reimbursement, the excess expenses are deductible (subject to the 2% limit) if you can prove them. Free tax preparation sites You must file Form 2106 to report these expenses. Free tax preparation sites   You can use the shorter Form 2106-EZ if you meet all three of the following conditions. Free tax preparation sites You are an employee deducting expenses related to your job. Free tax preparation sites You were not reimbursed by your employer for your expenses. Free tax preparation sites (Amounts included in box 1 of Form W-2 are not considered reimbursements. Free tax preparation sites ) If you claim car expenses, you use the standard mileage rate. Free tax preparation sites    For 2013, the standard mileage rate is 56. Free tax preparation sites 5 cents a mile for all business miles driven. Free tax preparation sites This rate is adjusted periodically. Free tax preparation sites Travel Expenses You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home. Free tax preparation sites If you are a member of the U. Free tax preparation sites S. Free tax preparation sites Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. Free tax preparation sites You cannot deduct your expenses for meals and lodging while at your permanent duty station. Free tax preparation sites You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. Free tax preparation sites A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a home aboard ship for travel expense purposes. Free tax preparation sites To be deductible, your travel expenses must be work related. Free tax preparation sites You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty. Free tax preparation sites Away from home. Free tax preparation sites   Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. Free tax preparation sites You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home. Free tax preparation sites   Examples of deductible travel expenses include: Expenses for business-related meals (generally limited to 50% of your unreimbursed cost), lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary duty or temporary additional duty, and Expenses of carrying out official business while on “No Cost” orders. Free tax preparation sites    You cannot deduct any expenses for travel away from home if the temporary assignment in a single location is realistically expected to last (and does in fact last) for more than 1 year. Free tax preparation sites This rule may not apply if you are participating in a federal crime investigation or prosecution. Free tax preparation sites For more information, see Publication 463 and the Form 2106 instructions. Free tax preparation sites Transportation Expenses These expenses include the ordinary and necessary costs of: Getting from one workplace to another when you are not away from home, Going to a business meeting away from your regular workplace, and Getting from your home to a temporary workplace when you have a regular place of work. Free tax preparation sites These expenses include the costs of transportation by air, bus, rail, taxi, and driving and maintaining your car. Free tax preparation sites Transportation expenses incurred while traveling away from home are included with your travel expenses, discussed earlier. Free tax preparation sites However, if you use your car while traveling away from home overnight, see the rules in chapter 4 of Publication 463 to figure your car expense deduction. Free tax preparation sites If you must go from one workplace to another while on duty (for example, as a courier or to attend meetings) without being away from home, your unreimbursed transportation expenses are deductible. Free tax preparation sites However, the expenses of getting to and from your regular place of work (commuting) are not deductible. Free tax preparation sites Temporary work location. Free tax preparation sites   If you have one or more regular places of business away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location. Free tax preparation sites   Generally, if your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary. Free tax preparation sites   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. Free tax preparation sites If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. Free tax preparation sites    If you do not have a regular place of business, but you ordinarily work in the metropolitan area where you live, you can deduct daily transportation expenses between your home and a temporary work site outside your metropolitan area. Free tax preparation sites However, you cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. Free tax preparation sites These are nondeductible commuting costs. Free tax preparation sites Armed Forces reservists. Free tax preparation sites   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. Free tax preparation sites You can deduct the expense of getting from one workplace to the other. Free tax preparation sites You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. Free tax preparation sites In this case, your transportation generally is a nondeductible commuting expense. Free tax preparation sites However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. Free tax preparation sites   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. Free tax preparation sites If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. Free tax preparation sites See Armed Forces Reservists under Adjustments to Income, earlier. Free tax preparation sites Uniforms You usually cannot deduct the expenses for uniform cost and upkeep. Free tax preparation sites Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty. Free tax preparation sites If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. Free tax preparation sites Unreimbursed expenses for the cost and upkeep of the following articles are deductible. Free tax preparation sites Military battle dress uniforms and utility uniforms that you cannot wear when off duty. Free tax preparation sites Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords. Free tax preparation sites Reservists' uniforms if you can wear the uniform only while performing duties as a reservist. Free tax preparation sites Professional Dues You can deduct unreimbursed dues paid to professional societies directly related to your military position. Free tax preparation sites However, you cannot deduct amounts paid to an officers' club or a noncommissioned officers' club. Free tax preparation sites Example. Free tax preparation sites Lieutenant Margaret Allen, an electrical engineer at Maxwell Air Force Base, can deduct professional dues paid to the American Society of Electrical Engineers. Free tax preparation sites Educational Expenses You can deduct the unreimbursed costs of qualifying work-related education. Free tax preparation sites This is education that meets at least one of the following two tests. Free tax preparation sites The education is required by your employer or the law to keep your present salary, status, or job. Free tax preparation sites The required education must serve a bona fide business purpose of your employer. Free tax preparation sites The education maintains or improves skills needed in your present work. Free tax preparation sites However, even if the education meets one or both of the above tests, it is not qualifying education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. Free tax preparation sites You can deduct the expenses for qualifying work-related education even if the education could lead to a degree. Free tax preparation sites Example 1. Free tax preparation sites Lieutenant Colonel Mason has a degree in financial management and is in charge of base finances at her post of duty. Free tax preparation sites She took an advanced finance course. Free tax preparation sites She already meets the minimum qualifications for her job. Free tax preparation sites By taking the course, she is improving skills in her current position. Free tax preparation sites The course does not qualify her for a new trade or business. Free tax preparation sites She can deduct educational expenses that are more than the educational allowance she received. Free tax preparation sites Example 2. Free tax preparation sites Major Williams worked in the military base legal office as a legal intern. Free tax preparation sites He was placed in excess leave status by his employer to attend law school. Free tax preparation sites He paid all his educational expenses and was not reimbursed. Free tax preparation sites After obtaining his law degree, he passed the state bar exam and worked as a judge advocate. Free tax preparation sites His educational expenses are not deductible because the law degree qualified him for a new trade or business, even though the education maintained and improved his skills in his work. Free tax preparation sites Travel to obtain education. Free tax preparation sites   If your work-related education qualifies, you can deduct the costs of travel, including meals (subject to the 50% limit), and lodging, if the main purpose of the trip is to obtain the education. Free tax preparation sites   You cannot deduct the cost of travel that is itself a form of education, even if it is directly related to your duties in your work or business. Free tax preparation sites Transportation for education. Free tax preparation sites   If your work-related education qualifies for a deduction, you can deduct the costs of transportation to obtain that education. Free tax preparation sites However, you cannot deduct the cost of services provided in kind, such as base-provided transportation to or from class. Free tax preparation sites Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. Free tax preparation sites   If you need more information on educational expenses, see Publication 970. Free tax preparation sites Repayments If you had to repay to your employer an amount that you included in your income in an earlier year, you may be able to deduct the repaid amount from your income for the year in which you repaid it. Free tax preparation sites Repayment of $3,000 or less. Free tax preparation sites   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Free tax preparation sites If you reported it as wages, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Free tax preparation sites Repayment over $3,000. Free tax preparation sites   If the amount you repaid was more than $3,000, see Repayments in Publication 525. Free tax preparation sites Credits After you have figured your taxable income and tax liability, you can determine if you are entitled to any tax credits. Free tax preparation sites This publication discusses the first-time homebuyer credit, child tax credit, earned income credit, and credit for excess social security tax withheld. Free tax preparation sites For information on other credits, see your tax form instructions. Free tax preparation sites First-Time Homebuyer Credit The first-time homebuyer credit is not available for homes purchased after 2011. Free tax preparation sites In 2011, this credit had already expired for most taxpayers, however, certain members of the uniformed services and Foreign Service and certain employees of the intelligence community could claim the credit for homes purchased in 2011. Free tax preparation sites If you bought the home (and claimed the credit) after 2008, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. Free tax preparation sites If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit. Free tax preparation sites If you bought your home in 2008, you generally must repay the credit over a 15-year period in 15 equal installments. Free tax preparation sites For more information, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. Free tax preparation sites Child Tax Credit The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. Free tax preparation sites The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. Free tax preparation sites The child tax credit is not the same as the credit for child and dependent care expenses. Free tax preparation sites See Publication 503 for information on the credit for child and dependent care expenses. Free tax preparation sites Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you, later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. Free tax preparation sites S. Free tax preparation sites citizen, a U. Free tax preparation sites S. Free tax preparation sites national, or a U. Free tax preparation sites S. Free tax preparation sites resident alien. Free tax preparation sites If the child was adopted, see Adopted child . Free tax preparation sites For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c, column (4). Free tax preparation sites Exceptions to time lived with you. Free tax preparation sites   A child is considered to have lived with you for all of 2013 if the child was born or died in 2013 and your home was this child's home for the entire time he or she was alive. Free tax preparation sites Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. Free tax preparation sites   There are also exceptions for kidnapped children and children of divorced or separated parents. Free tax preparation sites For details, see Publication 501. Free tax preparation sites Qualifying child of more than one person. Free tax preparation sites   A special rule applies if your qualifying child is the qualifying child of more than one person. Free tax preparation sites For details, see Publication 501. Free tax preparation sites Adopted child. Free tax preparation sites   An adopted child is always treated as your own child. Free tax preparation sites An adopted child includes a child lawfully placed with you for legal adoption. Free tax preparation sites   If you are a U. Free tax preparation sites S. Free tax preparation sites citizen or U. Free tax preparation sites S. Free tax preparation sites national and your adopted child lived with you as a member of your household all year, that child meets condition (7) above to be a qualifying child for the child tax credit. Free tax preparation sites Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. Free tax preparation sites Limits on the credit. Free tax preparation sites   You must reduce your child tax credit if either (1) or (2), below, applies. Free tax preparation sites The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. Free tax preparation sites If the amount is zero, you cannot take this credit because there is no tax to reduce. Free tax preparation sites However, you may be able to take the additional child tax credit. Free tax preparation sites See Additional Child Tax Credit , later. Free tax preparation sites Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. Free tax preparation sites Married filing jointly — $110,000. Free tax preparation sites Single, head of household,  or qualifying widow(er) — $75,000. Free tax preparation sites Married filing separately — $55,000. Free tax preparation sites Modified AGI. Free tax preparation sites   For purposes of the child tax credit, your modified AGI is the amount on Form 1040, line 38, or Form 1040A, line 22, plus the following amounts that may apply to you. Free tax preparation sites Any amount excluded from income because of the exclusion of income from Puerto Rico. Free tax preparation sites Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. Free tax preparation sites Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. Free tax preparation sites Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Free tax preparation sites   If you do not have any of the above, your modified AGI is the same as your AGI. Free tax preparation sites Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. Free tax preparation sites For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A. Free tax preparation sites Also attach Schedule 8812, Child Tax Credit, if required. Free tax preparation sites Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. Free tax preparation sites The additional child tax credit may give you a refund even if you do not owe any tax. Free tax preparation sites For more information, see the instructions for Form 1040 or Form 1040A, and Schedule 8812. Free tax preparation sites Earned Income Credit The earned income credit (EIC) is a cr

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What to Bring to Your Local VITA or TCE Site

  • Proof of identification (photo ID)
     
  • Social Security cards for you, your spouse and dependents or a Social Security number verification letter issued by the Social Security Administration
     
  • An Individual Taxpayer Identification Number (ITIN) assignment letter may be substituted for you, your spouse and your dependents if you do not have a Social Security number
     
  • Proof of foreign status, if applying for an ITIN
     
  • Birth dates for you, your spouse and dependents on the tax return
     
  • Wage and earning statements (Form W-2, W-2G, 1099-R,1099-Misc) from all employers
     
  • Interest and dividend statements from banks (Forms 1099)
     
  • A copy of last year’s federal and state returns, if available
     
  • Proof of bank account routing and account numbers for direct deposit such as a blank check
     
  • To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms
     
  • Total paid for daycare provider and the daycare provider's tax identifying number such as their Social Security number or business Employer Identification Number
Page Last Reviewed or Updated: 25-Mar-2014

The Free Tax Preparation Sites

Free tax preparation sites Index A Alimony paid, Alimony paid. Free tax preparation sites Alimony received, Alimony received. Free tax preparation sites Annulment, Divorce or separation. Free tax preparation sites Assistance (see Tax help) B Basis of property, death of spouse, Death of spouse. Free tax preparation sites Business expenses, Business and investment expenses. Free tax preparation sites C Child tax credit, Child tax credit. Free tax preparation sites Civil service annuities, Civil service retirement. Free tax preparation sites Community income defined, Community or Separate Property and Income Community income, special rules, Certain community income not treated as community income by one spouse. Free tax preparation sites Community property defined, Community or Separate Property and Income Community property laws disregarded, Community Property Laws Disregarded Credits Child tax credit, Credits, Taxes, and Payments Earned income credit, Earned income credit. Free tax preparation sites CSRS annuities, Civil service retirement. Free tax preparation sites D Death of spouse, basis of property, Death of spouse. Free tax preparation sites Deductions Alimony paid, Deductions Business expenses, Deductions Investment expenses, Deductions IRA deduction, Deductions Personal expenses, Deductions Dependents, Exemptions Dividends, Dividends, interest, and rents. Free tax preparation sites Divorce, Divorce or separation. Free tax preparation sites Domestic partners, Registered domestic partners. Free tax preparation sites Domicile, Domicile E Earned income credit, Earned income credit. Free tax preparation sites End of the marital community, End of the Community Equitable relief, Equitable relief. Free tax preparation sites ESA withdrawals, Withdrawals from individual retirement arrangements (IRAs) and Coverdell Education Savings Accounts (ESAs). Free tax preparation sites Estimated tax payments, Estimated tax payments. Free tax preparation sites Exempt income, Tax-exempt income. Free tax preparation sites Exemptions Dependent, Exemptions Personal, Exemptions Extensions, Extension of time to file. Free tax preparation sites F FERS annuities, Civil service retirement. Free tax preparation sites Form 8958, Community or Separate Property and Income, Identifying Income, Deductions, and Credits, Dividends, interest, and rents. Free tax preparation sites , Separate Return Preparation Free tax services, Free help with your tax return. Free tax preparation sites G Gains and losses, Gains and losses. Free tax preparation sites H Help (see Tax help) I Income Alimony received, Income Civil service annuities, Income Dividends, Income Gains and losses, Income Interest, Income IRA distributions, Income Lump-sum distributions, Income Military retirement pay, Income Partnership income, Income Pensions, Income Rents, Income Separate income, Income from separate property. Free tax preparation sites Tax-exempt income, Income Wages, earnings, and profits, Income Innocent spouse relief, Relief from liability arising from community property law. Free tax preparation sites , Equitable relief. Free tax preparation sites Interest, Dividends, interest, and rents. Free tax preparation sites Investment expenses, Business and investment expenses. Free tax preparation sites IRA deduction, IRA deduction. Free tax preparation sites IRA distributions, Withdrawals from individual retirement arrangements (IRAs) and Coverdell Education Savings Accounts (ESAs). Free tax preparation sites J Joint return vs. Free tax preparation sites separate returns, Joint Return Versus Separate Returns L Lump-sum distributions, Lump-sum distributions. Free tax preparation sites M Military retirement pay, Military retirement pay. Free tax preparation sites N Nonresident alien spouse, Nonresident alien spouse. Free tax preparation sites O Overpayments, Overpayments. Free tax preparation sites P Partnership income, Partnership income. Free tax preparation sites Partnerships, self-employment tax, Partnerships. Free tax preparation sites Payments Estimated tax payments, Estimated tax payments. Free tax preparation sites Federal income tax withheld, Federal income tax withheld. Free tax preparation sites Pensions, Pensions. Free tax preparation sites Personal expenses, Personal expenses. Free tax preparation sites Publications (see Tax help) R Registered domestic partners, Registered domestic partners. Free tax preparation sites Relief from liability arising from community property law, Relief from liability arising from community property law. Free tax preparation sites Rents, Dividends, interest, and rents. Free tax preparation sites S Self-employment tax Partnership, Self-employment tax. Free tax preparation sites Sole proprietorship, Self-employment tax. Free tax preparation sites Separate income defined, Separate income. Free tax preparation sites Separate property defined, Community or Separate Property and Income Separate property income, Income from separate property. Free tax preparation sites Separate returns Extensions, Extension of time to file. Free tax preparation sites Separate returns vs. Free tax preparation sites joint return, Joint Return Versus Separate Returns Separated spouses, Spouses living apart all year. Free tax preparation sites Separation agreement, Divorce or separation. Free tax preparation sites Sole proprietorship, self-employment tax, Sole proprietorship. Free tax preparation sites Spousal agreements, Spousal agreements. Free tax preparation sites Spouses living apart, Spouses living apart all year. Free tax preparation sites T Tax help, How To Get Tax Help Tax-exempt income, Tax-exempt income. Free tax preparation sites TTY/TDD information, How To Get Tax Help W Wages, earnings, and profits, Wages, earnings, and profits. Free tax preparation sites Withholding tax, Federal income tax withheld. Free tax preparation sites Prev  Up     Home   More Online Publications