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Help back taxes 37. Help back taxes   Other Credits Table of Contents What's New Introduction Useful Items - You may want to see: Nonrefundable CreditsAdoption Credit Alternative Motor Vehicle Credit Alternative Fuel Vehicle Refueling Property Credit Credit to Holders of Tax Credit Bonds Foreign Tax Credit Mortgage Interest Credit Nonrefundable Credit for Prior Year Minimum Tax Plug-in Electric Drive Motor Vehicle Credit Residential Energy Credits Retirement Savings Contributions Credit (Saver's Credit) Refundable CreditsCredit for Tax on Undistributed Capital Gain Health Coverage Tax Credit Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld What's New Adoption credit. Help back taxes  The maximum adoption credit is $12,970 for 2013. Help back taxes See Adoption Credit . Help back taxes Plug-in electric vehicle credit. Help back taxes  This credit has expired. Help back taxes Credit for prior year minimum tax. Help back taxes  The refundable portion of the credit for prior year minimum tax has expired. Help back taxes Excess withholding of social security and railroad retirement tax. Help back taxes  Social security tax and tier 1 railroad retirement (RRTA) tax were both withheld during 2013 at a rate of 6. Help back taxes 2% of wages up to $113,700. Help back taxes If you worked for more than one employer and had too much social security or RRTA tax withheld during 2013, you may be entitled to a credit for the excess withholding. Help back taxes See Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld . Help back taxes Introduction This chapter discusses the following nonrefundable credits. Help back taxes Adoption credit. Help back taxes Alternative motor vehicle credit. Help back taxes Alternative fuel vehicle refueling property credit. Help back taxes Credit to holders of tax credit bonds. Help back taxes Foreign tax credit. Help back taxes Mortgage interest credit. Help back taxes Nonrefundable credit for prior year minimum tax. Help back taxes Plug-in electric drive motor vehicle credit. Help back taxes Residential energy credits. Help back taxes Retirement savings contributions credit. Help back taxes This chapter also discusses the following refundable credits. Help back taxes Credit for tax on undistributed capital gain. Help back taxes Health coverage tax credit. Help back taxes Credit for excess social security tax or railroad retirement tax withheld. Help back taxes Several other credits are discussed in other chapters in this publication. Help back taxes Child and dependent care credit (chapter 32). Help back taxes Credit for the elderly or the disabled (chapter 33). Help back taxes Child tax credit (chapter 34). Help back taxes Education credits (chapter 35). Help back taxes Earned income credit (chapter 36). Help back taxes Nonrefundable credits. Help back taxes   The first part of this chapter, Nonrefundable Credits , covers ten credits that you subtract from your tax. Help back taxes These credits may reduce your tax to zero. Help back taxes If these credits are more than your tax, the excess is not refunded to you. Help back taxes Refundable credits. Help back taxes   The second part of this chapter, Refundable Credits , covers three credits that are treated as payments and are refundable to you. Help back taxes These credits are added to the federal income tax withheld and any estimated tax payments you made. Help back taxes If this total is more than your total tax, the excess will be refunded to you. Help back taxes Useful Items - You may want to see: Publication 502 Medical and Dental Expenses 514 Foreign Tax Credit for  Individuals 530 Tax Information for Homeowners 590 Individual Retirement Arrangements (IRAs) Form (and Instructions) 1116 Foreign Tax Credit 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 5695 Residential Energy Credits 8396 Mortgage Interest Credit 8801 Credit For Prior Year Minimum Tax — Individuals, Estates, and Trusts 8828 Recapture of Federal Mortgage Subsidy 8839 Qualified Adoption Expenses 8880 Credit for Qualified Retirement Savings Contributions 8885 Health Coverage Tax Credit 8910 Alternative Motor Vehicle Credit 8911 Alternative Fuel Vehicle Refueling Property Credit 8912 Credit to Holders of Tax Credit Bonds 8936 Qualified Plug-in Electric Drive Motor Vehicle Credit Nonrefundable Credits The credits discussed in this part of the chapter can reduce your tax. Help back taxes However, if the total of these credits is more than your tax, the excess is not refunded to you. Help back taxes Adoption Credit You may be able to take a tax credit of up to $12,970 for qualified expenses paid to adopt an eligible child. Help back taxes The credit may be allowed for the adoption of a child with special needs even if you do not have any qualified expenses. Help back taxes If your modified adjusted gross income (AGI) is more than $194,580, your credit is reduced. Help back taxes If your modified AGI is $234,580 or more, you cannot take the credit. Help back taxes Qualified adoption expenses. Help back taxes   Qualified adoption expenses are reasonable and necessary expenses directly related to, and whose principal purpose is for, the legal adoption of an eligible child. Help back taxes These expenses include: Adoption fees, Court costs, Attorney fees, Travel expenses (including amounts spent for meals and lodging) while away from home, and Re-adoption expenses to adopt a foreign child. Help back taxes Nonqualified expenses. Help back taxes   Qualified adoption expenses do not include expenses: That violate state or federal law, For carrying out any surrogate parenting arrangement, For the adoption of your spouse's child, For which you received funds under any federal, state, or local program, Allowed as a credit or deduction under any other federal income tax rule, or Paid or reimbursed by your employer or any other person or organization. Help back taxes Eligible child. Help back taxes   The term “eligible child” means any individual: Under 18 years old, or Physically or mentally incapable of caring for himself or herself. Help back taxes Child with special needs. Help back taxes   An eligible child is a child with special needs if all three of the following apply. Help back taxes The child was a citizen or resident of the United States (including U. Help back taxes S. Help back taxes possessions) at the time the adoption process began. Help back taxes A state (including the District of Columbia) has determined that the child cannot or should not be returned to his or her parents' home. Help back taxes The state has determined that the child will not be adopted unless assistance is provided to the adoptive parents. Help back taxes Factors used by states to make this determination include: The child's ethnic background, The child's age, Whether the child is a member of a minority or sibling group, and Whether the child has a medical condition or a physical, mental, or emotional handicap. Help back taxes When to take the credit. Help back taxes   Generally, until the adoption becomes final, you take the credit in the year after your qualified expenses were paid or incurred. Help back taxes If the adoption becomes final, you take the credit in the year your expenses were paid or incurred. Help back taxes See the Instructions for Form 8839 for more specific information on when to take the credit. Help back taxes Foreign child. Help back taxes   If the child is not a U. Help back taxes S. Help back taxes citizen or resident at the time the adoption process began, you cannot take the credit unless the adoption becomes final. Help back taxes You treat all adoption expenses paid or incurred in years before the adoption becomes final as paid or incurred in the year it becomes final. Help back taxes How to take the credit. Help back taxes   Figure your 2013 nonrefundable credit and any carryforward to 2014 on Form 8839 and attach it to your Form 1040. Help back taxes Include the credit in your total for Form 1040, line 53. Help back taxes Check box c and enter “8839” on the line next to that box. Help back taxes More information. Help back taxes   For more information, see the Instructions for Form 8839. Help back taxes Alternative Motor Vehicle Credit You may be able to take this credit if you place a qualified fuel cell vehicle in service in 2013. Help back taxes Amount of credit. Help back taxes   Generally, you can rely on the manufacturer's certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and the amount of the credit for which it qualifies. Help back taxes In the case of a foreign manufacturer, you generally can rely on its domestic distributor's certification to the IRS. Help back taxes   Ordinarily the amount of the credit is 100% of the manufacturer's (or domestic distributor's) certification to the IRS of the maximum credit allowable. Help back taxes How to take the credit. Help back taxes   To take the credit, you must complete Form 8910 and attach it to your Form 1040. Help back taxes Include the credit in your total for Form 1040, line 53. Help back taxes Check box c and enter “8910” on the line next to that box. Help back taxes More information. Help back taxes   For more information on the credit, see the Instructions for Form 8910. Help back taxes Alternative Fuel Vehicle Refueling Property Credit You may be able to take a credit if you place qualified alternative fuel vehicle refueling property in service in 2013. Help back taxes Qualified alternative fuel vehicle refueling property. Help back taxes   Qualified alternative fuel vehicle refueling property is any property (other than a building or its structural components) used for either of the following. Help back taxes To store or dispense alternative fuel into the fuel tank of a motor vehicle propelled by the fuel, but only if the storage or dispensing is at the point where the fuel is delivered into that tank. Help back taxes To recharge an electric vehicle, but only if the recharging property is located at the point where the vehicle is recharged. Help back taxes   The following are alternative fuels. Help back taxes Any fuel at least 85% of the volume of which consists of one or more of the following: ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas, or hydrogen. Help back taxes Any mixture which consists of two or more of the following: biodiesel, diesel fuel, or kerosene, and at least 20% of the volume of which consists of biodiesel determined without regard to any kerosene. Help back taxes Electricity. Help back taxes Amount of the credit. Help back taxes   For personal use property, the credit is generally the smaller of 30% of the property's cost or $1,000. Help back taxes For business use property, the credit is generally the smaller of 30% of the property's cost or $30,000. Help back taxes How to take the credit. Help back taxes   To take the credit, you must complete Form 8911 and attach it to your Form 1040. Help back taxes Include the credit in your total for Form 1040, line 53. Help back taxes Check box c and enter “8911” on the line next to that box. Help back taxes More information. Help back taxes   For more information on the credit, see the Form 8911 instructions. Help back taxes Credit to Holders of Tax Credit Bonds Tax credit bonds are bonds in which the holder receives a tax credit in lieu of some or all of the interest on the bond. Help back taxes You may be able to take a credit if you are a holder of one of the following bonds. Help back taxes Clean renewable energy bonds (issued before 2010). Help back taxes New clean renewable energy bonds. Help back taxes Qualified energy conservation bonds. Help back taxes Qualified school construction bonds. Help back taxes Qualified zone academy bonds. Help back taxes Build America bonds. Help back taxes In some instances, an issuer may elect to receive a credit for interest paid on the bond. Help back taxes If the issuer makes this election, you cannot also claim a credit. Help back taxes Interest income. Help back taxes   The amount of any tax credit allowed (figured before applying tax liability limits) must be included as interest income on your tax return. Help back taxes How to take the credit. Help back taxes   Complete Form 8912 and attach it to your Form 1040. Help back taxes Include the credit in your total for Form 1040, line 53. Help back taxes Check box c and enter “8912” on the line next to that box. Help back taxes More information. Help back taxes   For more information, see the Instructions for Form 8912. Help back taxes Foreign Tax Credit You generally can choose to take income taxes you paid or accrued during the year to a foreign country or U. Help back taxes S. Help back taxes possession as a credit against your U. Help back taxes S. Help back taxes income tax. Help back taxes Or, you can deduct them as an itemized deduction (see chapter 22). Help back taxes You cannot take a credit (or deduction) for foreign income taxes paid on income that you exclude from U. Help back taxes S. Help back taxes tax under any of the following. Help back taxes Foreign earned income exclusion. Help back taxes Foreign housing exclusion. Help back taxes Income from Puerto Rico exempt from U. Help back taxes S. Help back taxes tax. Help back taxes Possession exclusion. Help back taxes Limit on the credit. Help back taxes   Unless you can elect not to file Form 1116 (see Exception , later), your foreign tax credit cannot be more than your U. Help back taxes S. Help back taxes tax liability (Form 1040, line 44), multiplied by a fraction. Help back taxes The numerator of the fraction is your taxable income from sources outside the United States. Help back taxes The denominator is your total taxable income from U. Help back taxes S. Help back taxes and foreign sources. Help back taxes See Publication 514 for more information. Help back taxes How to take the credit. Help back taxes   Complete Form 1116 and attach it to your Form 1040. Help back taxes Enter the credit on Form 1040, line 47. Help back taxes Exception. Help back taxes   You do not have to complete Form 1116 to take the credit if all of the following apply. Help back taxes All of your gross foreign source income was from interest and dividends and all of that income and the foreign tax paid on it were reported to you on Form 1099-INT, Form 1099-DIV, or Schedule K-1 (or substitute statement). Help back taxes If you had dividend income from shares of stock, you held those shares for at least 16 days. Help back taxes You are not filing Form 4563 or excluding income from sources within Puerto Rico. Help back taxes The total of your foreign taxes was not more than $300 (not more than $600 if married filing jointly). Help back taxes All of your foreign taxes were: Legally owed and not eligible for a refund, and Paid to countries that are recognized by the United States and do not support terrorism. Help back taxes More information. Help back taxes   For more information on the credit and these requirements, see the Instructions for Form 1116. Help back taxes Mortgage Interest Credit The mortgage interest credit is intended to help lower-income individuals own a home. Help back taxes If you qualify, you can take the credit each year for part of the home mortgage interest you pay. Help back taxes Who qualifies. Help back taxes   You may be eligible for the credit if you were issued a qualified mortgage credit certificate (MCC) from your state or local government. Help back taxes Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. Help back taxes Amount of credit. Help back taxes   Figure your credit on Form 8396. Help back taxes If your mortgage loan amount is equal to (or smaller than) the certified indebtedness (loan) amount shown on your MCC, enter on Form 8396, line 1, all the interest you paid on your mortgage during the year. Help back taxes   If your mortgage loan amount is larger than the certified indebtedness amount shown on your MCC, you can figure the credit on only part of the interest you paid. Help back taxes To find the amount to enter on line 1, multiply the total interest you paid during the year on your mortgage by the following fraction. Help back taxes      Certified indebtedness amount on your MCC     Original amount of your mortgage   Limit based on credit rate. Help back taxes   If the certificate credit rate is more than 20%, the credit you are allowed cannot be more than $2,000. Help back taxes If two or more persons (other than a married couple filing a joint return) hold an interest in the home to which the MCC relates, this $2,000 limit must be divided based on the interest held by each person. Help back taxes See Publication 530 for more information. Help back taxes Carryforward. Help back taxes   Your credit (after applying the limit based on the credit rate) is also subject to a limit based on your tax that is figured using Form 8396. Help back taxes If your allowable credit is reduced because of this tax liability limit, you can carry forward the unused portion of the credit to the next 3 years or until used, whichever comes first. Help back taxes   If you are subject to the $2,000 limit because your certificate credit rate is more than 20%, you cannot carry forward any amount more than $2,000 (or your share of the $2,000 if you must divide the credit). Help back taxes How to take the credit. Help back taxes    Figure your 2013 credit and any carryforward to 2014 on Form 8396, and attach it to your Form 1040. Help back taxes Be sure to include any credit carryforward from 2010, 2011, and 2012. Help back taxes   Include the credit in your total for Form 1040, line 53. Help back taxes Check box c and enter “8396” on the line next to that box. Help back taxes Reduced home mortgage interest deduction. Help back taxes   If you itemize your deductions on Schedule A (Form 1040), you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit shown on Form 8396, line 3. Help back taxes You must do this even if part of that amount is to be carried forward to 2014. Help back taxes For more information about the home mortgage interest deduction, see chapter 23. Help back taxes Recapture of federal mortgage subsidy. Help back taxes   If you received an MCC with your mortgage loan, you may have to recapture (pay back) all or part of the benefit you received from that program. Help back taxes The recapture may be required if you sell or dispose of your home at a gain during the first 9 years after the date you closed your mortgage loan. Help back taxes See the Instructions for Form 8828 and chapter 15 for more information. Help back taxes More information. Help back taxes   For more information on the credit, see the Form 8396 instructions. Help back taxes Nonrefundable Credit for Prior Year Minimum Tax The tax laws give special treatment to some kinds of income and allow special deductions and credits for some kinds of expenses. Help back taxes If you benefit from these laws, you may have to pay at least a minimum amount of tax in addition to any other tax on these items. Help back taxes This is called the alternative minimum tax. Help back taxes The special treatment of some items of income and expenses only allows you to postpone paying tax until a later year. Help back taxes If in prior years you paid alternative minimum tax because of these tax postponement items, you may be able to take a credit for prior year minimum tax against your current year's regular tax. Help back taxes You may be able to take a credit against your regular tax if for 2012 you had: An alternative minimum tax liability and adjustments or preferences other than exclusion items, A minimum tax credit that you are carrying forward to 2013, or An unallowed qualified electric vehicle credit. Help back taxes How to take the credit. Help back taxes    Figure your 2013 nonrefundable credit (if any), and any carryforward to 2014 on Form 8801, and attach it to your Form 1040. Help back taxes Include the credit in your total for Form 1040, line 53, and check box b. Help back taxes You can carry forward any unused credit for prior year minimum tax to later years until it is completely used. Help back taxes More information. Help back taxes   For more information on the credit, see the Instructions for Form 8801. Help back taxes Plug-in Electric Drive Motor Vehicle Credit You may be able to take this credit if you placed in service for business or personal use a qualified plug-in electric drive motor vehicle or a qualified two- or three-wheeled plug-in electric vehicle in 2013 and you meet some other requirements. Help back taxes Qualified plug-in electric drive motor vehicle. Help back taxes   This is a new vehicle with at least four wheels that: Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Help back taxes Qualified two- or three-wheeled plug-in electric vehicle. Help back taxes   This is a new vehicle with two or three wheels that: Is capable of achieving a speed of 45 miles per hour or greater, Is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 2. Help back taxes 5 kilowatt hours and is capable of being recharged from an external source of electricity, and Has a gross vehicle weight of less than 14,000 pounds. Help back taxes Certification and other requirements. Help back taxes   Generally, you can rely on the manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification to the IRS that a specific make, model, and model year vehicle qualifies for the credit and, if applicable, the amount of the credit for which it qualifies. Help back taxes However, if the IRS publishes an announcement that the certification for any specific make, model, and model year vehicle has been withdrawn, you cannot rely on the certification for such a vehicle purchased after the date of publication of the withdrawal announcement. Help back taxes   The following requirements must also be met to qualify for the credit. Help back taxes You are the owner of the vehicle. Help back taxes If the vehicle is leased, only the lessor, and not the lessee, is entitled to the credit. Help back taxes You placed the vehicle in service during 2013. Help back taxes The vehicle is manufactured primarily for use on public streets, roads, and highways. Help back taxes The original use of the vehicle began with you. Help back taxes You acquired the vehicle for your use or to lease to others, and not for resale. Help back taxes In the case of the qualified two- or three-wheeled plug-in electric vehicle, the vehicle is acquired after 2011 and before 2014. Help back taxes You use the vehicle primarily in the United States. Help back taxes How to take the credit. Help back taxes   To take the credit, you must complete Form 8936 and attach it to your Form 1040. Help back taxes Include the credit in your total for Form 1040, line 53. Help back taxes Check box c and enter “8936” on the line next to that box. Help back taxes More information. Help back taxes   For more information on the credit, see the Form 8936 instructions. Help back taxes Residential Energy Credits You may be able to take one or both of the following credits if you made energy saving improvements to your home located in the United States in 2013. Help back taxes Nonbusiness energy property credit. Help back taxes Residential energy efficient property credit. Help back taxes If you are a member of a condominium management association for a condominium you own or a tenant-stockholder in a cooperative housing corporation, you are treated as having paid your proportionate share of any costs of the association or corporation for purposes of these credits. Help back taxes Nonbusiness energy property credit. Help back taxes   You may be able to take a credit equal to the sum of: 10% of the amount paid or incurred for qualified energy efficiency improvements installed during 2013, and Any residential energy property costs paid or incurred in 2013. Help back taxes   There is a lifetime limit of $500 for all years after 2005, of which only $200 can be for windows; $50 for any advanced main air circulating fan; $150 for any qualified natural gas, propane, or oil furnace or hot water boiler; and $300 for any item of energy efficient building property. Help back taxes    If the total of nonbusiness energy property credits you have taken in previous years (after 2005) is more than $500, you cannot take this credit in 2013. Help back taxes   Qualified energy efficiency improvements are the following improvements that are new, can be expected to remain in use at least 5 years, and meet certain requirements for energy efficiency. Help back taxes Any insulation material or system that is specifically and primarily designed to reduce heat loss or gain of a home. Help back taxes Exterior window (including skylights). Help back taxes Exterior doors. Help back taxes Any metal or asphalt roof that has appropriate pigmented coatings or cooling granules specifically and primarily designed to reduce heat gain of the home. Help back taxes   Residential energy property is any of the following. Help back taxes Certain electric heat pump water heaters; electric heat pumps; central air conditioners; natural gas, propane, or oil water heater; and stoves that use biomass fuel. Help back taxes Qualified natural gas, propane, or oil furnaces; and qualified natural gas, propane, or oil hot water boilers. Help back taxes Certain advanced main air circulating fans used in natural gas, propane, or oil furnaces. Help back taxes Residential energy efficient property credit. Help back taxes   You may be able to take a credit of 30% of your costs of qualified solar electric property, solar water heating property, fuel cell property, small wind energy property, and geothermal heat pump property. Help back taxes The credit amount for costs paid for qualified fuel cell property is limited to $500 for each one-half kilowatt of capacity of the property. Help back taxes Basis reduction. Help back taxes   You must reduce the basis of your home by the amount of any credit allowed. Help back taxes How to take the credit. Help back taxes   Complete Form 5695 and attach it to your Form 1040. Help back taxes Enter the credit on Form 1040, line 52. Help back taxes More information. Help back taxes   For more information on these credits, see the Form 5695 instructions. Help back taxes Retirement Savings Contributions Credit (Saver's Credit) You may be able to take this credit if you, or your spouse if filing jointly, made: Contributions (other than rollover contributions) to a traditional or Roth IRA, Elective deferrals to a 401(k) or 403(b) plan (including designated Roth contributions) or to a governmental 457, SEP, or SIMPLE plan, Voluntary employee contributions to a qualified retirement plan (including the federal Thrift Savings Plan), or Contributions to a 501(c)(18)(D) plan. Help back taxes However, you cannot take the credit if either of the following applies. Help back taxes The amount on Form 1040, line 38, or Form 1040A, line 22, is more than $29,500 ($44,250 if head of household; $59,000 if married filing jointly). Help back taxes The person(s) who made the qualified contribution or elective deferral (a) was born after January 1, 1996, (b) is claimed as a dependent on someone else's 2013 tax return, or (c) was a student (defined next). Help back taxes Student. Help back taxes   You were a student if during any part of 5 calendar months of 2013 you: Were enrolled as a full-time student at a school, or Took a full-time, on-farm training course given by a school or a state, county, or local government agency. Help back taxes School. Help back taxes   A school includes a technical, trade, or mechanical school. Help back taxes It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Help back taxes How to take the credit. Help back taxes   Figure the credit on Form 8880. Help back taxes Enter the credit on your Form 1040, line 50, or your Form 1040A, line 32, and attach Form 8880 to your return. Help back taxes More information. Help back taxes   For more information on the credit, see the Form 8880 instructions. Help back taxes Refundable Credits The credits discussed in this part of the chapter are treated as payments of tax. Help back taxes If the total of these credits, withheld federal income tax, and estimated tax payments is more than your total tax, the excess can be refunded to you. Help back taxes Credit for Tax on Undistributed Capital Gain You must include in your income any amounts that regulated investment companies (commonly called mutual funds) or real estate investment trusts (REITs) allocated to you as capital gain distributions, even if you did not actually receive them. Help back taxes If the mutual fund or REIT paid a tax on the capital gain, you are allowed a credit for the tax since it is considered paid by you. Help back taxes The mutual fund or REIT will send you Form 2439 showing your share of the undistributed capital gains and the tax paid, if any. Help back taxes How to take the credit. Help back taxes   To take the credit, attach Copy B of Form 2439 to your Form 1040. Help back taxes Include the amount from box 2 of your Form 2439 in the total for Form 1040, line 71, and check box a. Help back taxes More information. Help back taxes   See Capital Gain Distributions in chapter 8 for more information on undistributed capital gains. Help back taxes Health Coverage Tax Credit You may be able to take this credit for any month in which all the following statements were true on the first day of the month. Help back taxes You were an eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient, or Pension Benefit Guaranty Corporation (PBGC) pension recipient (defined later); or you were a qualified family member of one of these individuals when the individual died or you finalized a divorce with one of these individuals. Help back taxes You and/or your family members were covered by a qualified health insurance plan for which you paid the entire premiums, or your portion of the premiums, directly to your health plan or to “U. Help back taxes S. Help back taxes Treasury–HCTC. Help back taxes ” You were not enrolled in Medicare Part A, B, or C, or you were enrolled in Medicare but your family member(s) qualified for the HCTC. Help back taxes You were not enrolled in Medicaid or the Children's Health Insurance Program (CHIP). Help back taxes You were not enrolled in the Federal Employees Health Benefits program (FEHBP) or eligible to receive benefits under the U. Help back taxes S. Help back taxes military health system (TRICARE). Help back taxes You were not imprisoned under federal, state, or local authority. Help back taxes Your employer did not pay 50% or more of the cost of coverage. Help back taxes You did not receive a 65% COBRA premium reduction from your former employer or COBRA administrator. Help back taxes But, you cannot take the credit if you can be claimed as a dependent on someone else's 2013 tax return. Help back taxes If you meet all of these conditions, you may be able to take a credit of up to 72. Help back taxes 5% of the amount you paid directly to a qualified health plan for you and any qualifying family members. Help back taxes You cannot take the credit for insurance premiums on coverage that was actually paid for with a National Emergency Grant. Help back taxes The amount you paid for qualified health insurance coverage must be reduced by any Archer MSA and health savings account distributions used to pay for the coverage. Help back taxes You can take this credit on your tax return or have it paid on your behalf in advance to your insurance company. Help back taxes If the credit is paid on your behalf in advance, that amount will reduce the amount of the credit you can take on your tax return. Help back taxes TAA recipient. Help back taxes   You were an eligible TAA recipient on the first day of the month if, for any day in that month or the prior month, you: Received a trade readjustment allowance, or Would have been entitled to receive such an allowance except that you had not exhausted all rights to any unemployment insurance (except additional compensation that is funded by a state and is not reimbursed from any federal funds) to which you were entitled (or would be entitled if you applied). Help back taxes Example. Help back taxes You received a trade adjustment allowance for January 2013. Help back taxes You were an eligible TAA recipient on the first day of January and February. Help back taxes Alternative TAA recipient. Help back taxes   You were an eligible alternative TAA recipient on the first day of the month if, for that month or the prior month, you received benefits under an alternative trade adjustment assistance program for older workers established by the Department of Labor. Help back taxes Example. Help back taxes You received benefits under an alternative trade adjustment assistance program for older workers for October 2013. Help back taxes The program was established by the Department of Labor. Help back taxes You were an eligible alternative TAA recipient on the first day of October and November. Help back taxes RTAA recipient. Help back taxes   You were an eligible RTAA recipient on the first day of the month if, for that month or the prior month, you received benefits under a reemployment trade adjustment assistance program for older workers established by the Department of Labor. Help back taxes PBGC pension recipient. Help back taxes   You were an eligible PBGC pension recipient on the first day of the month, if both of the following apply. Help back taxes You were age 55 or older on the first day of the month. Help back taxes You received a benefit for that month paid by the PBGC under title IV of the Employee Retirement Income Security Act of 1974 (ERISA). Help back taxes If you received a lump-sum payment from the PBGC after August 5, 2002, you meet item (2) above for any month that you would have received a PBGC benefit if you had not received the lump-sum payment. Help back taxes How to take the credit. Help back taxes   To take the credit, complete Form 8885 and attach it to your Form 1040. Help back taxes Include your credit in the total for Form 1040, line 71, and check box c. Help back taxes   You must attach health insurance bills (or COBRA payment coupons) and proof of payment for any amounts you include on Form 8885, line 2. Help back taxes For details, see Publication 502 or Form 8885. Help back taxes More information. Help back taxes   For definitions and special rules, including those relating to qualified health insurance plans, qualifying family members, the effect of certain life events, and employer-sponsored health insurance plans, see Publication 502 and the Form 8885 instructions. Help back taxes Credit for Excess Social Security Tax or Railroad Retirement Tax Withheld Most employers must withhold social security tax from your wages. Help back taxes If you work for a railroad employer, that employer must withhold tier 1 railroad retirement (RRTA) tax and tier 2 RRTA tax. Help back taxes If you worked for two or more employers in 2013, you may have had too much social security tax withheld from your pay. Help back taxes If one or more of those employers was a railroad employer, too much tier 1 RRTA tax may also have been withheld at the 6. Help back taxes 2% rate. Help back taxes You can claim the excess social security or tier 1 RRTA tax as a credit against your income tax when you file your return. Help back taxes For the tier 1 RRTA tax, only use the portion of the tier 1 RRTA tax that was taxed at the 6. Help back taxes 2% rate when figuring if excess tier 1 RRTA tax was withheld; do not include any portion of the tier 1 RRTA tax that was withheld at the Medicare tax rate (1. Help back taxes 45%) or the Additional Medicare Tax rate (. Help back taxes 9%). Help back taxes The following table shows the maximum amount of wages subject to tax and the maximum amount of tax that should have been withheld for 2013. Help back taxes Type of tax Maximum  wages subject to tax Maximum tax that should have been withheld Social security or RRTA tier 1 $113,700 $7,049. Help back taxes 40 RRTA tier 2 $84,300 $3,709. Help back taxes 20 All wages are subject to Medicare tax withholding. Help back taxes   Use Form 843, Claim for Refund and Request for Abatement, to claim a refund of excess tier 2 RRTA tax. Help back taxes Be sure to attach a copy of all of your W-2 forms. Help back taxes Use Worksheet 3-3 in Publication 505, Tax Withholding and Estimated Tax, to help you figure the excess amount. Help back taxes Employer's error. Help back taxes   If any one employer withheld too much social security or tier 1 RRTA tax, you cannot take the excess as a credit against your income tax. Help back taxes The employer should adjust the tax for you. Help back taxes If the employer does not adjust the overcollection, you can file a claim for refund using Form 843. Help back taxes Joint return. Help back taxes   If you are filing a joint return, you cannot add the social security or tier 1 RRTA tax withheld from your spouse's wages to the amount withheld from your wages. Help back taxes Figure the withholding separately for you and your spouse to determine if either of you has excess withholding. Help back taxes How to figure the credit if you did not work for a railroad. Help back taxes   If you did not work for a railroad during 2013, figure the credit as follows: 1. Help back taxes Add all social security tax withheld (but not more than $7,049. Help back taxes 40 for each employer). Help back taxes Enter the total here   2. Help back taxes Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Help back taxes Add lines 1 and 2. Help back taxes If $7,049. Help back taxes 40 or less, stop here. Help back taxes You cannot take  the credit   4. Help back taxes Social security tax limit 7,049. Help back taxes 40 5. Help back taxes Credit. Help back taxes Subtract line 4 from line 3. Help back taxes Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ Example. Help back taxes You are married and file a joint return with your spouse who had no gross income in 2013. Help back taxes During 2013, you worked for the Brown Technology Company and earned $60,000 in wages. Help back taxes Social security tax of $3,720 was withheld. Help back taxes You also worked for another employer in 2013 and earned $55,000 in wages. Help back taxes $3,410 of social security tax was withheld from these wages. Help back taxes Because you worked for more than one employer and your total wages were more than $113,700, you can take a credit of $80. Help back taxes 60 for the excess social security tax withheld. Help back taxes 1. Help back taxes Add all social security tax withheld (but not more than $7,049. Help back taxes 40 for each employer). Help back taxes Enter the total here $7,130. Help back taxes 00 2. Help back taxes Enter any uncollected social security tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT” -0- 3. Help back taxes Add lines 1 and 2. Help back taxes If $7,049. Help back taxes 40 or less, stop here. Help back taxes You cannot take the credit 7,130. Help back taxes 00 4. Help back taxes Social security tax limit 7,049. Help back taxes 40 5. Help back taxes Credit. Help back taxes Subtract line 4 from line 3. Help back taxes Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $80. Help back taxes 60 How to figure the credit if you worked for a railroad. Help back taxes   If you were a railroad employee at any time during 2013, figure the credit as follows: 1. Help back taxes Add all social security and tier 1 RRTA tax withheld at the 6. Help back taxes 2% rate (but not more than $7,049. Help back taxes 40 for each employer). Help back taxes Enter the total here   2. Help back taxes Enter any uncollected social security and tier 1 RRTA tax on tips or group-term life insurance included in the total on Form 1040, line 60, identified by “UT”   3. Help back taxes Add lines 1 and 2. Help back taxes If $7,049. Help back taxes 40 or less, stop here. Help back taxes You cannot take  the credit   4. Help back taxes Social security and tier 1 RRTA  tax limit 7,049. Help back taxes 40 5. Help back taxes Credit. Help back taxes Subtract line 4 from line 3. Help back taxes Enter the result here and on Form 1040, line 69 (or Form 1040A, line 41) $ How to take the credit. Help back taxes   Enter the credit on Form 1040, line 69, or include it in the total for Form 1040A, line 41. Help back taxes More information. Help back taxes   For more information on the credit, see Publication 505. Help back taxes Prev  Up  Next   Home   More Online Publications
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  • 'Free Grants': Don't Take Them For Grant-ed
    The ads claim that you will qualify to receive a "free grant" for your education, your home repairs, your home business, or your unpaid bills. They say your application is guaranteed to be accepted, and you never have to repay the money. But the Federal Trade Commission (FTC) warns that "money for nothing" grant offers often are a scam: the grant isn't free, it isn't guaranteed, and often, it isn't even available to you.
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Help back taxes 7. Help back taxes   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Help back taxes Custodian account for your child. Help back taxes Penalty for failure to supply SSN. Help back taxes Reporting backup withholding. Help back taxes Savings account with parent as trustee. Help back taxes Interest not reported on Form 1099-INT. Help back taxes Nominees. Help back taxes Incorrect amount. Help back taxes Information reporting requirement. Help back taxes Taxable InterestInterest subject to penalty for early withdrawal. Help back taxes Money borrowed to invest in certificate of deposit. Help back taxes U. Help back taxes S. Help back taxes Savings Bonds Education Savings Bond Program U. Help back taxes S. Help back taxes Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Help back taxes How To Report Interest IncomeSchedule B (Form 1040A or 1040). Help back taxes Reporting tax-exempt interest. Help back taxes U. Help back taxes S. Help back taxes savings bond interest previously reported. Help back taxes Reminder Foreign-source income. Help back taxes  If you are a U. Help back taxes S. Help back taxes citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Help back taxes S. Help back taxes law. Help back taxes This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Help back taxes Introduction This chapter discusses the following topics. Help back taxes Different types of interest income. Help back taxes What interest is taxable and what interest is nontaxable. Help back taxes When to report interest income. Help back taxes How to report interest income on your tax return. Help back taxes In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Help back taxes Exceptions to this rule are discussed later in this chapter. Help back taxes You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Help back taxes See Money borrowed to invest in certificate of deposit , later, and chapter 28. Help back taxes Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. Help back taxes S. Help back taxes Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Help back taxes S. Help back taxes Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Help back taxes Recordkeeping. Help back taxes You should keep a list showing sources and interest amounts received during the year. Help back taxes Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Help back taxes Tax on unearned income of certain children. Help back taxes    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Help back taxes If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Help back taxes If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Help back taxes   Some parents can choose to include the child's interest and dividends on the parent's return. Help back taxes If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Help back taxes   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Help back taxes Beneficiary of an estate or trust. Help back taxes   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Help back taxes You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Help back taxes , from the fiduciary. Help back taxes Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Help back taxes Social security number (SSN). Help back taxes   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Help back taxes This includes payers of interest. Help back taxes If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Help back taxes SSN for joint account. Help back taxes   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Help back taxes (For information on who owns the funds in a joint account, see Joint accounts , later. Help back taxes ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Help back taxes This is because only one name and SSN can be shown on Form 1099. Help back taxes   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Help back taxes For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Help back taxes Custodian account for your child. Help back taxes   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Help back taxes For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Help back taxes Penalty for failure to supply SSN. Help back taxes   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Help back taxes See Failure to supply SSN under Penalties in chapter 1. Help back taxes Backup withholding also may apply. Help back taxes Backup withholding. Help back taxes   Your interest income is generally not subject to regular withholding. Help back taxes However, it may be subject to backup withholding to ensure that income tax is collected on the income. Help back taxes Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Help back taxes   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Help back taxes For more information, see Backup Withholding in chapter 4. Help back taxes Reporting backup withholding. Help back taxes   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. Help back taxes The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Help back taxes ” Joint accounts. Help back taxes   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. Help back taxes Income from property given to a child. Help back taxes   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Help back taxes   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Help back taxes Savings account with parent as trustee. Help back taxes   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Help back taxes The savings account legally belongs to the child. Help back taxes The parents are not legally permitted to use any of the funds to support the child. Help back taxes Form 1099-INT. Help back taxes   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Help back taxes This form shows you the interest you received during the year. Help back taxes Keep this form for your records. Help back taxes You do not have to attach it to your tax return. Help back taxes   Report on your tax return the total interest income you receive for the tax year. Help back taxes Interest not reported on Form 1099-INT. Help back taxes   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Help back taxes For example, you may receive distributive shares of interest from partnerships or S corporations. Help back taxes This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Help back taxes , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Help back taxes Nominees. Help back taxes   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Help back taxes   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. Help back taxes Incorrect amount. Help back taxes   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Help back taxes The new Form 1099-INT you receive will be marked “Corrected. Help back taxes ” Form 1099-OID. Help back taxes   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Help back taxes For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Help back taxes Exempt-interest dividends. Help back taxes   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Help back taxes (However, see Information reporting requirement , next. Help back taxes ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Help back taxes You do not reduce your basis for distributions that are exempt-interest dividends. Help back taxes Information reporting requirement. Help back taxes   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Help back taxes This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Help back taxes Note. Help back taxes Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Help back taxes See Alternative Minimum Tax (AMT) in chapter 30 for more information. Help back taxes Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Help back taxes Interest on VA dividends. Help back taxes   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Help back taxes This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Help back taxes Individual retirement arrangements (IRAs). Help back taxes   Interest on a Roth IRA generally is not taxable. Help back taxes Interest on a traditional IRA is tax deferred. Help back taxes You generally do not include it in your income until you make withdrawals from the IRA. Help back taxes See chapter 17. Help back taxes Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Help back taxes The following are some sources of taxable interest. Help back taxes Dividends that are actually interest. Help back taxes   Certain distributions commonly called dividends are actually interest. Help back taxes You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Help back taxes  The “dividends” will be shown as interest income on Form 1099-INT. Help back taxes Money market funds. Help back taxes   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Help back taxes Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Help back taxes Certificates of deposit and other deferred interest accounts. Help back taxes   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Help back taxes You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Help back taxes The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Help back taxes If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Help back taxes Interest subject to penalty for early withdrawal. Help back taxes   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Help back taxes You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Help back taxes See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. Help back taxes Money borrowed to invest in certificate of deposit. Help back taxes   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Help back taxes You must report the total interest you earn on the certificate in your income. Help back taxes If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Help back taxes See Interest Expenses in chapter 3 of Publication 550. Help back taxes Example. Help back taxes You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Help back taxes The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Help back taxes The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Help back taxes The bank also gives you a statement showing that you paid $310 interest for 2013. Help back taxes You must include the $575 in your income. Help back taxes If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Help back taxes Gift for opening account. Help back taxes   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Help back taxes   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Help back taxes For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Help back taxes The value is determined by the cost to the financial institution. Help back taxes Example. Help back taxes You open a savings account at your local bank and deposit $800. Help back taxes The account earns $20 interest. Help back taxes You also receive a $15 calculator. Help back taxes If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Help back taxes You must report $35 interest income on your tax return. Help back taxes Interest on insurance dividends. Help back taxes   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Help back taxes However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Help back taxes Prepaid insurance premiums. Help back taxes   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Help back taxes U. Help back taxes S. Help back taxes obligations. Help back taxes   Interest on U. Help back taxes S. Help back taxes obligations, such as U. Help back taxes S. Help back taxes Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Help back taxes Interest on tax refunds. Help back taxes   Interest you receive on tax refunds is taxable income. Help back taxes Interest on condemnation award. Help back taxes   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Help back taxes Installment sale payments. Help back taxes   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Help back taxes That interest is taxable when you receive it. Help back taxes If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Help back taxes See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Help back taxes Interest on annuity contract. Help back taxes   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Help back taxes Usurious interest. Help back taxes   Usurious interest is interest charged at an illegal rate. Help back taxes This is taxable as interest unless state law automatically changes it to a payment on the principal. Help back taxes Interest income on frozen deposits. Help back taxes   Exclude from your gross income interest on frozen deposits. Help back taxes A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Help back taxes   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Help back taxes If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. Help back taxes   The interest you exclude is treated as credited to your account in the following year. Help back taxes You must include it in income in the year you can withdraw it. Help back taxes Example. Help back taxes $100 of interest was credited on your frozen deposit during the year. Help back taxes You withdrew $80 but could not withdraw any more as of the end of the year. Help back taxes You must include $80 in your income and exclude $20 from your income for the year. Help back taxes You must include the $20 in your income for the year you can withdraw it. Help back taxes Bonds traded flat. Help back taxes   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Help back taxes The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Help back taxes When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Help back taxes Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Help back taxes See Bonds Sold Between Interest Dates , later, for more information. Help back taxes Below-market loans. Help back taxes   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Help back taxes See Below-Market Loans in chapter 1 of Publication 550 for more information. Help back taxes U. Help back taxes S. Help back taxes Savings Bonds This section provides tax information on U. Help back taxes S. Help back taxes savings bonds. Help back taxes It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Help back taxes For other information on U. Help back taxes S. Help back taxes savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Help back taxes O. Help back taxes Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Help back taxes O. Help back taxes Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Help back taxes O. Help back taxes Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Help back taxes treasurydirect. Help back taxes gov/indiv/indiv. Help back taxes htm. Help back taxes Accrual method taxpayers. Help back taxes   If you use an accrual method of accounting, you must report interest on U. Help back taxes S. Help back taxes savings bonds each year as it accrues. Help back taxes You cannot postpone reporting interest until you receive it or until the bonds mature. Help back taxes Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Help back taxes Cash method taxpayers. Help back taxes   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Help back taxes S. Help back taxes savings bonds when you receive it. Help back taxes The cash method of accounting is explained in chapter 1 under Accounting Methods. Help back taxes But see Reporting options for cash method taxpayers , later. Help back taxes Series HH bonds. Help back taxes    These bonds were issued at face value. Help back taxes Interest is paid twice a year by direct deposit to your bank account. Help back taxes If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Help back taxes   Series HH bonds were first offered in 1980 and last offered in August 2004. Help back taxes Before 1980, series H bonds were issued. Help back taxes Series H bonds are treated the same as series HH bonds. Help back taxes If you are a cash method taxpayer, you must report the interest when you receive it. Help back taxes   Series H bonds have a maturity period of 30 years. Help back taxes Series HH bonds mature in 20 years. Help back taxes The last series H bonds matured in 2009. Help back taxes Series EE and series I bonds. Help back taxes   Interest on these bonds is payable when you redeem the bonds. Help back taxes The difference between the purchase price and the redemption value is taxable interest. Help back taxes Series EE bonds. Help back taxes   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Help back taxes   Before July 1980, series E bonds were issued. Help back taxes The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Help back taxes Paper series EE and series E bonds are issued at a discount. Help back taxes The face value is payable to you at maturity. Help back taxes Electronic series EE bonds are issued at their face value. Help back taxes The face value plus accrued interest is payable to you at maturity. Help back taxes As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Help back taxes   Owners of paper series EE bonds can convert them to electronic bonds. Help back taxes These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Help back taxes Series I bonds. Help back taxes   Series I bonds were first offered in 1998. Help back taxes These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Help back taxes The face value plus all accrued interest is payable to you at maturity. Help back taxes Reporting options for cash method taxpayers. Help back taxes   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Help back taxes Method 1. Help back taxes Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Help back taxes (However, see Savings bonds traded , later. Help back taxes )  Note. Help back taxes Series EE bonds issued in 1983 matured in 2013. Help back taxes If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Help back taxes The last series E bonds were issued in 1980 and matured in 2010. Help back taxes If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Help back taxes Method 2. Help back taxes Choose to report the increase in redemption value as interest each year. Help back taxes You must use the same method for all series EE, series E, and series I bonds you own. Help back taxes If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Help back taxes    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Help back taxes To learn how, see Education Savings Bond Program, later. Help back taxes Change from method 1. Help back taxes   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Help back taxes In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Help back taxes   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Help back taxes Change from method 2. Help back taxes   To change from method 2 to method 1, you must request permission from the IRS. Help back taxes Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Help back taxes You have typed or printed the following number at the top: “131. Help back taxes ” It includes your name and social security number under “131. Help back taxes ” It includes the year of change (both the beginning and ending dates). Help back taxes It identifies the savings bonds for which you are requesting this change. Help back taxes It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Help back taxes   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Help back taxes   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Help back taxes On the statement, type or print “Filed pursuant to section 301. Help back taxes 9100-2. Help back taxes ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Help back taxes    By the date you file the original statement with your return, you must also send a signed copy to the address below. Help back taxes   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Help back taxes O. Help back taxes Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Help back taxes   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. Help back taxes In that case, follow the form instructions for an automatic change. Help back taxes No user fee is required. Help back taxes Co-owners. Help back taxes   If a U. Help back taxes S. Help back taxes savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Help back taxes One co-owner's funds used. Help back taxes    If you used your funds to buy the bond, you must pay the tax on the interest. Help back taxes This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Help back taxes Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Help back taxes The co-owner who redeemed the bond is a “nominee. Help back taxes ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. Help back taxes Both co-owners' funds used. Help back taxes   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Help back taxes Community property. Help back taxes   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Help back taxes If you file separate returns, each of you generally must report one-half of the bond interest. Help back taxes For more information about community property, see Publication 555. Help back taxes Table 7-1. Help back taxes   These rules are also shown in Table 7-1. Help back taxes Ownership transferred. Help back taxes   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Help back taxes But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Help back taxes   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Help back taxes Purchased jointly. Help back taxes   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Help back taxes The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Help back taxes This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Help back taxes   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Help back taxes But the new co-owner will report only his or her share of the interest earned after the transfer. Help back taxes   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Help back taxes    Table 7-1. Help back taxes Who Pays the Tax on U. Help back taxes S. Help back taxes Savings Bond Interest IF . Help back taxes . Help back taxes . Help back taxes THEN the interest must be reported by . Help back taxes . Help back taxes . Help back taxes you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Help back taxes you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Help back taxes you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Help back taxes you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Help back taxes If you file separate returns, both you and your spouse generally report one-half of the interest. Help back taxes Example 1. Help back taxes You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Help back taxes The bond was issued to you and your spouse as co-owners. Help back taxes You both postpone reporting interest on the bond. Help back taxes You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Help back taxes At that time neither you nor your spouse has to report the interest earned to the date of reissue. Help back taxes Example 2. Help back taxes You bought a $1,000 series EE savings bond entirely with your own funds. Help back taxes The bond was issued to you and your spouse as co-owners. Help back taxes You both postpone reporting interest on the bond. Help back taxes You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Help back taxes You must report half the interest earned to the date of reissue. Help back taxes Transfer to a trust. Help back taxes   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Help back taxes However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Help back taxes You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Help back taxes   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Help back taxes See Savings bonds traded , later. Help back taxes Decedents. Help back taxes   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Help back taxes This is explained in chapter 1 of Publication 550. Help back taxes Savings bonds traded. Help back taxes   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Help back taxes (You cannot trade series I bonds for series HH bonds. Help back taxes After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Help back taxes ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Help back taxes When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Help back taxes Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Help back taxes Example. Help back taxes You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Help back taxes You reported the $223 as taxable income on your tax return. Help back taxes At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Help back taxes You hold the series HH bonds until maturity, when you receive $2,500. Help back taxes You must report $300 as interest income in the year of maturity. Help back taxes This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Help back taxes (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Help back taxes ) Choice to report interest in year of trade. Help back taxes   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. Help back taxes If you made this choice, it is treated as a change from method 1. Help back taxes See Change from method 1 under Series EE and series I bonds, earlier. Help back taxes Form 1099-INT for U. Help back taxes S. Help back taxes savings bonds interest. Help back taxes   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Help back taxes Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Help back taxes However, your Form 1099-INT may show more interest than you have to include on your income tax return. Help back taxes For example, this may happen if any of the following are true. Help back taxes You chose to report the increase in the redemption value of the bond each year. Help back taxes The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Help back taxes You received the bond from a decedent. Help back taxes The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Help back taxes Ownership of the bond was transferred. Help back taxes The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Help back taxes You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Help back taxes The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Help back taxes (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Help back taxes ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Help back taxes The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Help back taxes (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Help back taxes , for the year of distribution. Help back taxes )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Help back taxes Publication 550 includes examples showing how to report these amounts. Help back taxes    Interest on U. Help back taxes S. Help back taxes savings bonds is exempt from state and local taxes. Help back taxes The Form 1099-INT you receive will indicate the amount that is for U. Help back taxes S. Help back taxes savings bond interest in box 3. Help back taxes Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Help back taxes S. Help back taxes savings bonds during the year if you pay qualified higher educational expenses during the same year. Help back taxes This exclusion is known as the Education Savings Bond Program. Help back taxes You do not qualify for this exclusion if your filing status is married filing separately. Help back taxes Form 8815. Help back taxes   Use Form 8815 to figure your exclusion. Help back taxes Attach the form to your Form 1040 or Form 1040A. Help back taxes Qualified U. Help back taxes S. Help back taxes savings bonds. Help back taxes   A qualified U. Help back taxes S. Help back taxes savings bond is a series EE bond issued after 1989 or a series I bond. Help back taxes The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Help back taxes You must be at least 24 years old before the bond's issue date. Help back taxes For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Help back taxes    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Help back taxes Beneficiary. Help back taxes   You can designate any individual (including a child) as a beneficiary of the bond. Help back taxes Verification by IRS. Help back taxes   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Help back taxes Qualified expenses. Help back taxes   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Help back taxes   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Help back taxes   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Help back taxes Eligible educational institutions. Help back taxes   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. Help back taxes S. Help back taxes Department of Education. Help back taxes Reduction for certain benefits. Help back taxes   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Help back taxes Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Help back taxes Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Help back taxes Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Help back taxes Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Help back taxes Any expense used in figuring the American Opportunity and lifetime learning credits. Help back taxes Amount excludable. Help back taxes   If the total proceeds (interest and principal) from the qualified U. Help back taxes S. Help back taxes savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Help back taxes If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Help back taxes   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Help back taxes The numerator of the fraction is the qualified higher educational expenses you paid during the year. Help back taxes The denominator of the fraction is the total proceeds you received during the year. Help back taxes Example. Help back taxes In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Help back taxes S. Help back taxes savings bond they bought in April 1997. Help back taxes They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Help back taxes In 2013, they paid $4,000 of their daughter's college tuition. Help back taxes They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Help back taxes They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Help back taxes They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Help back taxes Modified adjusted gross income limit. Help back taxes   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. Help back taxes You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. Help back taxes   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. Help back taxes   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Help back taxes If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. Help back taxes   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. Help back taxes Recordkeeping. Help back taxes If you claim the interest exclusion, you must keep a written record of the qualified U. Help back taxes S. Help back taxes savings bonds you redeem. Help back taxes Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Help back taxes You can use Form 8818 to record this information. Help back taxes You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Help back taxes U. Help back taxes S. Help back taxes Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Help back taxes S. Help back taxes Government. Help back taxes Taxation of interest. Help back taxes   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Help back taxes You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Help back taxes   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Help back taxes Treasury bills. Help back taxes   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Help back taxes They are generally issued at a discount in the amount of $100 and multiples of $100. Help back taxes The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Help back taxes Generally, you report this interest income when the bill is paid at maturity. Help back taxes If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. Help back taxes Treasury notes and bonds. Help back taxes   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Help back taxes Maturity periods for Treasury bonds are longer than 10 years. Help back taxes Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Help back taxes Generally, you report this interest for the year paid. Help back taxes For more information, see U. Help back taxes S. Help back taxes Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Help back taxes For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Help back taxes O. Help back taxes Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Help back taxes treasurydirect. Help back taxes gov/indiv/indiv. Help back taxes htm. Help back taxes For information on series EE, series I, and series HH savings bonds, see U. Help back taxes S. Help back taxes Savings Bonds , earlier. Help back taxes Treasury inflation-protected securities (TIPS). Help back taxes   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Help back taxes For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Help back taxes Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. Help back taxes You must report that part of the sales price as interest income for the year of sale. Help back taxes If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Help back taxes When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. Help back taxes See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Help back taxes Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Help back taxes But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Help back taxes For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Help back taxes Annuity. Help back taxes   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. Help back taxes See chapter 10 for information on pension and annuity income from nonqualified plans. Help back taxes State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. Help back taxes Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. Help back taxes Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. Help back taxes For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. Help back taxes Information reporting requirement. Help back taxes   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Help back taxes This is an information reporting requirement only. Help back taxes It does not change tax-exempt interest to taxable interest. Help back taxes Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Help back taxes You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. Help back taxes A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Help back taxes OID is the difference between the stated redemption price at maturity and the issue price. Help back taxes All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Help back taxes Zero coupon bonds are one example of these instruments. Help back taxes The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). Help back taxes See Discount on Short-Term Obligations in chapter 1 of Publication 550. Help back taxes De minimis OID. Help back taxes   You can treat the discount as zero if it is less than one-fourth of 1% (. Help back taxes 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Help back taxes This small discount is known as “de minimis” OID. Help back taxes Example 1. Help back taxes You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Help back taxes One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Help back taxes Because the $20 discount is less than $25, the OID is treated as zero. Help back taxes (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Help back taxes ) Example 2. Help back taxes The facts are the same as in Example 1, except that the bond was issued at $950. Help back taxes The OID is $50. Help back taxes Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. Help back taxes Debt instrument bought after original issue. Help back taxes   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Help back taxes If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Help back taxes See Market Discount Bonds in chapter 1 of Publication 550. Help back taxes Exceptions to reporting OID. Help back taxes   The OID rules discussed in this chapter do not apply to the following debt instruments. Help back taxes Tax-exempt obligations. Help back taxes (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Help back taxes U. Help back taxes S. Help back taxes savings bonds. Help back taxes Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Help back taxes Obligations issued by an individual before March 2, 1984. Help back taxes Loans between individuals if all the following are true. Help back taxes The lender is not in the business of lending money. Help back taxes The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Help back taxes Avoiding any federal tax is not one of the principal purposes of the loan. Help back taxes Form 1099-OID. Help back taxes   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. Help back taxes Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Help back taxes It also will show, in box 2, the stated interest you must include in your income. Help back taxes A copy of Form 1099-OID will be sent to the IRS. Help back taxes Do not file your copy with your return. Help back taxes Keep it for your records. Help back taxes   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Help back taxes But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Help back taxes Form 1099-OID not received. Help back taxes   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Help back taxes gov that list total OID on certain debt instruments and have information that will help you figure OID. Help back taxes For the latest OID tables, go to www. Help back taxes irs. Help back taxes gov and enter “OID tables” in the Search box. Help back taxes If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Help back taxes Nominee. Help back taxes   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. Help back taxes Refiguring OID shown on Form 1099-OID. Help back taxes   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Help back taxes You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Help back taxes The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Help back taxes For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. Help back taxes Refiguring periodic interest shown on Form 1099-OID. Help back taxes   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. Help back taxes Certificates of deposit (CDs). Help back taxes   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. Help back taxes   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Help back taxes , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Help back taxes Bearer CDs. Help back taxes   CDs issued after 1982 generally must be in registered form. Help back taxes Bearer CDs are CDs not in registered form. Help back taxes They are not issued in the depositor's name and are transferable from one individual to another. Help back taxes   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Help back taxes More information. Help back taxes   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Help back taxes When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. Help back taxes Cash method. Help back taxes   Most individual taxpayers use the cash method. Help back taxes If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Help back taxes However, there are special rules for reporting the discount on certain debt instruments. Help back taxes See U. Help back taxes S. Help back taxes Savings Bonds and Original Issue Discount (OID) , earlier. Help back taxes Example. Help back taxes On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Help back taxes You are not in the business of lending money. Help back taxes The note stated that principal and interest would be due on August 31, 2013. Help back taxes In 2013, you received $2,508. Help back taxes 80 ($2,000 principal and $508. Help back taxes 80 interest). Help back taxes If you use the cash method, you must include in income on your 2013 return the $508. Help back taxes 80 interest you received in that year. Help back taxes Constructive receipt. Help back taxes   You constructively receive income when it is credited to your account or made available to you. Help back taxes You do not need to have physical possession of it. Help back taxes For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. Help back taxes This is true even if they are not yet entered in your passbook. Help back taxes   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. Help back taxes Accrual method. Help back taxes   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Help back taxes Interest is earned over the term of the debt instrument. Help back taxes Example. Help back taxes If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Help back taxes You would report the interest as follows: 2011, $80; 2012, $249. Help back taxes 60; and 2013, $179. Help back taxes 20. Help back taxes Coupon bonds. Help back taxes   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Help back taxes It does not matter when you mail the coupon for payment. Help back taxes How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. Help back taxes You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Help back taxes Instead, you must use Form 1040A or Form 1040. Help back taxes Form 1040A. Help back taxes   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Help back taxes Your taxable interest income is more than $1,500. Help back taxes You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Help back taxes You received interest from a seller-financed mortgage, and the buyer used the property as a home. Help back taxes You received a Form 1099-INT for U. Help back taxes S. Help back taxes savings bond interest that includes amounts you reported before 2013. Help back taxes You received, as a nominee, interest that actually belongs to someone else. Help back taxes You received a Form 1099-INT for interest on frozen deposits. Help back taxes You are reporting OID in an amount less than the amount shown on Form 1099-OID. Help back taxes You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Help back taxes You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). Help back taxes List each payer's name and the amount of interest income received from each payer on line 1. Help back taxes If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Help back taxes   You cannot use Form 1040A if you must use Form 1040, as described next. Help back taxes Form 1040. Help back taxes   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. Help back taxes Schedule B (Form 1040A or 1040). Help back taxes   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Help back taxes Your taxable interest income is more than $1,500. Help back taxes You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Help back taxes You received interest from a seller-financed mortgage, and the buyer used the property as a home. Help back taxes You received a Form 1099-INT for U. Help back taxes S. Help back taxes savings bond interest that includes amounts you reported before 2013. Help back taxes You received, as a nominee, interest that actually belongs to someone else. Help back taxes You received a Form 1099-INT for interest on frozen deposits. Help back taxes You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Help back taxes You are reporting OID in an amount less than the amount shown on Form 1099-OID. Help back taxes Statement (2) in the preceding list under Form 1040 is true. Help back taxes In Part I, line 1, list each payer's name and the amount received from each. Help back taxes If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Help back taxes Reporting tax-exempt interest. Help back taxes   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. Help back taxes Add these amounts to any other tax-exempt interest you received. Help back taxes Report the total on line 8b of Form 1040A or 1040. Help back taxes   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Help back taxes Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Help back taxes   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. Help back taxes These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Help back taxes Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Help back taxes    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Help back taxes Form 1099-INT. Help back taxes   Your taxable interest income, except for interest from U. Help back taxes S. Help back taxes savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Help back taxes Add this amount to any other taxable interest income you received. Help back taxes You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Help back taxes Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Help back taxes Your identifying number may be truncated on any paper Form 1099-INT you receive. Help back taxes   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. Help back taxes See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Help back taxes   Box 3 of Form 1099-INT shows the interest income you received from U. Help back taxes S. Help back taxes savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Help back taxes Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. Help back taxes If part of the amount shown in box 3 was previously included in your interest income, see U. Help back taxes S. Help back taxes savings bond interest previously reported , later. Help back taxes   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Help back taxes Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). Help back taxes   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Help back taxes See chapter 28 for more information about investment expenses. Help back taxes   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Help back taxes You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). Help back taxes To take the credit, you may have to file Form 1116, Foreign Tax Credit. Help back taxes For more information, see Publication 514, Foreign Tax Credit for Individuals. Help back taxes U. Help back taxes S. Help back taxes savings bond interest previously reported. Help back taxes   If you received a Form 1099-INT for U. Help back taxes S. Help back taxes savings bond interest, the form may show interest you do not have to report. Help back taxes See Form 1099-INT for U. Help back taxes S. Help back taxes savings bonds interest , earlier, under U. Help back taxes S. Help back taxes Savings Bonds. Help back taxes   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Help back taxes Then follow these steps. Help back taxes Several lines above line 2, enter a subtotal of all interest listed on line 1. Help back taxes Below the subtotal enter “U. Help back taxes S. Help back taxes Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Help back taxes Subtract these amounts from the subtotal and enter the result on line 2. Help back taxes More information. Help back taxes   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Help back taxes Prev  Up  Next   Home   More Online Publications