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Free tax preperation 23. Free tax preperation   Interest Expense Table of Contents Introduction Useful Items - You may want to see: Home Mortgage InterestAmount Deductible Points Mortgage Insurance Premiums Form 1098, Mortgage Interest Statement Investment InterestInvestment Property Allocation of Interest Expense Limit on Deduction Items You Cannot DeductPersonal Interest Allocation of Interest How To ReportMore than one borrower. Free tax preperation Mortgage proceeds used for business or investment. Free tax preperation Introduction This chapter discusses what interest expenses you can deduct. Free tax preperation Interest is the amount you pay for the use of borrowed money. Free tax preperation The following are types of interest you can deduct as itemized deductions on Schedule A (Form 1040). Free tax preperation Home mortgage interest, including certain points and mortgage insurance premiums. Free tax preperation Investment interest. Free tax preperation This chapter explains these deductions. Free tax preperation It also explains where to deduct other types of interest and lists some types of interest you cannot deduct. Free tax preperation Use Table 23-1 to find out where to get more information on various types of interest, including investment interest. Free tax preperation Useful Items - You may want to see: Publication 936 Home Mortgage Interest Deduction 550 Investment Income and Expenses Home Mortgage Interest Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). Free tax preperation The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. Free tax preperation You can deduct home mortgage interest if all the following conditions are met. Free tax preperation You file Form 1040 and itemize deductions on Schedule A (Form 1040). Free tax preperation The mortgage is a secured debt on a qualified home in which you have an ownership interest. Free tax preperation (Generally, your mortgage is a secured debt if you put your home up as collateral to protect the interest of the lender. Free tax preperation The term “qualified home” means your main home or second home. Free tax preperation For details, see Publication 936. Free tax preperation )  Both you and the lender must intend that the loan be repaid. Free tax preperation Amount Deductible In most cases, you can deduct all of your home mortgage interest. Free tax preperation How much you can deduct depends on the date of the mortgage, the amount of the mortgage, and how you use the mortgage proceeds. Free tax preperation Fully deductible interest. Free tax preperation   If all of your mortgages fit into one or more of the following three categories at all times during the year, you can deduct all of the interest on those mortgages. Free tax preperation (If any one mortgage fits into more than one category, add the debt that fits in each category to your other debt in the same category. Free tax preperation )   The three categories are as follows: Mortgages you took out on or before October 13, 1987 (called grandfathered debt). Free tax preperation Mortgages you took out after October 13, 1987, to buy, build, or improve your home (called home acquisition debt), but only if throughout 2013 these mortgages plus any grandfathered debt totaled $1 million or less ($500,000 or less if married filing separately). Free tax preperation Mortgages you took out after October 13, 1987, other than to buy, build, or improve your home (called home equity debt), but only if throughout 2013 these mortgages totaled $100,000 or less ($50,000 or less if married filing separately) and totaled no more than the fair market value of your home reduced by (1) and (2). Free tax preperation The dollar limits for the second and third categories apply to the combined mortgages on your main home and second home. Free tax preperation   See Part II of Publication 936 for more detailed definitions of grandfathered, home acquisition, and home equity debt. Free tax preperation    You can use Figure 23-A to check whether your home mortgage interest is fully deductible. Free tax preperation Figure 23-A. Free tax preperation Is My Home Mortgage Interest Fully Deductible? Please click here for the text description of the image. Free tax preperation Figure 23-A. Free tax preperation Is My Interest Fully Deductible? Limits on deduction. Free tax preperation   You cannot fully deduct interest on a mortgage that does not fit into any of the three categories listed earlier. Free tax preperation If this applies to you, see Part II of Publication 936 to figure the amount of interest you can deduct. Free tax preperation Special Situations This section describes certain items that can be included as home mortgage interest and others that cannot. Free tax preperation It also describes certain special situations that may affect your deduction. Free tax preperation Late payment charge on mortgage payment. Free tax preperation   You can deduct as home mortgage interest a late payment charge if it was not for a specific service performed in connection with your mortgage loan. Free tax preperation Mortgage prepayment penalty. Free tax preperation   If you pay off your home mortgage early, you may have to pay a penalty. Free tax preperation You can deduct that penalty as home mortgage interest provided the penalty is not for a specific service performed or cost incurred in connection with your mortgage loan. Free tax preperation Sale of home. Free tax preperation   If you sell your home, you can deduct your home mortgage interest (subject to any limits that apply) paid up to, but not including, the date of sale. Free tax preperation Example. Free tax preperation John and Peggy Harris sold their home on May 7. Free tax preperation Through April 30, they made home mortgage interest payments of $1,220. Free tax preperation The settlement sheet for the sale of the home showed $50 interest for the 6-day period in May up to, but not including, the date of sale. Free tax preperation Their mortgage interest deduction is $1,270 ($1,220 + $50). Free tax preperation Prepaid interest. Free tax preperation   If you pay interest in advance for a period that goes beyond the end of the tax year, you must spread this interest over the tax years to which it applies. Free tax preperation You can deduct in each year only the interest that qualifies as home mortgage interest for that year. Free tax preperation However, there is an exception that applies to points, discussed later. Free tax preperation Mortgage interest credit. Free tax preperation   You may be able to claim a mortgage interest credit if you were issued a mortgage credit certificate (MCC) by a state or local government. Free tax preperation Figure the credit on Form 8396, Mortgage Interest Credit. Free tax preperation If you take this credit, you must reduce your mortgage interest deduction by the amount of the credit. Free tax preperation   For more information on the credit, see chapter 37. Free tax preperation Ministers' and military housing allowance. Free tax preperation   If you are a minister or a member of the uniformed services and receive a housing allowance that is not taxable, you can still deduct your home mortgage interest. Free tax preperation Hardest Hit Fund and Emergency Homeowners' Loan Programs. Free tax preperation   You can use a special method to compute your deduction for mortgage interest and real estate taxes on your main home if you meet the following two conditions. Free tax preperation You received assistance under: A State Housing Finance Agency (State HFA) Hardest Hit Fund program in which program payments could be used to pay mortgage interest, or An Emergency Homeowners' Loan Program administered by the Department of Housing and Urban Development (HUD) or a state. Free tax preperation You meet the rules to deduct all of the mortgage interest on your loan and all of the real estate taxes on your main home. Free tax preperation If you meet these tests, then you can deduct all of the payments you actually made during the year to your mortgage servicer, the State HFA, or HUD on the home mortgage (including the amount shown on box 3 of Form 1098-MA, Mortgage Assistance Payments), but not more than the sum of the amounts shown on Form 1098, Mortgage Interest Statement, in box 1 (mortgage interest received from payer(s) / borrower(s)), box 4 (mortgage insurance premiums) and box 5 (real property taxes). Free tax preperation However, you are not required to use this special method to compute your deduction for mortgage interest and real estate taxes on your main home. Free tax preperation Mortgage assistance payments under section 235 of the National Housing Act. Free tax preperation   If you qualify for mortgage assistance payments for lower-income families under section 235 of the National Housing Act, part or all of the interest on your mortgage may be paid for you. Free tax preperation You cannot deduct the interest that is paid for you. Free tax preperation No other effect on taxes. Free tax preperation   Do not include these mortgage assistance payments in your income. Free tax preperation Also, do not use these payments to reduce other deductions, such as real estate taxes. Free tax preperation Divorced or separated individuals. Free tax preperation   If a divorce or separation agreement requires you or your spouse or former spouse to pay home mortgage interest on a home owned by both of you, the payment of interest may be alimony. Free tax preperation See the discussion of Payments for jointly-owned home in chapter 18. Free tax preperation Redeemable ground rents. Free tax preperation   If you make annual or periodic rental payments on a redeemable ground rent, you can deduct them as mortgage interest. Free tax preperation   Payments made to end the lease and to buy the lessor's entire interest in the land are not deductible as mortgage interest. Free tax preperation For more information, see Publication 936. Free tax preperation Nonredeemable ground rents. Free tax preperation   Payments on a nonredeemable ground rent are not mortgage interest. Free tax preperation You can deduct them as rent if they are a business expense or if they are for rental property. Free tax preperation Reverse mortgages. Free tax preperation   A reverse mortgage is a loan where the lender pays you (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home. Free tax preperation With a reverse mortgage, you retain title to your home. Free tax preperation Depending on the plan, your reverse mortgage becomes due with interest when you move, sell your home, reach the end of a pre-selected loan period, or die. Free tax preperation Because reverse mortgages are considered loan advances and not income, the amount you receive is not taxable. Free tax preperation Any interest (including original issue discount) accrued on a reverse mortgage is not deductible until the loan is paid in full. Free tax preperation Your deduction may be limited because a reverse mortgage loan generally is subject to the limit on Home Equity Debt discussed in Publication 936. Free tax preperation Rental payments. Free tax preperation   If you live in a house before final settlement on the purchase, any payments you make for that period are rent and not interest. Free tax preperation This is true even if the settlement papers call them interest. Free tax preperation You cannot deduct these payments as home mortgage interest. Free tax preperation Mortgage proceeds invested in tax-exempt securities. Free tax preperation   You cannot deduct the home mortgage interest on grandfathered debt or home equity debt if you used the proceeds of the mortgage to buy securities or certificates that produce tax-free income. Free tax preperation “Grandfathered debt” and “home equity debt” are defined earlier under Amount Deductible. Free tax preperation Refunds of interest. Free tax preperation   If you receive a refund of interest in the same tax year you paid it, you must reduce your interest expense by the amount refunded to you. Free tax preperation If you receive a refund of interest you deducted in an earlier year, you generally must include the refund in income in the year you receive it. Free tax preperation However, you need to include it only up to the amount of the deduction that reduced your tax in the earlier year. Free tax preperation This is true whether the interest overcharge was refunded to you or was used to reduce the outstanding principal on your mortgage. Free tax preperation    If you received a refund of interest you overpaid in an earlier year, you generally will receive a Form 1098, Mortgage Interest Statement, showing the refund in box 3. Free tax preperation For information about Form 1098, see Form 1098, Mortgage Interest Statement , later. Free tax preperation   For more information on how to treat refunds of interest deducted in earlier years, see Recoveries in chapter 12. Free tax preperation Points The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Free tax preperation Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points. Free tax preperation A borrower is treated as paying any points that a home seller pays for the borrower's mortgage. Free tax preperation See Points paid by the seller , later. Free tax preperation General Rule You generally cannot deduct the full amount of points in the year paid. Free tax preperation Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage. Free tax preperation See Deduction Allowed Ratably , next. Free tax preperation For exceptions to the general rule, see Deduction Allowed in Year Paid , later. Free tax preperation Deduction Allowed Ratably If you do not meet the tests listed under Deduction Allowed in Year Paid , later, the loan is not a home improvement loan, or you choose not to deduct your points in full in the year paid, you can deduct the points ratably (equally) over the life of the loan if you meet all the following tests. Free tax preperation You use the cash method of accounting. Free tax preperation This means you report income in the year you receive it and deduct expenses in the year you pay them. Free tax preperation Most individuals use this method. Free tax preperation Your loan is secured by a home. Free tax preperation (The home does not need to be your main home. Free tax preperation ) Your loan period is not more than 30 years. Free tax preperation If your loan period is more than 10 years, the terms of your loan are the same as other loans offered in your area for the same or longer period. Free tax preperation Either your loan amount is $250,000 or less, or the number of points is not more than: 4, if your loan period is 15 years or less, or 6, if your loan period is more than 15 years. Free tax preperation Deduction Allowed in Year Paid You can fully deduct points in the year paid if you meet all the following tests. Free tax preperation (You can use Figure 23-B as a quick guide to see whether your points are fully deductible in the year paid. Free tax preperation ) Your loan is secured by your main home. Free tax preperation (Your main home is the one you ordinarily live in most of the time. Free tax preperation ) Paying points is an established business practice in the area where the loan was made. Free tax preperation The points paid were not more than the points generally charged in that area. Free tax preperation You use the cash method of accounting. Free tax preperation This means you report income in the year you receive it and deduct expenses in the year you pay them. Free tax preperation (If you want more information about this method, see Accounting Methods in chapter 1. Free tax preperation ) The points were not paid in place of amounts that ordinarily are stated separately on the settlement statement, such as appraisal fees, inspection fees, title fees, attorney fees, and property taxes. Free tax preperation The funds you provided at or before closing, plus any points the seller paid, were at least as much as the points charged. Free tax preperation The funds you provided are not required to have been applied to the points. Free tax preperation They can include a down payment, an escrow deposit, earnest money, and other funds you paid at or before closing for any purpose. Free tax preperation You cannot have borrowed these funds from your lender or mortgage broker. Free tax preperation You use your loan to buy or build your main home. Free tax preperation The points were computed as a percentage of the principal amount of the mortgage. Free tax preperation The amount is clearly shown on the settlement statement (such as the Settlement Statement, Form HUD-1) as points charged for the mortgage. Free tax preperation The points may be shown as paid from either your funds or the seller's. Free tax preperation Figure 23-B. Free tax preperation Are My Points Fully Deductible This Year? Please click here for the text description of the image. Free tax preperation Figure 23-B. Free tax preperation Are My Points Fully Deductible This Year? Note. Free tax preperation If you meet all of these tests, you can choose to either fully deduct the points in the year paid, or deduct them over the life of the loan. Free tax preperation Home improvement loan. Free tax preperation   You can also fully deduct in the year paid points paid on a loan to improve your main home, if tests (1) through (6) are met. Free tax preperation Second home. Free tax preperation You cannot fully deduct in the year paid points you pay on loans secured by your second home. Free tax preperation You can deduct these points only over the life of the loan. Free tax preperation Refinancing. Free tax preperation   Generally, points you pay to refinance a mortgage are not deductible in full in the year you pay them. Free tax preperation This is true even if the new mortgage is secured by your main home. Free tax preperation   However, if you use part of the refinanced mortgage proceeds to improve your main home and you meet the first 6 tests listed under Deduction Allowed in Year Paid , earlier, you can fully deduct the part of the points related to the improvement in the year you paid them with your own funds. Free tax preperation You can deduct the rest of the points over the life of the loan. Free tax preperation Example 1. Free tax preperation In 1998, Bill Fields got a mortgage to buy a home. Free tax preperation In 2013, Bill refinanced that mortgage with a 15-year $100,000 mortgage loan. Free tax preperation The mortgage is secured by his home. Free tax preperation To get the new loan, he had to pay three points ($3,000). Free tax preperation Two points ($2,000) were for prepaid interest, and one point ($1,000) was charged for services, in place of amounts that ordinarily are stated separately on the settlement statement. Free tax preperation Bill paid the points out of his private funds, rather than out of the proceeds of the new loan. Free tax preperation The payment of points is an established practice in the area, and the points charged are not more than the amount generally charged there. Free tax preperation Bill's first payment on the new loan was due July 1. Free tax preperation He made six payments on the loan in 2013 and is a cash basis taxpayer. Free tax preperation Bill used the funds from the new mortgage to repay his existing mortgage. Free tax preperation Although the new mortgage loan was for Bill's continued ownership of his main home, it was not for the purchase or improvement of that home. Free tax preperation He cannot deduct all of the points in 2013. Free tax preperation He can deduct two points ($2,000) ratably over the life of the loan. Free tax preperation He deducts $67 [($2,000 ÷ 180 months) × 6 payments] of the points in 2013. Free tax preperation The other point ($1,000) was a fee for services and is not deductible. Free tax preperation Example 2. Free tax preperation The facts are the same as in Example 1, except that Bill used $25,000 of the loan proceeds to improve his home and $75,000 to repay his existing mortgage. Free tax preperation Bill deducts 25% ($25,000 ÷ $100,000) of the points ($2,000) in 2013. Free tax preperation His deduction is $500 ($2,000 × 25%). Free tax preperation Bill also deducts the ratable part of the remaining $1,500 ($2,000 − $500) that must be spread over the life of the loan. Free tax preperation This is $50 [($1,500 ÷ 180 months) × 6 payments] in 2013. Free tax preperation The total amount Bill deducts in 2013 is $550 ($500 + $50). Free tax preperation Special Situations This section describes certain special situations that may affect your deduction of points. Free tax preperation Original issue discount. Free tax preperation   If you do not qualify to either deduct the points in the year paid or deduct them ratably over the life of the loan, or if you choose not to use either of these methods, the points reduce the issue price of the loan. Free tax preperation This reduction results in original issue discount, which is discussed in chapter 4 of Publication 535. Free tax preperation Amounts charged for services. Free tax preperation   Amounts charged by the lender for specific services connected to the loan are not interest. Free tax preperation Examples of these charges are: Appraisal fees, Notary fees, and Preparation costs for the mortgage note or deed of trust. Free tax preperation You cannot deduct these amounts as points either in the year paid or over the life of the mortgage. Free tax preperation Points paid by the seller. Free tax preperation   The term “points” includes loan placement fees that the seller pays to the lender to arrange financing for the buyer. Free tax preperation Treatment by seller. Free tax preperation   The seller cannot deduct these fees as interest. Free tax preperation But they are a selling expense that reduces the amount realized by the seller. Free tax preperation See chapter 15 for information on selling your home. Free tax preperation Treatment by buyer. Free tax preperation    The buyer reduces the basis of the home by the amount of the seller-paid points and treats the points as if he or she had paid them. Free tax preperation If all the tests under Deduction Allowed in Year Paid , earlier, are met, the buyer can deduct the points in the year paid. Free tax preperation If any of those tests are not met, the buyer deducts the points over the life of the loan. Free tax preperation   For information about basis, see chapter 13. Free tax preperation Funds provided are less than points. Free tax preperation   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the funds you provided were less than the points charged to you (test (6)), you can deduct the points in the year paid, up to the amount of funds you provided. Free tax preperation In addition, you can deduct any points paid by the seller. Free tax preperation Example 1. Free tax preperation When you took out a $100,000 mortgage loan to buy your home in December, you were charged one point ($1,000). Free tax preperation You meet all the tests for deducting points in the year paid, except the only funds you provided were a $750 down payment. Free tax preperation Of the $1,000 charged for points, you can deduct $750 in the year paid. Free tax preperation You spread the remaining $250 over the life of the mortgage. Free tax preperation Example 2. Free tax preperation The facts are the same as in Example 1, except that the person who sold you your home also paid one point ($1,000) to help you get your mortgage. Free tax preperation In the year paid, you can deduct $1,750 ($750 of the amount you were charged plus the $1,000 paid by the seller). Free tax preperation You spread the remaining $250 over the life of the mortgage. Free tax preperation You must reduce the basis of your home by the $1,000 paid by the seller. Free tax preperation Excess points. Free tax preperation   If you meet all the tests in Deduction Allowed in Year Paid , earlier, except that the points paid were more than generally paid in your area (test (3)), you deduct in the year paid only the points that are generally charged. Free tax preperation You must spread any additional points over the life of the mortgage. Free tax preperation Mortgage ending early. Free tax preperation   If you spread your deduction for points over the life of the mortgage, you can deduct any remaining balance in the year the mortgage ends. Free tax preperation However, if you refinance the mortgage with the same lender, you cannot deduct any remaining balance of spread points. Free tax preperation Instead, deduct the remaining balance over the term of the new loan. Free tax preperation    A mortgage may end early due to a prepayment, refinancing, foreclosure, or similar event. Free tax preperation Example. Free tax preperation Dan paid $3,000 in points in 2002 that he had to spread out over the 15-year life of the mortgage. Free tax preperation He deducts $200 points per year. Free tax preperation Through 2012, Dan has deducted $2,200 of the points. Free tax preperation Dan prepaid his mortgage in full in 2013. Free tax preperation He can deduct the remaining $800 of points in 2013. Free tax preperation Limits on deduction. Free tax preperation   You cannot fully deduct points paid on a mortgage unless the mortgage fits into one of the categories listed earlier under Fully deductible interest . Free tax preperation See Publication 936 for details. Free tax preperation Mortgage Insurance Premiums You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. Free tax preperation The insurance must be in connection with home acquisition debt and the insurance contract must have been issued after 2006. Free tax preperation Qualified mortgage insurance. Free tax preperation   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006). Free tax preperation   Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. Free tax preperation If provided by the Rural Housing Service, it is commonly known as a guarantee fee. Free tax preperation These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Free tax preperation Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098. Free tax preperation Special rules for prepaid mortgage insurance. Free tax preperation   Generally, if you paid premiums for qualified mortgage insurance that are allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. Free tax preperation You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. Free tax preperation No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. Free tax preperation This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service. Free tax preperation See the Example below. Free tax preperation Example. Free tax preperation Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Free tax preperation Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Free tax preperation Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Free tax preperation Ryan's adjusted gross income (AGI) for 2012 is $76,000. Free tax preperation Ryan can deduct $880 ($9,240 ÷ 84 × 8 months) for qualified mortgage insurance premiums in 2012. Free tax preperation For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 × 12 months) if his AGI is $100,000 or less. Free tax preperation In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months). Free tax preperation Limit on deduction. Free tax preperation   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. Free tax preperation See Line 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. Free tax preperation If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums. Free tax preperation Form 1098, Mortgage Interest Statement If you paid $600 or more of mortgage interest (including certain points and mortgage insurance premiums) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement from the mortgage holder. Free tax preperation You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. Free tax preperation A governmental unit is a person for purposes of furnishing the statement. Free tax preperation The statement for each year should be sent to you by January 31 of the following year. Free tax preperation A copy of this form will also be sent to the IRS. Free tax preperation The statement will show the total interest you paid during the year, any mortgage insurance premiums you paid, and if you purchased a main home during the year, it also will show the deductible points paid during the year, including seller-paid points. Free tax preperation However, it should not show any interest that was paid for you by a government agency. Free tax preperation As a general rule, Form 1098 will include only points that you can fully deduct in the year paid. Free tax preperation However, certain points not included on Form 1098 also may be deductible, either in the year paid or over the life of the loan. Free tax preperation See Points , earlier, to determine whether you can deduct points not shown on Form 1098. Free tax preperation Prepaid interest on Form 1098. Free tax preperation   If you prepaid interest in 2013 that accrued in full by January 15, 2014, this prepaid interest may be included in box 1 of Form 1098. Free tax preperation However, you cannot deduct the prepaid amount for January 2014 in 2013. Free tax preperation (See Prepaid interest , earlier. Free tax preperation ) You will have to figure the interest that accrued for 2014 and subtract it from the amount in box 1. Free tax preperation You will include the interest for January 2014 with the other interest you pay for 2014. Free tax preperation See How To Report , later. Free tax preperation Refunded interest. Free tax preperation   If you received a refund of mortgage interest you overpaid in an earlier year, you generally will receive a Form 1098 showing the refund in box 3. Free tax preperation See Refunds of interest , earlier. Free tax preperation Mortgage insurance premiums. Free tax preperation   The amount of mortgage insurance premiums you paid during 2013 may be shown in box 4 of Form 1098. Free tax preperation See Mortgage Insurance Premiums, earlier. Free tax preperation Investment Interest This section discusses interest expenses you may be able to deduct as an investor. Free tax preperation If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Free tax preperation You can deduct investment interest subject to the limit discussed later. Free tax preperation However, you cannot deduct interest you incurred to produce tax-exempt income. Free tax preperation Nor can you deduct interest expenses on straddles. Free tax preperation Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Free tax preperation Investment Property Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Free tax preperation It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Free tax preperation Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Free tax preperation Partners, shareholders, and beneficiaries. Free tax preperation   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Free tax preperation Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Free tax preperation Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Free tax preperation The allocation is not affected by the use of property that secures the debt. Free tax preperation Limit on Deduction Generally, your deduction for investment interest expense is limited to the amount of your net investment income. Free tax preperation You can carry over the amount of investment interest that you could not deduct because of this limit to the next tax year. Free tax preperation The interest carried over is treated as investment interest paid or accrued in that next year. Free tax preperation You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Free tax preperation Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Free tax preperation Investment income. Free tax preperation    This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Free tax preperation Investment income does not include Alaska Permanent Fund dividends. Free tax preperation It also does not include qualified dividends or net capital gain unless you choose to include them. Free tax preperation Choosing to include qualified dividends. Free tax preperation   Investment income generally does not include qualified dividends, discussed in chapter 8. Free tax preperation However, you can choose to include all or part of your qualified dividends in investment income. Free tax preperation   You make this choice by completing Form 4952, line 4g, according to its instructions. Free tax preperation   If you choose to include any amount of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Free tax preperation Choosing to include net capital gain. Free tax preperation   Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Free tax preperation However, you can choose to include all or part of your net capital gain in investment income. Free tax preperation    You make this choice by completing Form 4952, line 4g, according to its instructions. Free tax preperation   If you choose to include any amount of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Free tax preperation    Before making either choice, consider the overall effect on your tax liability. Free tax preperation Compare your tax if you make one or both of these choices with your tax if you do not. Free tax preperation Investment income of child reported on parent's return. Free tax preperation    Investment income includes the part of your child's interest and dividend income that you choose to report on your return. Free tax preperation If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814, Parents' Election To Report Child's Interest and Dividends. Free tax preperation Child's qualified dividends. Free tax preperation   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Free tax preperation However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Free tax preperation   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Free tax preperation Child's Alaska Permanent Fund dividends. Free tax preperation   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Free tax preperation To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Free tax preperation Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Free tax preperation Subtract the result from the amount on Form 8814, line 12. Free tax preperation Child's capital gain distributions. Free tax preperation    If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D, line 13, or Form 1040, line 13) generally does not count as investment income. Free tax preperation However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Free tax preperation   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Free tax preperation Investment expenses. Free tax preperation   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Free tax preperation Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Free tax preperation Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A, line 27. Free tax preperation Losses from passive activities. Free tax preperation   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Free tax preperation See Publication 925, Passive Activity and At-Risk Rules, for information about passive activities. Free tax preperation Form 4952 Use Form 4952, Investment Interest Expense Deduction, to figure your deduction for investment interest. Free tax preperation Exception to use of Form 4952. Free tax preperation   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Free tax preperation Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Free tax preperation You do not have any other deductible investment expenses. Free tax preperation You have no carryover of investment interest expense from 2012. Free tax preperation If you meet all of these tests, you can deduct all of your investment interest. Free tax preperation More Information For more information on investment interest, see Interest Expenses in chapter 3 of Publication 550. Free tax preperation Items You Cannot Deduct Some interest payments are not deductible. Free tax preperation Certain expenses similar to interest also are not deductible. Free tax preperation Nondeductible expenses include the following items. Free tax preperation Personal interest (discussed later). Free tax preperation Service charges (however, see Other Expenses (Line 23) in chapter 28). Free tax preperation Annual fees for credit cards. Free tax preperation Loan fees. Free tax preperation Credit investigation fees. Free tax preperation Interest to purchase or carry tax-exempt securities. Free tax preperation Penalties. Free tax preperation   You cannot deduct fines and penalties paid to a government for violations of law, regardless of their nature. Free tax preperation Personal Interest Personal interest is not deductible. Free tax preperation Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. Free tax preperation It includes the following items. Free tax preperation Interest on car loans (unless you use the car for business). Free tax preperation Interest on federal, state, or local income tax. Free tax preperation Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses. Free tax preperation Late payment charges by a public utility. Free tax preperation You may be able to deduct interest you pay on a qualified student loan. Free tax preperation For details, see Publication 970, Tax Benefits for Education. Free tax preperation Allocation of Interest If you use the proceeds of a loan for more than one purpose (for example, personal and business), you must allocate the interest on the loan to each use. Free tax preperation However, you do not have to allocate home mortgage interest if it is fully deductible, regardless of how the funds are used. Free tax preperation You allocate interest (other than fully deductible home mortgage interest) on a loan in the same way as the loan itself is allocated. Free tax preperation You do this by tracing disbursements of the debt proceeds to specific uses. Free tax preperation For details on how to do this, see chapter 4 of Publication 535. Free tax preperation How To Report You must file Form 1040 to deduct any home mortgage interest expense on your tax return. Free tax preperation Where you deduct your interest expense generally depends on how you use the loan proceeds. Free tax preperation See Table 23-1 for a summary of where to deduct your interest expense. Free tax preperation Home mortgage interest and points. Free tax preperation   Deduct the home mortgage interest and points reported to you on Form 1098 on Schedule A (Form 1040), line 10. Free tax preperation If you paid more deductible interest to the financial institution than the amount shown on Form 1098, show the larger deductible amount on line 10. Free tax preperation Attach a statement explaining the difference and print “See attached” next to line 10. Free tax preperation    Deduct home mortgage interest that was not reported to you on Form 1098 on Schedule A (Form 1040), line 11. Free tax preperation If you paid home mortgage interest to the person from whom you bought your home, show that person's name, address, and taxpayer identification number (TIN) on the dotted lines next to line 11. Free tax preperation The seller must give you this number and you must give the seller your TIN. Free tax preperation A Form W-9, Request for Taxpayer Identification Number and Certification, can be used for this purpose. Free tax preperation Failure to meet any of these requirements may result in a $50 penalty for each failure. Free tax preperation The TIN can be either a social security number, an individual taxpayer identification number (issued by the Internal Revenue Service), or an employer identification number. Free tax preperation See Social Security Number (SSN) in chapter 1 for more information about TINs. Free tax preperation    If you can take a deduction for points that were not reported to you on Form 1098, deduct those points on Schedule A (Form 1040), line 12. Free tax preperation   Deduct mortgage insurance premiums on Schedule A (Form 1040), line 13. Free tax preperation More than one borrower. Free tax preperation   If you and at least one other person (other than your spouse if you file a joint return) were liable for and paid interest on a mortgage that was for your home, and the other person received a Form 1098 showing the interest that was paid during the year, attach a statement to your return explaining this. Free tax preperation Show how much of the interest each of you paid, and give the name and address of the person who received the form. Free tax preperation Deduct your share of the interest on Schedule A (Form 1040), line 11, and print “See attached” next to the line. Free tax preperation Also, deduct your share of any qualified mortgage insurance premiums on Schedule A (Form 1040), line 13. Free tax preperation   Similarly, if you are the payer of record on a mortgage on which there are other borrowers entitled to a deduction for the interest shown on the Form 1098 you received, deduct only your share of the interest on Schedule A (Form 1040), line 10. Free tax preperation You should let each of the other borrowers know what his or her share is. Free tax preperation Mortgage proceeds used for business or investment. Free tax preperation    If your home mortgage interest deduction is limited, but all or part of the mortgage proceeds were used for business, investment, or other deductible activities, see Table 23-1. Free tax preperation It shows where to deduct the part of your excess interest that is for those activities. Free tax preperation Investment interest. Free tax preperation    Deduct investment interest, subject to certain limits discussed in Publication 550, on Schedule A (Form 1040), line 14. Free tax preperation Amortization of bond premium. Free tax preperation   There are various ways to treat the premium you pay to buy taxable bonds. Free tax preperation See Bond Premium Amortization in Publication 550. Free tax preperation Income-producing rental or royalty interest. Free tax preperation   Deduct interest on a loan for income-producing rental or royalty property that is not used in your business in Part I of Schedule E (Form 1040). Free tax preperation Example. Free tax preperation You rent out part of your home and borrow money to make repairs. Free tax preperation You can deduct only the interest payment for the rented part in Part I of Schedule E (Form 1040). Free tax preperation Deduct the rest of the interest payment on Schedule A (Form 1040) if it is deductible home mortgage interest. Free tax preperation Table 23-1. Free tax preperation Where To Deduct Your Interest Expense IF you have . Free tax preperation . Free tax preperation . Free tax preperation THEN deduct it on . Free tax preperation . Free tax preperation . Free tax preperation AND for more information go to . Free tax preperation . Free tax preperation . Free tax preperation deductible student loan interest Form 1040, line 33, or Form 1040A, line 18 Publication 970. Free tax preperation deductible home mortgage interest and points reported on Form 1098 Schedule A (Form 1040), line 10 Publication 936. Free tax preperation deductible home mortgage interest not reported on Form 1098 Schedule A (Form 1040), line 11 Publication 936. Free tax preperation deductible points not reported on Form 1098 Schedule A (Form 1040), line 12 Publication 936. Free tax preperation deductible mortgage insurance premiums Schedule A (Form 1040), line 13 Publication 936. Free tax preperation deductible investment interest (other than incurred to produce rents or royalties) Schedule A (Form 1040), line 14 Publication 550. Free tax preperation deductible business interest (non-farm) Schedule C or C-EZ (Form 1040) Publication 535. Free tax preperation deductible farm business interest Schedule F (Form 1040) Publications 225 and 535. Free tax preperation deductible interest incurred to produce rents or royalties Schedule E (Form 1040) Publications 527 and 535. Free tax preperation personal interest not deductible. Free tax preperation Prev  Up  Next   Home   More Online Publications
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SOI Tax Stats - Individual Tax Statistics

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Here you will find links to various studies relating to the individual taxpayer.

 

Individual Income Tax Numerous studies which provide statistics on income, deductions, tax, and credits reported on individual Form 1040 income tax returns and associated schedules are available in this area. Find statistics on high income tax returns, income tax rates, nonfarm sole proprietorships, data by geographic areas, and more...

Estate Tax

Estate Tax Statistics OneSheet

This annual study includes information on gross estate and its composition, deductions, and tax; and information on the age, sex, and marital status of decedents. Basic estate tax return data by year in which returns are filed are produced each year. Also included are data on nonresident aliens who had more than $60,000 of assets in the United States. These data come from taxpayers filing Form 706.
International Numerous studies which provide statistics on the individual taxpayer in the international context. Find statistics on foreign recipients of U.S. income, foreign trusts, individual foreign earned income and the foreign tax credit, international boycotts and nonresident alien estate tax returns. These data come from taxpayers filing Forms 706-NA, 1042-S, 1116, 2555, 3520, 5713 and more.
Personal Wealth This periodic study provides estimates of personal wealth of top wealth holders that are generated from estate tax return data using the "estate multiplier" technique, in conjunction with both filing-year and year-of-death estate databases.

Income from Trusts and Estates

Snapshot of Estate and Trust Income Tax Statistics

The U.S. Income Tax Return for Estates and Trusts (Form 1041) is used to report the income, deductions, gains, and losses of estates and trusts, as well as distributions to beneficiaries and income tax liability. Entities are classified into types based on their purpose.  

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Page Last Reviewed or Updated: 24-Mar-2014

The Free Tax Preperation

Free tax preperation Publication 972 - Main Content Table of Contents Child Tax CreditQualifying Child Limits on the Credit Claiming the Credit Earned Income Additional Child Tax Credit How To Get Tax HelpLow Income Taxpayer Clinics Child Tax Credit This credit is for people who have a qualifying child as defined later. Free tax preperation It is in addition to the credit for child and dependent care expenses (on Form 1040, line 48; Form 1040A, line 29; or Form 1040NR, line 46) and the earned income credit (on Form 1040, line 64a; or Form 1040A, line 38a). Free tax preperation The maximum amount you can claim for the credit is $1,000 for each qualifying child. Free tax preperation 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, 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 preperation S. Free tax preperation citizen, a U. Free tax preperation S. Free tax preperation national, or a U. Free tax preperation S. Free tax preperation resident alien. Free tax preperation For more information, see Publication 519, U. Free tax preperation S. Free tax preperation Tax Guide for Aliens. Free tax preperation If the child was adopted, see Adopted child , later. Free tax preperation For each qualifying child, you must either check the box on Form 1040 or Form 1040A, line 6c, column (4); or Form 1040NR, line 7c, column (4). Free tax preperation Example. Free tax preperation Your 10-year-old nephew lives in Mexico and qualifies as your dependent. Free tax preperation Because he is not a U. Free tax preperation S. Free tax preperation citizen, U. Free tax preperation S. Free tax preperation national, or U. Free tax preperation S. Free tax preperation resident alien, he is not a qualifying child for the child tax credit. Free tax preperation Filers who have certain child dependents with an IRS Individual Taxpayer Identification Number (ITIN). Free tax preperation   If you are claiming a child tax credit or additional child tax credit for a child identified on your tax return with an ITIN, you must complete Part I of Schedule 8812 (Form 1040A or 1040). Free tax preperation   Although a child may be your dependent, you may only claim a child tax credit or additional child tax credit for a dependent who is a citizen, national, or resident of the United States. Free tax preperation To be treated as a resident of the United States, a child generally will need to meet the requirements of the substantial presence test. Free tax preperation For more information about the substantial presence test, see Publication 519, U. Free tax preperation S. Free tax preperation Tax Guide for Aliens. Free tax preperation Adopted child. Free tax preperation   An adopted child is always treated as your own child. Free tax preperation An adopted child includes a child lawfully placed with you for legal adoption. Free tax preperation   If you are a U. Free tax preperation S. Free tax preperation citizen or U. Free tax preperation S. Free tax preperation national and your adopted child lived with you all year as a member of your household in 2013, that child meets condition (7) above to be a qualifying child for the child tax credit. Free tax preperation Exceptions to time lived with you. Free tax preperation    A child is considered to have lived with you for more than half of 2013 if the child was born or died in 2013 and your home was this child's home for more than half the time he or she was alive. Free tax preperation 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 preperation   There are also exceptions for kidnapped children and children of divorced or separated parents. Free tax preperation For details, see the instructions for line 6c in either the Form 1040 or Form 1040A instructions. Free tax preperation Qualifying child of more than one person. Free tax preperation   A special rule applies if your qualifying child is the qualifying child of more than one person. Free tax preperation For details, see the instructions for line 6c in either the Form 1040 or Form 1040A instructions. Free tax preperation Limits on the Credit You must reduce your child tax credit if either (1) or (2) applies. Free tax preperation The amount on Form 1040, line 46; Form 1040A, line 28; or Form 1040NR, line 44, is less than the credit. Free tax preperation If this amount is zero, you cannot take this credit because there is no tax to reduce. Free tax preperation But you may be able to take the additional child tax credit. Free tax preperation See Additional Child Tax Credit, later. Free tax preperation Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. Free tax preperation Married filing jointly – $110,000. Free tax preperation Single, head of household, or qualifying widow(er) – $75,000. Free tax preperation Married filing separately – $55,000. Free tax preperation Modified AGI. Free tax preperation   For purposes of the child tax credit, your modified AGI is your AGI plus the following amounts that may apply to you. Free tax preperation Any amount excluded from income because of the exclusion of income from Puerto Rico. Free tax preperation On the dotted line next to Form 1040, line 38, enter the amount excluded and identify it as “EPRI. Free tax preperation ” Also attach a copy of any Form(s) 499R-2/W-2PR to your return. Free tax preperation Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. Free tax preperation Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. Free tax preperation Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. Free tax preperation   If you do not have any of the above, your modified AGI is the same as your AGI. Free tax preperation AGI. Free tax preperation   Your AGI is the amount on Form 1040, line 38; Form 1040A, line 22; or Form 1040NR, line 37. Free tax preperation Claiming the Credit To claim the child tax credit, you must file Form 1040, Form 1040A, or Form 1040NR. Free tax preperation You cannot claim the child tax credit on Form 1040EZ or Form 1040NR-EZ. Free tax preperation You must provide the name and identification number (usually a social security number) on your tax return for each qualifying child. Free tax preperation Earned Income You will need to figure your earned income using one of the worksheets that appear later in this publication if you are completing the Line 11 Worksheet , later, or Schedule 8812. Free tax preperation Form 1040 or Form 1040NR filers, use the 1040 and 1040NR Filers — Earned Income Worksheet , later, to figure your earned income. Free tax preperation Form 1040A filers, use the 1040A Filers —- Earned Income Worksheet , later. Free tax preperation For this purpose, earned income includes only: Taxable earned income, and Nontaxable combat pay. Free tax preperation Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. Free tax preperation The additional child tax credit may give you a refund even if you do not owe any tax. Free tax preperation How to claim the additional child tax credit. Free tax preperation   To claim the additional child tax credit, follow the steps below. Free tax preperation Make sure you figured the amount, if any, of your child tax credit. Free tax preperation If you answered “Yes” on line 9 or line 10 of the Child Tax Credit Worksheet in the Form 1040, Form 1040A, or Form 1040NR instructions (or on line 13 of the Child Tax Credit Worksheet in this publication), use Parts II through IV of Schedule 8812 to see if you can take the additional child tax credit. Free tax preperation If you have an additional child tax credit on line 13 of Schedule 8812, carry it to Form 1040, line 65; Form 1040A, line 39; or Form 1040NR, line 63. Free tax preperation Child Tax Credit Worksheet This image is too large to be displayed in the current screen. Free tax preperation Please click the link to view the image. Free tax preperation Child tax worksheet - page 1. Free tax preperation Child Tax Credit Worksheet—Continued This image is too large to be displayed in the current screen. Free tax preperation Please click the link to view the image. Free tax preperation Child tax worksheet - page 2. Free tax preperation Line 11 Worksheet This image is too large to be displayed in the current screen. Free tax preperation Please click the link to view the image. Free tax preperation Line 11 worksheet - page 1. Free tax preperation Line 11 Worksheet—Continued This image is too large to be displayed in the current screen. Free tax preperation Please click the link to view the image. Free tax preperation Line 11 worksheet - page 2. Free tax preperation 1040 and 1040NR Filers — Earned Income Worksheet (for line 2 of the Line 11 Worksheet or line 4a of Schedule 8812, Child Tax Credit) Before you begin:    ✓Use this worksheet only if you were sent here from the Line 11 Worksheet earlier in this publication or line  4a of Schedule 8812, Child Tax Credit. Free tax preperation  ✓Disregard community property laws when figuring the amounts to enter on this worksheet. Free tax preperation  ✓If married filing jointly, include your spouse's amounts with yours when completing this worksheet. Free tax preperation     1. Free tax preperation a. Free tax preperation Enter the amount from Form 1040, line 7, or Form 1040NR, line 8 1a. Free tax preperation     b. Free tax preperation Enter the amount of any nontaxable combat pay received. Free tax preperation Also enter this amount on Schedule 8812, line 4b. Free tax preperation This amount should be shown in Form(s) W-2, box 12, with code Q. Free tax preperation 1b. Free tax preperation       Next, if you are filing Schedule C, C-EZ, F, or SE, or you received a Schedule K-1 (Form 1065 or Form 1065-B), go to line 2a. Free tax preperation Otherwise, skip lines 2a through 2e and go to line 3. Free tax preperation     2. Free tax preperation a. Free tax preperation Enter any statutory employee income reported on line 1 of Schedule C or C-EZ 2a. Free tax preperation     b. Free tax preperation Enter any net profit or (loss) from Schedule C, line 31; Schedule C-EZ, line 3; Schedule K-1 (Form 1065), box 14, code A (other than farming); and Schedule K-1 (Form 1065-B), box 9, code J1. Free tax preperation * Reduce any Schedule K-1 amounts as described in the instructions for completing Schedule SE in the Partner's Instructions for Schedule K-1. Free tax preperation Do not include on this line any statutory employee income or any other amounts exempt from self-employment tax. Free tax preperation Options and commodities dealers must add any gain or subtract any loss (in the normal course of dealing in or trading section 1256 contracts) from section 1256 contracts or related property 2b. Free tax preperation     c. Free tax preperation Enter any net farm profit or (loss) from Schedule F, line 34, and from farm partnerships, Schedule K-1 (Form 1065), box 14, code A. Free tax preperation * Reduce any Schedule K-1 amounts as described in the instructions for completing Schedule SE in the Partner's Instructions for Schedule K-1. Free tax preperation Do not include on this line any amounts exempt from self-employment tax 2c. Free tax preperation         d. Free tax preperation If you used the farm optional method to figure net earnings from self-employment, enter the amount from Schedule SE, Section B, line 15. Free tax preperation Otherwise, skip this line and enter on line 2e the amount from line 2c 2d. Free tax preperation         e. Free tax preperation If line 2c is a profit, enter the smaller of line 2c or line 2d. Free tax preperation If line 2c is a (loss), enter the (loss) from line 2c. Free tax preperation 2e. Free tax preperation   3. Free tax preperation Combine lines 1a, 1b, 2a, 2b, and 2e. Free tax preperation If zero or less, stop. Free tax preperation Do not complete the rest of this worksheet. Free tax preperation Instead, enter -0- on line 2 of the Line 11 Worksheet or line 4a of Schedule 8812, whichever applies 3. Free tax preperation   4. Free tax preperation Enter any amount included on line 1a that is:               a. Free tax preperation A scholarship or fellowship grant not reported on Form W-2 4a. Free tax preperation         b. Free tax preperation For work done while an inmate in a penal institution (enter “PRI” and this amount on the dotted line next to line 7 of Form 1040 or line 8 of Form 1040NR) 4b. Free tax preperation         c. Free tax preperation A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan (enter “DFC” and this amount on the dotted line next to line 7 of Form 1040 or line 8 of Form 1040NR). Free tax preperation This amount may be shown in box 11 of your Form W-2. Free tax preperation If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity. Free tax preperation 4c. Free tax preperation       5. Free tax preperation a. Free tax preperation Enter any amount included on line 3 that is also included on Form 2555, line 43, or Form 2555-EZ, line 18. Free tax preperation Do not include any amount that is also included on line 4a, 4b, or 4c above 5a. Free tax preperation             b. Free tax preperation Enter the portion, if any, of the amount from Form 2555, line 44 that you also included on Schedule E in partnership net income or (loss) or deducted on Form 1040, line 27, or Form 1040NR, line 27; Schedule C; Schedule C-EZ; or Schedule F. Free tax preperation 5b. Free tax preperation             c. Free tax preperation Subtract line 5b from line 5a 5c. Free tax preperation       6. Free tax preperation Enter the amount from Form 1040, line 27, or Form 1040NR, line 27 6. Free tax preperation       7. Free tax preperation Add lines 4a through 4c, 5c, and 6 7. Free tax preperation   8. Free tax preperation Subtract line 7 from line 3 8. Free tax preperation       If you were sent here from the Line 11 Worksheet, enter this amount on line 2 of that worksheet. Free tax preperation If you were sent here from Schedule 8812, enter this amount on line 4a of that form. Free tax preperation     *If you have any Schedule K-1 amounts and you are not required to file Schedule SE, complete the appropriate line(s) of Schedule SE, Section A. Free tax preperation Put your name and social security number on Schedule SE and attach it to your return. Free tax preperation                     1040A Filers — Earned Income Worksheet (for line 2 of the Line 11 Worksheet) Before you begin:   ✓Use this worksheet only if you were sent here from the Line 11 Worksheet earlier in this publication. Free tax preperation  ✓Disregard community property laws when figuring the amounts to enter on this worksheet. Free tax preperation               1. Free tax preperation a. Free tax preperation Enter the amount from Form 1040A, line 7 1a. Free tax preperation         b. Free tax preperation Enter the amount of any nontaxable combat pay received. Free tax preperation Also enter this amount on Schedule 8812, line 4b. Free tax preperation This amount should be shown in Form(s) W-2, box 12, with code Q. Free tax preperation 1b. Free tax preperation         c. Free tax preperation Add lines 1a and 1b. Free tax preperation     1c. Free tax preperation   2. Free tax preperation Enter any amount included on line 1a that is:           a. Free tax preperation A scholarship or fellowship grant not reported on Form W-2 2a. Free tax preperation         b. Free tax preperation For work done while an inmate in a penal institution (enter “PRI” and this amount next to line 7 of Form 1040A) 2b. Free tax preperation         c. Free tax preperation A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan (enter “DFC” and this amount next to line 7 of Form 1040A). Free tax preperation This amount may be shown in box 11 of your Form W-2. Free tax preperation If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity 2c. Free tax preperation       3. Free tax preperation Add lines 2a through 2c 3. Free tax preperation   4. Free tax preperation Subtract line 3 from line 1c. Free tax preperation Enter the result here and on line 2 of the Line 11 Worksheet 4. Free tax preperation                 Additional Medicare Tax and RRTA Tax Worksheet (for line 6 of the Line 11 Worksheet) If your employer withheld or you paid Additional Medicare Tax or Tier 1 RRTA taxes, use this worksheet to figure the amount to enter on line 6 of the Line 11 Worksheet. Free tax preperation Social security tax, Medicare tax, and Additional Medicare Tax on wages. Free tax preperation 1. Free tax preperation Enter the social security tax withheld (Form(s) W-2, box 4) 1. Free tax preperation   2. Free tax preperation Enter the Medicare tax withheld (Form(s) W-2, box 6). Free tax preperation Box 6 includes any Additional Medicare Tax 2. Free tax preperation   3. Free tax preperation Enter the Additional Medicare Tax, if any, on wages (Form 8959, line 7) 3. Free tax preperation   4. Free tax preperation Add lines 1, 2, and 3 4. Free tax preperation   5. Free tax preperation Enter the Additional Medicare Tax withheld (Form 8959, line 22) 5. Free tax preperation   6. Free tax preperation Subtract line 5 from line 4 6. Free tax preperation   Additional Medicare Tax on Self-Employment Income. Free tax preperation 7. Free tax preperation Enter one-half of the Additional Medicare Tax, if any, on self-employment income (one-half of Form 8959, line 13) 7. Free tax preperation   Tier 1 RRTA taxes as an employee of a railroad (enter amounts on lines 8, 9, 10, and 11) or employee representative (enter amounts on lines 12, 13, 14, and 15). Free tax preperation Do not include amounts in Form W-2, box 14, that are identified as Additional Medicare Tax or Tier 2 tax. Free tax preperation Do not include amounts shown on Form CT-2 on line 3 for Additional Medicare Tax or line 4 for Tier 2 tax. Free tax preperation 8. Free tax preperation Enter the Tier 1 tax (Form(s) W-2, box 14) 8. Free tax preperation   9. Free tax preperation Enter the Medicare tax (Form(s) W-2, box 14) 9. Free tax preperation   10. Free tax preperation Enter the Additional Medicare Tax, if any, on RRTA compensation as an employee (Form 8959, line 17). Free tax preperation Do not use the same amount from Form 8959, line 17, for both this line and line 14 10. Free tax preperation   11. Free tax preperation Add lines 8, 9, and 10 11. Free tax preperation   12. Free tax preperation Enter one-half of Tier 1 tax (one-half of Form(s) CT-2, line 1, for all 4 quarters of 2013) 12. Free tax preperation   13. Free tax preperation Enter one-half of Tier 1 Medicare tax (one-half of Form(s) CT-2, line 2, for all 4 quarters of 2013) 13. Free tax preperation   14. Free tax preperation Enter one-half of the Additional Medicare Tax, if any, on RRTA compensation as an employee representative (one-half of Form 8959, line 17). Free tax preperation Do not use the same amount from Form 8959, line 17, for both this line and line 10 14. Free tax preperation   15. Free tax preperation Add lines 12, 13, and 14 15. Free tax preperation   Line 6 amount 16. Free tax preperation Add lines 6, 7, 11, and 15. Free tax preperation Enter here and on line 6 of the Line 11 Worksheet. Free tax preperation 16. Free tax preperation   Paperwork Reduction Act Notice. Free tax preperation   We ask for the information on the worksheets in this publication to carry out the Internal Revenue laws of the United States. Free tax preperation You are required to give us the information if requested. Free tax preperation We need it to ensure that you are complying with these laws and to allow us to figure and collect the right amount of tax. Free tax preperation   You are not required to provide the information requested on a form (or worksheet in this publication) that is subject to the Paperwork Reduction Act unless the form (or publication) displays a valid OMB control number. Free tax preperation Books or records relating to a form, its instructions, or this publication must be retained as long as their contents may become material in the administration of any Internal Revenue law. Free tax preperation Generally, tax returns and return information are confidential, as required by section 6103. Free tax preperation   The average time and expenses required to complete these worksheets will vary depending on individual circumstances. Free tax preperation For the estimated averages, see the instructions for your income tax return. Free tax preperation   If you have suggestions for making these worksheets simpler, we would be happy to hear from you. Free tax preperation See Comments and suggestions , earlier. Free tax preperation How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. Free tax preperation Free help with your tax return. Free tax preperation   You can get free help preparing your return nationwide from IRS-certified volunteers. Free tax preperation The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. Free tax preperation The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Free tax preperation Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Free tax preperation In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. Free tax preperation To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. Free tax preperation gov, download the IRS2Go app, or call 1-800-906-9887. Free tax preperation   As part of the TCE program, AARP offers the Tax-Aide counseling program. Free tax preperation To find the nearest AARP Tax-Aide site, visit AARP's website at www. Free tax preperation aarp. Free tax preperation org/money/taxaide or call 1-888-227-7669. Free tax preperation For more information on these programs, go to IRS. Free tax preperation gov and enter “VITA” in the search box. Free tax preperation Internet. Free tax preperation    IRS. Free tax preperation gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. Free tax preperation Download the free IRS2Go app from the iTunes app store or from Google Play. Free tax preperation Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. Free tax preperation Check the status of your 2013 refund with the Where's My Refund? application on IRS. Free tax preperation gov or download the IRS2Go app and select the Refund Status option. Free tax preperation The IRS issues more than 9 out of 10 refunds in less than 21 days. Free tax preperation Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. Free tax preperation You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free tax preperation The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Free tax preperation Use the Interactive Tax Assistant (ITA) to research your tax questions. Free tax preperation No need to wait on the phone or stand in line. Free tax preperation The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. Free tax preperation When you reach the response screen, you can print the entire interview and the final response for your records. Free tax preperation New subject areas are added on a regular basis. Free tax preperation  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. Free tax preperation gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. Free tax preperation You can use the IRS Tax Map, to search publications and instructions by topic or keyword. Free tax preperation The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. Free tax preperation When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. Free tax preperation Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. Free tax preperation You can also ask the IRS to mail a return or an account transcript to you. Free tax preperation Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. Free tax preperation gov or by calling 1-800-908-9946. Free tax preperation Tax return and tax account transcripts are generally available for the current year and the past three years. Free tax preperation Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. Free tax preperation Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. Free tax preperation If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. Free tax preperation Check the status of your amended return using Where's My Amended Return? Go to IRS. Free tax preperation gov and enter Where's My Amended Return? in the search box. Free tax preperation You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Free tax preperation It can take up to 3 weeks from the date you mailed it to show up in our system. Free tax preperation Make a payment using one of several safe and convenient electronic payment options available on IRS. Free tax preperation gov. Free tax preperation Select the Payment tab on the front page of IRS. Free tax preperation gov for more information. Free tax preperation Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. Free tax preperation Figure your income tax withholding with the IRS Withholding Calculator on IRS. Free tax preperation gov. Free tax preperation Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. Free tax preperation Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. Free tax preperation gov. Free tax preperation Request an Electronic Filing PIN by going to IRS. Free tax preperation gov and entering Electronic Filing PIN in the search box. Free tax preperation Download forms, instructions and publications, including accessible versions for people with disabilities. Free tax preperation Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. Free tax preperation gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. Free tax preperation An employee can answer questions about your tax account or help you set up a payment plan. Free tax preperation Before you visit, check the Office Locator on IRS. Free tax preperation gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. Free tax preperation If you have a special need, such as a disability, you can request an appointment. Free tax preperation Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. Free tax preperation Apply for an Employer Identification Number (EIN). Free tax preperation Go to IRS. Free tax preperation gov and enter Apply for an EIN in the search box. Free tax preperation Read the Internal Revenue Code, regulations, or other official guidance. Free tax preperation Read Internal Revenue Bulletins. Free tax preperation Sign up to receive local and national tax news and more by email. Free tax preperation Just click on “subscriptions” above the search box on IRS. Free tax preperation gov and choose from a variety of options. Free tax preperation    Phone. Free tax preperation You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. Free tax preperation Download the free IRS2Go app from the iTunes app store or from Google Play. Free tax preperation Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. Free tax preperation gov, or download the IRS2Go app. Free tax preperation Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. Free tax preperation The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. Free tax preperation Most VITA and TCE sites offer free electronic filing. Free tax preperation Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. Free tax preperation Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. Free tax preperation Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. Free tax preperation If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. Free tax preperation The IRS issues more than 9 out of 10 refunds in less than 21 days. Free tax preperation Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. Free tax preperation Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. Free tax preperation The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. Free tax preperation Note, the above information is for our automated hotline. Free tax preperation Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. Free tax preperation Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. Free tax preperation You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. Free tax preperation It can take up to 3 weeks from the date you mailed it to show up in our system. Free tax preperation Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). Free tax preperation You should receive your order within 10 business days. Free tax preperation Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. Free tax preperation If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. Free tax preperation Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. Free tax preperation The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. Free tax preperation These individuals can also contact the IRS through relay services such as the Federal Relay Service. Free tax preperation    Walk-in. Free tax preperation You can find a selection of forms, publications and services — in-person. Free tax preperation Products. Free tax preperation You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Free tax preperation Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. Free tax preperation Services. Free tax preperation You can walk in to your local TAC for face-to-face tax help. Free tax preperation An employee can answer questions about your tax account or help you set up a payment plan. Free tax preperation Before visiting, use the Office Locator tool on IRS. Free tax preperation gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. Free tax preperation    Mail. Free tax preperation You can send your order for forms, instructions, and publications to the address below. Free tax preperation You should receive a response within 10 business days after your request is received. Free tax preperation Internal Revenue Service 1201 N. Free tax preperation Mitsubishi Motorway Bloomington, IL 61705-6613    The Taxpayer Advocate Service Is Here to Help You. Free tax preperation The Taxpayer Advocate Service (TAS) is your voice at the IRS. Free tax preperation Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. Free tax preperation   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. Free tax preperation We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. Free tax preperation You face (or your business is facing) an immediate threat of adverse action. Free tax preperation You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. Free tax preperation   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. Free tax preperation Here's why we can help: TAS is an independent organization within the IRS. Free tax preperation Our advocates know how to work with the IRS. Free tax preperation Our services are free and tailored to meet your needs. Free tax preperation We have offices in every state, the District of Columbia, and Puerto Rico. Free tax preperation   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at Taxpayer Advocate, or call us toll-free at 1-877-777-4778. Free tax preperation   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. Free tax preperation If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System. Free tax preperation Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. Free tax preperation Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. Free tax preperation Visit Taxpayer Advocate or see IRS Publication 4134, Low Income Taxpayer Clinic List. Free tax preperation Prev  Up  Next   Home   More Online Publications