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H&r Block Tax Returns

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H&r Block Tax Returns

H&r block tax returns 5. H&r block tax returns   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. H&r block tax returns Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. H&r block tax returns When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. H&r block tax returns Otherwise, these are capital expenses that must be added to the basis of the land. H&r block tax returns (See chapter 6 for information on determining basis. H&r block tax returns ) Conservation expenses for land in a foreign country do not qualify for this special treatment. H&r block tax returns The deduction for conservation expenses cannot be more than 25% of your gross income from farming. H&r block tax returns See 25% Limit on Deduction , later. H&r block tax returns Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. H&r block tax returns These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. H&r block tax returns You must include in income most government payments for approved conservation practices. H&r block tax returns However, you can exclude some payments you receive under certain cost-sharing conservation programs. H&r block tax returns For more information, see Agricultural Program Payments in chapter 3. H&r block tax returns To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. H&r block tax returns Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. H&r block tax returns You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. H&r block tax returns You are not farming if you are engaged only in forestry or the growing of timber. H&r block tax returns Farm defined. H&r block tax returns   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. H&r block tax returns It also includes plantations, ranches, ranges, and orchards. H&r block tax returns A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. H&r block tax returns It does not include an area where they are merely caught or harvested. H&r block tax returns A plant nursery is a farm for purposes of deducting soil and water conservation expenses. H&r block tax returns Farm rental. H&r block tax returns   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. H&r block tax returns If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. H&r block tax returns   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. H&r block tax returns Example. H&r block tax returns You own a farm in Iowa and live in California. H&r block tax returns You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. H&r block tax returns You cannot deduct your soil conservation expenses for this farm. H&r block tax returns You must capitalize the expenses and add them to the basis of the land. H&r block tax returns     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. H&r block tax returns Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. H&r block tax returns If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. H&r block tax returns Keep a copy of the plan with your books and records to support your deductions. H&r block tax returns Conservation plan. H&r block tax returns   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. H&r block tax returns There are three types of approved plans. H&r block tax returns NRCS individual site plans. H&r block tax returns These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. H&r block tax returns NRCS county plans. H&r block tax returns These plans include a listing of farm conservation practices approved for the county where the farmland is located. H&r block tax returns You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. H&r block tax returns Comparable state agency plans. H&r block tax returns These plans are approved by state agencies and can be approved individual site plans or county plans. H&r block tax returns   A list of NRCS conservation programs is available at www. H&r block tax returns nrcs. H&r block tax returns usda. H&r block tax returns gov/programs. H&r block tax returns Individual site plans can be obtained from NRCS offices and the comparable state agencies. H&r block tax returns Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. H&r block tax returns These expenses include, but are not limited to, the following. H&r block tax returns The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. H&r block tax returns The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. H&r block tax returns The eradication of brush. H&r block tax returns The planting of windbreaks. H&r block tax returns You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. H&r block tax returns These expenses are added to the basis of the land. H&r block tax returns If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. H&r block tax returns See chapter 3 for information about payments eligible for the cost-sharing exclusion. H&r block tax returns New farm or farmland. H&r block tax returns   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. H&r block tax returns You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. H&r block tax returns The new farming activity does not have to be the same as the old farming activity. H&r block tax returns For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. H&r block tax returns Land not used for farming. H&r block tax returns   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. H&r block tax returns For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. H&r block tax returns You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. H&r block tax returns Depreciable conservation assets. H&r block tax returns   You generally cannot deduct your expenses for depreciable conservation assets. H&r block tax returns However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. H&r block tax returns See Assessment for Depreciable Property , later. H&r block tax returns   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. H&r block tax returns These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. H&r block tax returns You recover your capital investment through annual allowances for depreciation. H&r block tax returns   You can deduct soil and water conservation expenses for nondepreciable earthen items. H&r block tax returns Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. H&r block tax returns Water well. H&r block tax returns   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. H&r block tax returns It is a capital expense. H&r block tax returns You recover your cost through depreciation. H&r block tax returns You also must capitalize your cost for drilling a test hole. H&r block tax returns If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. H&r block tax returns You can recover the total cost through depreciation deductions. H&r block tax returns   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. H&r block tax returns Abandonment means that all economic benefits from the well are terminated. H&r block tax returns For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. H&r block tax returns Endangered species recovery expenses. H&r block tax returns   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. H&r block tax returns Otherwise, these are capital expenses that must be added to the basis of the land. H&r block tax returns   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. H&r block tax returns See Internal Revenue Code section 175 for more information. H&r block tax returns Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. H&r block tax returns You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. H&r block tax returns Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. H&r block tax returns This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. H&r block tax returns The depreciable property must be used in the district's soil and water conservation activities. H&r block tax returns However, the following limits apply to these assessments. H&r block tax returns The total assessment limit. H&r block tax returns The yearly assessment limit. H&r block tax returns After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. H&r block tax returns The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. H&r block tax returns See Table 5-1 for a brief summary of these limits. H&r block tax returns Table 5-1. H&r block tax returns Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. H&r block tax returns Your deductible share of the cost to the district for the property. H&r block tax returns Your gross income from farming. H&r block tax returns No one taxpayer can deduct more than 10% of the total assessment. H&r block tax returns Any amount over 10% is a capital expense and is added to the basis of your land. H&r block tax returns If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. H&r block tax returns If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. H&r block tax returns You can deduct the remainder in equal amounts over the next 9 tax years. H&r block tax returns Limit for all conservation expenses, including assessments for depreciable property. H&r block tax returns Amounts greater than 25% can be carried to the following year and added to that year's expenses. H&r block tax returns The total is then subject to the 25% of gross income from farming limit in that year. H&r block tax returns To ensure your deduction is within the deduction limits, keep records to show the following. H&r block tax returns The total assessment against all members of the district for the depreciable property. H&r block tax returns Your deductible share of the cost to the district for the depreciable property. H&r block tax returns Your gross income from farming. H&r block tax returns Total assessment limit. H&r block tax returns   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. H&r block tax returns This applies whether you pay the assessment in one payment or in installments. H&r block tax returns If your assessment is more than 10% of the total amount assessed, both the following rules apply. H&r block tax returns The amount over 10% is a capital expense and is added to the basis of your land. H&r block tax returns If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. H&r block tax returns Yearly assessment limit. H&r block tax returns   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. H&r block tax returns If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. H&r block tax returns If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. H&r block tax returns You can deduct the remainder in equal amounts over the next 9 tax years. H&r block tax returns Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. H&r block tax returns Example 1. H&r block tax returns This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. H&r block tax returns Of the assessment, $1,500 is for digging drainage ditches. H&r block tax returns You can deduct this part as a soil or conservation expense as if you had paid it directly. H&r block tax returns The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. H&r block tax returns The total amount assessed by the district against all its members for the depreciable equipment is $7,000. H&r block tax returns The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. H&r block tax returns The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. H&r block tax returns To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. H&r block tax returns Add $500 to the result for a total of $570. H&r block tax returns Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). H&r block tax returns You can deduct the balance at the rate of $70 a year over the next 9 years. H&r block tax returns You add $70 to the $1,500 portion of the assessment for drainage ditches. H&r block tax returns You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. H&r block tax returns Example 2. H&r block tax returns Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. H&r block tax returns The total amount assessed by the district against all its members for depreciable equipment is $5,500. H&r block tax returns The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. H&r block tax returns The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). H&r block tax returns Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. H&r block tax returns You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. H&r block tax returns Sale or other disposal of land during 9-year period. H&r block tax returns   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. H&r block tax returns Death of farmer during 9-year period. H&r block tax returns   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. H&r block tax returns 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. H&r block tax returns Gross income from farming. H&r block tax returns   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. H&r block tax returns Gains from sales of draft, breeding, or dairy livestock are included. H&r block tax returns Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. H&r block tax returns Carryover of deduction. H&r block tax returns   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. H&r block tax returns However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. H&r block tax returns Example. H&r block tax returns In 2012, you have gross income of $32,000 from two farms. H&r block tax returns During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. H&r block tax returns However, your deduction is limited to 25% of $32,000, or $8,000. H&r block tax returns The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. H&r block tax returns The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. H&r block tax returns Any expenses over the limit in that year are carried to 2014 and later years. H&r block tax returns Net operating loss. H&r block tax returns   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. H&r block tax returns If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. H&r block tax returns When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. H&r block tax returns If you do not choose to deduct the expenses, you must capitalize them. H&r block tax returns Change of method. H&r block tax returns   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. H&r block tax returns To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. H&r block tax returns You or your authorized representative must sign the request. H&r block tax returns   The request must include the following information. H&r block tax returns Your name and address. H&r block tax returns The first tax year the method or change of method is to apply. H&r block tax returns Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. H&r block tax returns If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. H&r block tax returns The total expenses you paid or incurred in the first tax year the method or change of method is to apply. H&r block tax returns A statement that you will account separately in your books for the expenses to which this method or change of method relates. H&r block tax returns Send your request to the following  address. H&r block tax returns  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. H&r block tax returns Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). H&r block tax returns However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. H&r block tax returns Gain on sale of farmland. H&r block tax returns   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. H&r block tax returns If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. H&r block tax returns See Section 1252 property under Other Gains in chapter 9. 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The H&r Block Tax Returns

H&r block tax returns 5. H&r block tax returns   Table and Worksheets for the Self-Employed Table of Contents Community property laws. H&r block tax returns As discussed in chapters 2 and 4, if you are self-employed, you must use the rate table or rate worksheet and deduction worksheet to figure your deduction for contributions you made for yourself to a SEP-IRA or qualified plan. H&r block tax returns First, use either the rate table or rate worksheet to find your reduced contribution rate. H&r block tax returns Then complete the deduction worksheet to figure your deduction for contributions. H&r block tax returns The table and the worksheets in chapter 5 apply only to self-employed individuals who have only one defined contribution plan, such as a profit-sharing plan. H&r block tax returns A SEP plan is treated as a profit-sharing plan. H&r block tax returns However, do not use this worksheet for SARSEPs. H&r block tax returns Rate table for self-employed. H&r block tax returns   If your plan's contribution rate is a whole percentage (for example, 12% rather than 12½%), you can use the table on the next page to find your reduced contribution rate. H&r block tax returns Otherwise, use the rate worksheet provided below. H&r block tax returns   First, find your plan contribution rate (the contribution rate stated in your plan) in Column A of the table. H&r block tax returns Then read across to the rate under Column B. H&r block tax returns Enter the rate from Column B in step 4 of the Deduction Worksheet for Self-Employed on this page. H&r block tax returns    Example. H&r block tax returns You are a sole proprietor with no employees. H&r block tax returns If your plan's contribution rate is 10% of a participant's compensation, your rate is 0. H&r block tax returns 090909. H&r block tax returns Enter this rate in step 4 of the Deduction Worksheet for Self-Employed on this page. H&r block tax returns Deduction Worksheet for Self-Employed   Step 1           Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. H&r block tax returns For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. H&r block tax returns       *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b. H&r block tax returns       **General partners should reduce this amount by the same additional expenses subtracted from box 14, code A to determine the amount on line 1 or 2 of Schedule SE. H&r block tax returns     Step 2           Enter your deduction for self-employment tax from Form 1040, line 27             Step 3           Net earnings from self-employment. H&r block tax returns Subtract step 2 from step 1     Step 4           Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed     Step 5           Multiply step 3 by step 4     Step 6           Multiply $255,000 by your plan contribution rate (not the reduced rate)     Step 7           Enter the smaller of step 5 or step 6     Step 8           Contribution dollar limit $51,000     • If you made any elective deferrals to your self-employed plan, go to step 9. H&r block tax returns         • Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21. H&r block tax returns       Step 9           Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. H&r block tax returns Do not enter more than $17,500     Step 10           Subtract step 9 from step 8     Step 11           Subtract step 9 from step 3       Step 12           Enter one-half of step 11     Step 13           Enter the smallest of step 7, 10, or 12     Step 14           Subtract step 13 from step 3     Step 15           Enter the smaller of step 9 or step 14       • If you made catch-up contributions, go to step 16. H&r block tax returns         • Otherwise, skip steps 16 through 18 and go to step 19. H&r block tax returns       Step 16           Subtract step 15 from step 14     Step 17           Enter your catch-up contributions (including designated Roth contributions), if any. H&r block tax returns Do not enter more than $5,500     Step 18           Enter the smaller of step 16 or step 17     Step 19           Add steps 13, 15, and 18. H&r block tax returns     Step 20           Enter the amount of designated Roth contributions included on lines 9 and 17. H&r block tax returns     Step 21           Subtract step 20 from step 19. H&r block tax returns This is your maximum deductible contribution. H&r block tax returns                 Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28. H&r block tax returns   Rate worksheet for self-employed. H&r block tax returns   If your plan's contribution rate is not a whole percentage (for example, 10½%), you cannot use the Rate Table for Self-Employed. H&r block tax returns Use the following worksheet instead. H&r block tax returns Rate Worksheet for Self-Employed 1) Plan contribution rate as a decimal (for example, 10½% = 0. H&r block tax returns 105)   2) Rate in line 1 plus 1 (for example, 0. H&r block tax returns 105 + 1 = 1. H&r block tax returns 105)   3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0. H&r block tax returns 105 ÷ 1. H&r block tax returns 105 = 0. H&r block tax returns 095)   Figuring your deduction. H&r block tax returns   Now that you have your self-employed rate from either the rate table or rate worksheet, you can figure your maximum deduction for contributions for yourself by completing the Deduction Worksheet for Self-Employed. H&r block tax returns Community property laws. H&r block tax returns   If you reside in a community property state and you are married and filing a separate return, disregard community property laws for step 1 of the Deduction Worksheet for Self-Employed. H&r block tax returns Enter on step 1 the total net profit you actually earned. H&r block tax returns Rate Table for Self-Employed Column A  If the plan contri- bution rate is: (shown as %) Column B  Your rate is: (shown as decimal) 1 . H&r block tax returns 009901 2 . H&r block tax returns 019608 3 . H&r block tax returns 029126 4 . H&r block tax returns 038462 5 . H&r block tax returns 047619 6 . H&r block tax returns 056604 7 . H&r block tax returns 065421 8 . H&r block tax returns 074074 9 . H&r block tax returns 082569 10 . H&r block tax returns 090909 11 . H&r block tax returns 099099 12 . H&r block tax returns 107143 13 . H&r block tax returns 115044 14 . H&r block tax returns 122807 15 . H&r block tax returns 130435 16 . H&r block tax returns 137931 17 . H&r block tax returns 145299 18 . H&r block tax returns 152542 19 . H&r block tax returns 159664 20 . H&r block tax returns 166667 21 . H&r block tax returns 173554 22 . H&r block tax returns 180328 23 . H&r block tax returns 186992 24 . H&r block tax returns 193548 25* . H&r block tax returns 200000* *The deduction for annual employer contributions (other than elective deferrals) to a SEP plan, a profit-sharing plan, or a money purchase plan cannot be more than 20% of your net earnings (figured without deducting contributions for yourself) from the business that has the plan. H&r block tax returns Example. H&r block tax returns You are a sole proprietor with no employees. H&r block tax returns The terms of your plan provide that you contribute 8½% (. H&r block tax returns 085) of your compensation to your plan. H&r block tax returns Your net profit from line 31, Schedule C (Form 1040) is $200,000. H&r block tax returns You have no elective deferrals or catch-up contributions. H&r block tax returns Your self-employment tax deduction on line 27 of Form 1040 is $9,728. H&r block tax returns See the filled-in portions of both Schedule SE (Form 1040), Self-Employment Income, and Form 1040, later. H&r block tax returns You figure your self-employed rate and maximum deduction for employer contributions you made for yourself as follows. H&r block tax returns Deduction Worksheet for Self-Employed   Step 1           Enter your net profit from line 31, Schedule C (Form 1040); line 3, Schedule C-EZ (Form 1040); line 34, Schedule F (Form 1040)*; or box 14, code A**, Schedule K-1 (Form 1065)*. H&r block tax returns For information on other income included in net profit from self-employment, see the Instructions for Schedule SE, Form 1040. H&r block tax returns $200,000     *Reduce this amount by any amount reported on Schedule SE (Form 1040), line 1b. H&r block tax returns       **General partners should reduce this amount by the same additional expenses subtracted from box 14, code A to determine the amount on line 1 or 2 of Schedule SE. H&r block tax returns     Step 2           Enter your deduction for self-employment tax from Form 1040, line 27 9,728           Step 3           Net earnings from self-employment. H&r block tax returns Subtract step 2 from step 1 190,272   Step 4           Enter your rate from the Rate Table for Self-Employed or Rate Worksheet for Self-Employed 0. H&r block tax returns 078   Step 5           Multiply step 3 by step 4 14,841   Step 6           Multiply $255,000 by your plan contribution rate (not the reduced rate) 21,675   Step 7           Enter the smaller of step 5 or step 6 14,841   Step 8           Contribution dollar limit $51,000     • If you made any elective deferrals to your self-employed plan, go to step 9. H&r block tax returns         • Otherwise, skip steps 9 through 20 and enter the smaller of step 7 or step 8 on step 21. H&r block tax returns       Step 9           Enter your allowable elective deferrals (including designated Roth contributions) made to your self-employed plan during 2013. H&r block tax returns Do not enter more than $17,500 N/A   Step 10           Subtract step 9 from step 8     Step 11           Subtract step 9 from step 3       Step 12           Enter one-half of step 11     Step 13           Enter the smallest of step 7, 10, or 12     Step 14           Subtract step 13 from step 3     Step 15           Enter the smaller of step 9 or step 14       • If you made catch-up contributions, go to step 16. H&r block tax returns         • Otherwise, skip steps 16 through 18 and go to step 19. H&r block tax returns       Step 16           Subtract step 15 from step 14     Step 17           Enter your catch-up contributions (including designated Roth contributions), if any. H&r block tax returns Do not enter more than $5,500     Step 18           Enter the smaller of step 16 or step 17     Step 19           Add steps 13, 15, and 18. H&r block tax returns     Step 20           Enter the amount of designated Roth contributions included on lines 9 and 17     Step 21           Subtract step 20 from step 19. H&r block tax returns This is your maximum deductible contribution $14,841                 Next: Enter your actual contribution, not to exceed your maximum deductible contribution, on Form 1040, line 28. H&r block tax returns   See the filled-in Deduction Worksheet for Self-Employed on this page. H&r block tax returns Rate Worksheet for Self-Employed 1) Plan contribution rate as a decimal (for example, 10½% = 0. H&r block tax returns 105) 0. H&r block tax returns 085 2) Rate in line 1 plus 1 (for example, 0. H&r block tax returns 105 + 1 = 1. H&r block tax returns 105) 1. H&r block tax returns 085 3) Self-employed rate as a decimal rounded to at least 3 decimal places (line 1 ÷ line 2) (for example, 0. H&r block tax returns 105 ÷ 1. H&r block tax returns 105 = 0. H&r block tax returns 095) 0. H&r block tax returns 078 This image is too large to be displayed in the current screen. H&r block tax returns Please click the link to view the image. H&r block tax returns Portion of Form 1040 and Portion of Schedule SE Prev  Up  Next   Home   More Online Publications