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Irs Forms 1040 Ez

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Irs Forms 1040 Ez

Irs forms 1040 ez 1. Irs forms 1040 ez   Filing Information Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Filing RequirementsWhen To File and Pay Foreign Currency Does My Return Have To Be On Paper? Where To File Nonresident Alien Spouse Treated as a ResidentSocial Security Number (SSN) How To Make the Choice Suspending the Choice Ending the Choice Estimated Tax Other Forms You May Have To File Topics - This chapter discusses: Whether you have to file a return, When to file your return and pay any tax due, How to treat foreign currency, How to file electronically, Where to file your return, When you can treat your nonresident alien spouse as a resident, and When you may have to make estimated tax payments. Irs forms 1040 ez Useful Items - You may want to see: Publication 3 Armed Forces' Tax Guide 501 Exemptions, Standard Deduction, and Filing Information 505 Tax Withholding and Estimated Tax 519 U. Irs forms 1040 ez S. Irs forms 1040 ez Tax Guide for Aliens 970 Tax Benefits for Education Form (and Instructions) 1040-ES Estimated Tax for Individuals 1040X Amended U. Irs forms 1040 ez S. Irs forms 1040 ez Individual Income Tax Return 2350 Application for Extension of Time To File U. Irs forms 1040 ez S. Irs forms 1040 ez Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 4868 Application for Automatic Extension of Time To File U. Irs forms 1040 ez S. Irs forms 1040 ez Individual Income Tax Return 8822 Change of Address See chapter 7 for information about getting these publications and forms. Irs forms 1040 ez Filing Requirements If you are a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad. Irs forms 1040 ez Your income, filing status, and age generally determine whether you must file an income tax return. Irs forms 1040 ez Generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table. Irs forms 1040 ez Filing Status*   Amount Single $10,000 65 or older $11,500 Head of household $12,850 65 or older $14,350 Qualifying widow(er) $16,100 65 or older $17,300 Married filing jointly $20,000 Not living with spouse at end of year $3,900 One spouse 65 or older $21,200 Both spouses 65 or older $22,400 Married filing separately $3,900 *If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return. Irs forms 1040 ez Gross income. Irs forms 1040 ez   This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax. Irs forms 1040 ez   For purposes of determining whether you must file a return, gross income includes any income that you can exclude as foreign earned income or as a foreign housing amount. Irs forms 1040 ez If you are self-employed, your gross income includes the amount on Part I, line 7 of Schedule C (Form 1040), Profit or Loss From Business, or line 1 of Schedule C-EZ (Form 1040), Net Profit From Business. Irs forms 1040 ez Self-employed individuals. Irs forms 1040 ez   If your net earnings from self-employment are $400 or more, you must file a return even if your gross income is below the amount listed for your filing status in the table shown earlier. Irs forms 1040 ez Net earnings from self-employment are defined in Publication 334, Tax Guide for Small Business. Irs forms 1040 ez 65 or older. Irs forms 1040 ez   You are considered to be age 65 on the day before your 65th birthday. Irs forms 1040 ez For example, if your 65th birthday is on January 1, 2014, you are considered 65 for 2013. Irs forms 1040 ez Residents of U. Irs forms 1040 ez S. Irs forms 1040 ez possessions. Irs forms 1040 ez   If you are (or were) a bona fide resident of a U. Irs forms 1040 ez S. Irs forms 1040 ez possession, you may be required to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U. Irs forms 1040 ez S. Irs forms 1040 ez Possession. Irs forms 1040 ez See the instructions for the form for more information. Irs forms 1040 ez When To File and Pay If you file on a calendar year basis, the due date for filing your return is April 15 of the following year. Irs forms 1040 ez If you file on a fiscal year basis (a year ending on the last day of any month except December), the due date is 3 months and 15 days after the close of your fiscal year. Irs forms 1040 ez In general, the tax shown on your return should be paid by the due date of the return, without regard to any extension of time for filing the return. Irs forms 1040 ez When the due date for doing any act for tax purposes—filing a return, paying taxes, etc. Irs forms 1040 ez — falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. Irs forms 1040 ez A tax return delivered by the U. Irs forms 1040 ez S. Irs forms 1040 ez mail or a designated delivery service that is postmarked or dated by the delivery service on or before the due date is considered to have been filed on or before that date. Irs forms 1040 ez See your Form 1040 or Form 1040A instructions for a list of designated delivery services. Irs forms 1040 ez Foreign wire transfers. Irs forms 1040 ez   If you have a U. Irs forms 1040 ez S. Irs forms 1040 ez bank account, you can use: EFTPS (Electronic Federal Tax Payment System), or Federal Tax Application (same-day wire transfer). Irs forms 1040 ez If you do not have a U. Irs forms 1040 ez S. Irs forms 1040 ez bank account, ask if your financial institution has a U. Irs forms 1040 ez S. Irs forms 1040 ez affiliate that can help you make same-day wire transfers. Irs forms 1040 ez   For more information, visit www. Irs forms 1040 ez eftps. Irs forms 1040 ez gov. Irs forms 1040 ez Extensions You can get an extension of time to file your return. Irs forms 1040 ez In some circumstances, you also can get an extension of time to file and pay any tax due. Irs forms 1040 ez However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. Irs forms 1040 ez This publication discusses four extensions: an automatic 2-month extension, an automatic 6-month extension, an additional extension for taxpayers out of the country, and an extension of time to meet tests. Irs forms 1040 ez If you served in a combat zone or qualified hazardous duty area, see Publication 3 for a discussion of extensions of deadlines. Irs forms 1040 ez Automatic 2-month extension. Irs forms 1040 ez   You are allowed an automatic 2-month extension to file your return and pay federal income tax if you are a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien, and on the regular due date of your return: You are living outside the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Irs forms 1040 ez   If you use a calendar year, the regular due date of your return is April 15. Irs forms 1040 ez Even if you are allowed an extension, you will have to pay interest on any tax not paid by the regular due date of your return. Irs forms 1040 ez Married taxpayers. Irs forms 1040 ez   If you file a joint return, either you or your spouse can qualify for the automatic extension. Irs forms 1040 ez If you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies for it. Irs forms 1040 ez How to get the extension. Irs forms 1040 ez   To use this automatic 2-month extension, you must attach a statement to your return explaining which of the two situations listed earlier qualified you for the extension. Irs forms 1040 ez Automatic 6-month extension. Irs forms 1040 ez   If you are not able to file your return by the due date, you generally can get an automatic 6-month extension of time to file (but not of time to pay). Irs forms 1040 ez To get this automatic extension, you must file a paper Form 4868 or use IRS e-file (electronic filing). Irs forms 1040 ez For more information about filing electronically, see E-file options , later. Irs forms 1040 ez   The form must show your properly estimated tax liability based on the information available to you. Irs forms 1040 ez    You may not be eligible. Irs forms 1040 ez You cannot use the automatic 6-month extension of time to file if: You want the IRS to figure your tax, or You are under a court order to file by the regular due date. Irs forms 1040 ez E-file options. Irs forms 1040 ez    You can use e-file to get an extension of time to file. Irs forms 1040 ez You can either file Form 4868 electronically or you can pay part or all of your estimate of tax due using a credit or debit card. Irs forms 1040 ez   First, complete Form 4868 to use as a worksheet. Irs forms 1040 ez If you think you may owe tax when you file your return, use Part II of the form to estimate your balance due. Irs forms 1040 ez    Then, do one of the following. Irs forms 1040 ez E-file Form 4868. Irs forms 1040 ez You can use a tax software package with your personal computer or a tax professional to file Form 4868 electronically. Irs forms 1040 ez You will need to provide certain information from your tax return for 2012. Irs forms 1040 ez If you wish to make a payment by electronic funds withdrawal, see the instructions for Form 4868. Irs forms 1040 ez If you e-file Form 4868, do not also send a paper Form 4868. Irs forms 1040 ez E-file and pay by credit or debit card. Irs forms 1040 ez You can get an extension by paying part or all of your estimate of tax due by using a credit or debit card. Irs forms 1040 ez You can do this by phone or over the Internet. Irs forms 1040 ez If you do this, you do not file Form 4868. Irs forms 1040 ez For more information, see the instructions for your tax return. Irs forms 1040 ez When to file. Irs forms 1040 ez   Generally, you must request the 6-month extension by the regular due date of your return. Irs forms 1040 ez Previous 2-month extension. Irs forms 1040 ez   If you cannot file your return within the automatic 2-month extension period, you generally can get an additional 4 months to file your return, for a total of 6 months. Irs forms 1040 ez The 2-month period and the 6-month period start at the same time. Irs forms 1040 ez You have to request the additional 4 months by the new due date allowed by the 2-month extension. Irs forms 1040 ez   The additional 4 months of time to file (unlike the original 2-month extension) is not an extension of time to pay. Irs forms 1040 ez You must make an accurate estimate of your tax based on the information available to you. Irs forms 1040 ez If you find you cannot pay the full amount due with Form 4868, you can still get the extension. Irs forms 1040 ez You will owe interest on the unpaid amount from the original due date of the return. Irs forms 1040 ez   You also may be charged a penalty for paying the tax late unless you have reasonable cause for not paying your tax when due. Irs forms 1040 ez Penalties for paying the tax late are assessed from the original due date of your return, unless you qualify for the automatic 2-month extension. Irs forms 1040 ez In that situation, penalties for paying late are assessed from the extended due date of the payment (June 15 for calendar year taxpayers). Irs forms 1040 ez Additional extension of time for taxpayers out of the country. Irs forms 1040 ez   In addition to the 6-month extension, taxpayers who are out of the country can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Irs forms 1040 ez   To request this extension, you must send the Internal Revenue Service a letter explaining the reasons why you need the additional 2 months. Irs forms 1040 ez Send the letter by the extended due date (October 15 for calendar year taxpayers) to the following address: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You will not receive any notification from the Internal Revenue Service unless your request is denied. Irs forms 1040 ez   The discretionary 2-month additional extension is not available to taxpayers who have an approved extension of time to file on Form 2350, discussed next. Irs forms 1040 ez Extension of time to meet tests. Irs forms 1040 ez   You generally cannot get an extension of more than 6 months. Irs forms 1040 ez However, if you are outside the United States and meet certain requirements, you may be able to get a longer extension. Irs forms 1040 ez   You can get an extension of more than 6 months to file your tax return if you need the time to meet either the bona fide residence test or the physical presence test to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction. Irs forms 1040 ez The tests, the exclusions, and the deduction are explained in chapter 4. Irs forms 1040 ez   You should request an extension if all three of the following apply. Irs forms 1040 ez You are a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien. Irs forms 1040 ez You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due. Irs forms 1040 ez Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies. Irs forms 1040 ez   If you are granted an extension, it generally will be to 30 days beyond the date on which you can reasonably expect to qualify for an exclusion or deduction under either the bona fide residence test or the physical presence test. Irs forms 1040 ez However, if you have moving expenses that are for services performed in 2 years, you may be granted an extension until after the end of the second year. Irs forms 1040 ez How to get an extension. Irs forms 1040 ez   To obtain an extension, file Form 2350 either by giving it to a local IRS representative or other IRS employee or by mailing it to the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0045   You must file Form 2350 by the due date for filing your return. Irs forms 1040 ez Generally, if both your tax home and your abode are outside the United States and Puerto Rico on the regular due date of your return and you file on a calendar year basis, the due date for filing your return is June 15. Irs forms 1040 ez What if tests are not met. Irs forms 1040 ez   If you obtain an extension and unforeseen events make it impossible for you to meet either the bona fide residence test or the physical presence test, you should file your income tax return as soon as possible because you must pay interest on any tax due after the regular due date of the return (even though an extension was granted). Irs forms 1040 ez    You should make any request for an extension early, so that if it is denied you still can file your return on time. Irs forms 1040 ez Otherwise, if you file late and additional tax is due, you may be subject to a penalty. Irs forms 1040 ez Return filed before test is met. Irs forms 1040 ez   If you file a return before you meet the bona fide residence test or the physical presence test, you must include all income from both U. Irs forms 1040 ez S. Irs forms 1040 ez and foreign sources and pay the tax on that income. Irs forms 1040 ez If you later meet either of the tests, you can claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction on Form 1040X. Irs forms 1040 ez Foreign Currency You must express the amounts you report on your U. Irs forms 1040 ez S. Irs forms 1040 ez tax return in U. Irs forms 1040 ez S. Irs forms 1040 ez dollars. Irs forms 1040 ez If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. Irs forms 1040 ez S. Irs forms 1040 ez dollars. Irs forms 1040 ez How you do this depends on your functional currency. Irs forms 1040 ez Your functional currency generally is the U. Irs forms 1040 ez S. Irs forms 1040 ez dollar unless you are required to use the currency of a foreign country. Irs forms 1040 ez You must make all federal income tax determinations in your functional currency. Irs forms 1040 ez The U. Irs forms 1040 ez S. Irs forms 1040 ez dollar is the functional currency for all taxpayers except some qualified business units (QBUs). Irs forms 1040 ez A QBU is a separate and clearly identified unit of a trade or business that maintains separate books and records. Irs forms 1040 ez Even if you have a QBU, your functional currency is the dollar if any of the following apply. Irs forms 1040 ez You conduct the business in U. Irs forms 1040 ez S. Irs forms 1040 ez dollars. Irs forms 1040 ez The principal place of business is located in the United States. Irs forms 1040 ez You choose to or are required to use the U. Irs forms 1040 ez S. Irs forms 1040 ez dollar as your functional currency. Irs forms 1040 ez The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. Irs forms 1040 ez Make all income tax determinations in your functional currency. Irs forms 1040 ez If your functional currency is the U. Irs forms 1040 ez S. Irs forms 1040 ez dollar, you must immediately translate into U. Irs forms 1040 ez S. Irs forms 1040 ez dollars all items of income, expense, etc. Irs forms 1040 ez (including taxes), that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Irs forms 1040 ez Use the exchange rate prevailing when you receive, pay, or accrue the item. Irs forms 1040 ez If there is more than one exchange rate, use the one that most properly reflects your income. Irs forms 1040 ez You can generally get exchange rates from banks and U. Irs forms 1040 ez S. Irs forms 1040 ez Embassies. Irs forms 1040 ez If your functional currency is not the U. Irs forms 1040 ez S. Irs forms 1040 ez dollar, make all income tax determinations in your functional currency. Irs forms 1040 ez At the end of the year, translate the results, such as income or loss, into U. Irs forms 1040 ez S. Irs forms 1040 ez dollars to report on your income tax return. Irs forms 1040 ez Blocked Income You generally must report your foreign income in terms of U. Irs forms 1040 ez S. Irs forms 1040 ez dollars and, with one exception (see Fulbright Grant, later), you must pay taxes due on it in U. Irs forms 1040 ez S. Irs forms 1040 ez dollars. Irs forms 1040 ez If, because of restrictions in a foreign country, your income is not readily convertible into U. Irs forms 1040 ez S. Irs forms 1040 ez dollars or into other money or property that is readily convertible into U. Irs forms 1040 ez S. Irs forms 1040 ez dollars, your income is “blocked” or “deferrable” income. Irs forms 1040 ez You can report this income in one of two ways: Report the income and pay your federal income tax with U. Irs forms 1040 ez S. Irs forms 1040 ez dollars that you have in the United States or in some other country, or Postpone the reporting of the income until it becomes unblocked. Irs forms 1040 ez If you choose to postpone the reporting of the income, you must file an information return with your tax return. Irs forms 1040 ez For this information return, you should use another Form 1040 labeled “Report of Deferrable Foreign Income, pursuant to Rev. Irs forms 1040 ez Rul. Irs forms 1040 ez 74-351. Irs forms 1040 ez ” You must declare on the information return that you will include the deferrable income in your taxable income for the year that it becomes unblocked. Irs forms 1040 ez You also must state that you waive any right to claim that the deferrable income was includible in your income for any earlier year. Irs forms 1040 ez You must report your income on your information return using the foreign currency in which you received that income. Irs forms 1040 ez If you have blocked income from more than one foreign country, include a separate information return for each country. Irs forms 1040 ez Income becomes unblocked and reportable for tax purposes when it becomes convertible, or when it is converted, into U. Irs forms 1040 ez S. Irs forms 1040 ez dollars or into other money or property that is convertible into U. Irs forms 1040 ez S. Irs forms 1040 ez currency. Irs forms 1040 ez Also, if you use blocked income for your personal expenses or dispose of it by gift, bequest, or devise, you must treat it as unblocked and reportable. Irs forms 1040 ez If you have received blocked income on which you have not paid tax, you should check to see whether that income is still blocked. Irs forms 1040 ez If it is not, you should take immediate steps to pay tax on it, file a declaration or amended declaration of estimated tax, and include the income on your tax return for the year in which the income became unblocked. Irs forms 1040 ez If you choose to postpone reporting blocked income and in a later tax year you wish to begin including it in gross income although it is still blocked, you must obtain the permission of the IRS to do so. Irs forms 1040 ez To apply for permission, file Form 3115, Application for Change in Accounting Method. Irs forms 1040 ez You also must request permission from the IRS on Form 3115 if you have not chosen to defer the reporting of blocked income in the past, but now wish to begin reporting blocked income under the deferred method. Irs forms 1040 ez See the instructions for Form 3115 for information on changing your accounting method. Irs forms 1040 ez Fulbright Grant All income must be reported in U. Irs forms 1040 ez S. Irs forms 1040 ez dollars. Irs forms 1040 ez In most cases, the tax also must be paid in U. Irs forms 1040 ez S. Irs forms 1040 ez dollars. Irs forms 1040 ez If, however, at least 70% of your Fulbright grant has been paid in nonconvertible foreign currency (blocked income), you can use the currency of the host country to pay the part of the U. Irs forms 1040 ez S. Irs forms 1040 ez tax that is based on the blocked income. Irs forms 1040 ez Paying U. Irs forms 1040 ez S. Irs forms 1040 ez tax in foreign currency. Irs forms 1040 ez   To qualify for this method of payment, you must prepare a statement that shows the following information. Irs forms 1040 ez You were a Fulbright grantee and were paid in nonconvertible foreign currency. Irs forms 1040 ez The total grant you received during the year and the amount you received in nonconvertible foreign currency. Irs forms 1040 ez At least 70% of the grant was paid in nonconvertible foreign currency. Irs forms 1040 ez The statement must be certified by the U. Irs forms 1040 ez S. Irs forms 1040 ez educational foundation or commission paying the grant or other person having control of grant payments to you. Irs forms 1040 ez   You should prepare at least two copies of this statement. Irs forms 1040 ez Attach one copy to your Form 1040 and keep the other copy for identification purposes when you make a tax deposit of nonconvertible foreign currency. Irs forms 1040 ez Figuring actual tax. Irs forms 1040 ez   When you prepare your income tax return, you may owe tax or the entire liability may have been satisfied with your estimated tax payments. Irs forms 1040 ez If you owe tax, figure the part due to (and payable in) the nonconvertible foreign currency by using the following formula. Irs forms 1040 ez   Adjusted gross income that is blocked income × Total U. Irs forms 1040 ez S. Irs forms 1040 ez tax = Tax on blocked income     Total adjusted  gross income     You must attach all of the following to the return. Irs forms 1040 ez A copy of the certified statement discussed earlier. Irs forms 1040 ez A detailed statement showing the allocation of tax attributable to amounts received in foreign currency and the rates of exchange used in determining your tax liability in U. Irs forms 1040 ez S. Irs forms 1040 ez dollars. Irs forms 1040 ez The original deposit receipt for any balance of tax due that you paid in nonconvertible foreign currency. Irs forms 1040 ez Figuring estimated tax on nonconvertible foreign currency. Irs forms 1040 ez   If you are liable for estimated tax (discussed later), figure the amount you can pay to the IRS in nonconvertible foreign currency using the following formula. Irs forms 1040 ez   Adjusted gross income that is blocked income × Total estimated U. Irs forms 1040 ez S. Irs forms 1040 ez tax = Estimated tax on blocked income     Total adjusted  gross income     If you must pay your host country income tax on your grant, subtract any estimated foreign tax credit that applies to your grant from the estimated tax on the blocked income. Irs forms 1040 ez Deposit of foreign currency with disbursing officer. Irs forms 1040 ez   Once you have determined the amount of the actual tax or estimated tax that you can pay in nonconvertible foreign currency, deposit that amount with the disbursing officer of the Department of State in the foreign country in which the foundation or commission paying the grant is located. Irs forms 1040 ez Estimated tax installments. Irs forms 1040 ez   You can either deposit the full estimated tax amount before the first installment due date or make four equal payments before the installment due dates. Irs forms 1040 ez See Estimated Tax , later. Irs forms 1040 ez Deposit receipt. Irs forms 1040 ez   Upon accepting the foreign currency, the disbursing officer will give you a receipt in duplicate. Irs forms 1040 ez The original of this receipt (showing the amount of foreign currency deposited and its equivalent in U. Irs forms 1040 ez S. Irs forms 1040 ez dollars) should be attached to your Form 1040 or payment voucher from Form 1040-ES. Irs forms 1040 ez Keep the copy for your records. Irs forms 1040 ez Does My Return Have To Be On Paper? IRS e-file (electronic filing) is the fastest, easiest, and most convenient way to file your income tax return electronically. Irs forms 1040 ez IRS e-file offers accurate, safe, and fast alternatives to filing on paper. Irs forms 1040 ez IRS computers quickly and automatically check for errors or other missing information. Irs forms 1040 ez Even returns with a foreign address can be e-filed! How to e-file. Irs forms 1040 ez   There are three ways you can e-file. Irs forms 1040 ez Use your personal computer. Irs forms 1040 ez Use a volunteer. Irs forms 1040 ez Many programs offering free tax help can e-file your return. Irs forms 1040 ez Use a tax professional. Irs forms 1040 ez Most tax professionals can e-file your return. Irs forms 1040 ez These methods are explained in detail in the instructions for your tax return. Irs forms 1040 ez Where To File If any of the following situations apply to you, do not file your return with the service center listed for your home state. Irs forms 1040 ez You claim the foreign earned income exclusion. Irs forms 1040 ez You claim the foreign housing exclusion or deduction. Irs forms 1040 ez You live in a foreign country. Irs forms 1040 ez Instead, use one of the following special addresses. Irs forms 1040 ez If you are not enclosing a check or money order, file your return with the: Department of the Treasury Internal Revenue Service Center Austin, TX 73301-0215 USA If you are enclosing a check or money order, file your return with: Internal Revenue Service Center P. Irs forms 1040 ez O. Irs forms 1040 ez Box 1303 Charlotte, NC 28201-1303 USA If you do not know where your legal residence is and you do not have a principal place of business in the United States, you can file with the appropriate address listed above. Irs forms 1040 ez However, you should not file with the addresses listed above if you are a bona fide resident of the U. Irs forms 1040 ez S. Irs forms 1040 ez Virgin Islands, Guam, or the Commonwealth of the Northern Mariana Islands during your entire tax year. Irs forms 1040 ez Resident of U. Irs forms 1040 ez S. Irs forms 1040 ez Virgin Islands (USVI). Irs forms 1040 ez   If you are a bona fide resident of the USVI during your entire tax year, you generally are not required to file a U. Irs forms 1040 ez S. Irs forms 1040 ez return. Irs forms 1040 ez However, you must file a return with the USVI. Irs forms 1040 ez    Send your return to the:     Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay Suite 225 St. Irs forms 1040 ez Thomas, Virgin Islands 00802 Non-USVI resident with USVI income. Irs forms 1040 ez   If you are a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien and you have income from sources in the USVI or income effectively connected with the conduct of a trade or business in the USVI, and you are not a bona fide resident of the USVI during your entire tax year, you must file identical tax returns with the United States and the USVI. Irs forms 1040 ez File the original return with the United States and file a signed copy of the U. Irs forms 1040 ez S. Irs forms 1040 ez return (including all attachments, forms, and schedules) with the Virgin Islands Bureau of Internal Revenue. Irs forms 1040 ez   You must complete Form 8689, Allocation of Individual Income Tax to the U. Irs forms 1040 ez S. Irs forms 1040 ez Virgin Islands, and attach a copy to both your U. Irs forms 1040 ez S. Irs forms 1040 ez return and your USVI return. Irs forms 1040 ez You should file your U. Irs forms 1040 ez S. Irs forms 1040 ez return with the address listed under Where To File. Irs forms 1040 ez   See Publication 570, Tax Guide for Individuals With Income From U. Irs forms 1040 ez S. Irs forms 1040 ez Possessions, for information about filing Virgin Islands returns. Irs forms 1040 ez Resident of Guam. Irs forms 1040 ez   If you are a bona fide resident of Guam during your entire tax year, you should file a return with Guam. Irs forms 1040 ez    Send your return to the:     Department of Revenue and Taxation Government of Guam P. Irs forms 1040 ez O. Irs forms 1040 ez Box 23607 GMF, GU 96921   However, if you have income from sources within Guam and you are a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien, but not a bona fide resident of Guam during the entire tax year, you should file a return with the United States. Irs forms 1040 ez Send your return to the address listed under Where To File. Irs forms 1040 ez   See Publication 570 for information about filing Guam returns. Irs forms 1040 ez Resident of the Commonwealth of the Northern Mariana Islands. Irs forms 1040 ez   If you are a bona fide resident of the Commonwealth of the Northern Mariana Islands (CNMI) during your entire tax year, you should file a return with the Northern Mariana Islands. Irs forms 1040 ez    Send your return to the:      Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. Irs forms 1040 ez O. Irs forms 1040 ez Box 5234, CHRB Saipan, MP 96950   However, if you have income from sources within the CNMI and you are a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien, but not a bona fide resident of the CNMI during the entire tax year, you should file a return with the United States. Irs forms 1040 ez Send your return to the address listed under Where To File. Irs forms 1040 ez   See Publication 570 for information about filing Northern Mariana Islands returns. Irs forms 1040 ez Nonresident Alien Spouse Treated as a Resident If, at the end of your tax year, you are married and one spouse is a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or a resident alien and the other is a nonresident alien, you can choose to treat the nonresident as a U. Irs forms 1040 ez S. Irs forms 1040 ez resident. Irs forms 1040 ez This includes situations in which one of you is a nonresident alien at the beginning of the tax year and a resident alien at the end of the year and the other is a nonresident alien at the end of the year. Irs forms 1040 ez If you make this choice, the following two rules apply. Irs forms 1040 ez You and your spouse are treated, for income tax purposes, as residents for all tax years that the choice is in effect. Irs forms 1040 ez You must file a joint income tax return for the year you make the choice. Irs forms 1040 ez This means that neither of you can claim under any tax treaty not to be a U. Irs forms 1040 ez S. Irs forms 1040 ez resident for a tax year for which the choice is in effect. Irs forms 1040 ez You can file joint or separate returns in years after the year in which you make the choice. Irs forms 1040 ez Example 1. Irs forms 1040 ez Pat Smith, a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen, is married to Norman, a nonresident alien. Irs forms 1040 ez Pat and Norman make the choice to treat Norman as a resident alien by attaching a statement to their joint return. Irs forms 1040 ez Pat and Norman must report their worldwide income for the year they make the choice and for all later years unless the choice is ended or suspended. Irs forms 1040 ez Although Pat and Norman must file a joint return for the year they make the choice, they can file either joint or separate returns for later years. Irs forms 1040 ez Example 2. Irs forms 1040 ez When Bob and Sharon Williams got married, both were nonresident aliens. Irs forms 1040 ez In June of last year, Bob became a resident alien and remained a resident for the rest of the year. Irs forms 1040 ez Bob and Sharon both choose to be treated as resident aliens by attaching a statement to their joint return for last year. Irs forms 1040 ez Bob and Sharon must report their worldwide income for last year and all later years unless the choice is ended or suspended. Irs forms 1040 ez Bob and Sharon must file a joint return for last year, but they can file either joint or separate returns for later years. Irs forms 1040 ez If you do not choose to treat your nonresident alien spouse as a U. Irs forms 1040 ez S. Irs forms 1040 ez resident, you may be able to use head of household filing status. Irs forms 1040 ez To use this status, you must pay more than half the cost of maintaining a household for certain dependents or relatives other than your nonresident alien spouse. Irs forms 1040 ez For more information, see Publication 501. Irs forms 1040 ez Social Security Number (SSN) If you choose to treat your nonresident alien spouse as a U. Irs forms 1040 ez S. Irs forms 1040 ez resident, your spouse must have either an SSN or an individual taxpayer identification number (ITIN). Irs forms 1040 ez To get an SSN for a nonresident alien spouse, apply at an office of the U. Irs forms 1040 ez S. Irs forms 1040 ez Social Security Administration (SSA) or U. Irs forms 1040 ez S. Irs forms 1040 ez consulate. Irs forms 1040 ez You must complete Form SS-5, Application for a Social Security Card, available at www. Irs forms 1040 ez socialsecurity. Irs forms 1040 ez gov or by calling 1-800-772-1213. Irs forms 1040 ez You must also provide original or certified copies of documents to verify that spouse's age, identity, and citizenship. Irs forms 1040 ez If the nonresident alien spouse is not eligible to get an SSN, he or she can file Form W-7, Application for IRS Individual Taxpayer Identification Number, with the IRS to apply for an ITIN. Irs forms 1040 ez How To Make the Choice Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. Irs forms 1040 ez It should contain the following: A declaration that one spouse was a nonresident alien and the other spouse a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien on the last day of your tax year and that you choose to be treated as U. Irs forms 1040 ez S. Irs forms 1040 ez residents for the entire tax year, and The name, address, and social security number (or individual taxpayer identification number) of each spouse. Irs forms 1040 ez (If one spouse died, include the name and address of the person making the choice for the deceased spouse. Irs forms 1040 ez ) You generally make this choice when you file your joint return. Irs forms 1040 ez However, you also can make the choice by filing a joint amended return on Form 1040X. Irs forms 1040 ez Attach Form 1040, 1040A, or 1040EZ and print “Amended” across the top of the amended return. Irs forms 1040 ez If you make the choice with an amended return, you and your spouse also must amend any returns that you may have filed after the year for which you made the choice. Irs forms 1040 ez You generally must file the amended joint return within 3 years from the date you filed your original U. Irs forms 1040 ez S. Irs forms 1040 ez income tax return or 2 years from the date you paid your income tax for that year, whichever is later. Irs forms 1040 ez Table 1–1. Irs forms 1040 ez Ending the Choice To Treat Nonresident Alien Spouse as a Resident Revocation   Either spouse can revoke the choice for any tax year. Irs forms 1040 ez   • The revocation must be made by the due date for filing the tax return for that tax year. Irs forms 1040 ez   • The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. Irs forms 1040 ez The statement revoking the choice must include the following:     • The name, address, and social security number (or taxpayer identification number) of each spouse. Irs forms 1040 ez     • The name and address of any person who is revoking the choice for a deceased spouse. Irs forms 1040 ez     • A list of any states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income. Irs forms 1040 ez   • If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the Internal Revenue Service Center where the last joint return was filed. Irs forms 1040 ez Death   The death of either spouse ends the choice, beginning with the first tax year following the year in which the spouse died. Irs forms 1040 ez   • If the surviving spouse is a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien and is entitled to the joint tax rates as a surviving spouse, the choice will not end until the close of the last year for which these joint rates may be used. Irs forms 1040 ez   • If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died. Irs forms 1040 ez Divorce or  Legal separation   A divorce or legal separation ends the choice as of the beginning of the tax year in which the legal separation occurs. Irs forms 1040 ez Inadequate records   The Internal Revenue Service can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other information necessary to determine the correct income tax liability, or to provide adequate access to those records. Irs forms 1040 ez Suspending the Choice The choice to be treated as a resident alien does not apply to any later tax year if neither of you is a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident alien at any time during the later tax year. Irs forms 1040 ez Example. Irs forms 1040 ez Dick Brown was a resident alien on December 31, 2010, and married to Judy, a nonresident alien. Irs forms 1040 ez They chose to treat Judy as a resident alien and filed a joint 2010 income tax return. Irs forms 1040 ez On January 10, 2012, Dick became a nonresident alien. Irs forms 1040 ez Judy had remained a nonresident alien. Irs forms 1040 ez Because Dick was a resident alien during part of 2012, Dick and Judy can file joint or separate returns for that year. Irs forms 1040 ez Neither Dick nor Judy was a resident alien at any time during 2013 and their choice is suspended for that year. Irs forms 1040 ez For 2013, both are treated as nonresident aliens. Irs forms 1040 ez If Dick becomes a resident alien again in 2014, their choice is no longer suspended and both are treated as resident aliens. Irs forms 1040 ez Ending the Choice Once made, the choice to be treated as a resident applies to all later years unless suspended (as explained earlier) or ended in one of the ways shown in Table 1-1. Irs forms 1040 ez If the choice is ended for any of the reasons listed in Table 1-1, neither spouse can make a choice in any later tax year. Irs forms 1040 ez Estimated Tax The requirements for determining who must pay estimated tax are the same for a U. Irs forms 1040 ez S. Irs forms 1040 ez citizen or resident abroad as for a taxpayer in the United States. Irs forms 1040 ez For current instructions on making estimated tax payments, see Form 1040-ES. Irs forms 1040 ez If you had a tax liability for 2013, you may have to pay estimated tax for 2014. Irs forms 1040 ez Generally, you must make estimated tax payments for 2014 if you expect to owe at least $1,000 in tax for 2014 after subtracting your withholding and credits and you expect your withholding and credits to be less than the smaller of: 90% of the tax to be shown on your 2014 tax return, or 100% of the tax shown on your 2013 tax return. Irs forms 1040 ez (The return must cover all 12 months. Irs forms 1040 ez ) If less than two-thirds of your gross income for 2013 and 2014 is from farming or fishing and your adjusted gross income for 2013 is more than $150,000 ($75,000 if you are married and file separately), substitute 110% for 100% in (2). Irs forms 1040 ez See Publication 505 for more information. Irs forms 1040 ez The first installment of estimated tax is due on April 15, 2014. Irs forms 1040 ez Foreign earned income exclusion. Irs forms 1040 ez   When figuring your estimated gross income, subtract amounts you expect to exclude under the foreign earned income exclusion and the foreign housing exclusion. Irs forms 1040 ez In addition, you can reduce your income by your estimated foreign housing deduction. Irs forms 1040 ez However, you must estimate tax on your nonexcluded income using the tax rates that will apply had you not excluded the income. Irs forms 1040 ez If the actual amount of the exclusion or deduction is less than you estimate, you may have to pay a penalty for underpayment of estimated tax. Irs forms 1040 ez   For more information about figuring your estimated tax, see Publication 505. Irs forms 1040 ez Other Forms You May Have To File FinCEN Form 114 (replaces Form TD F 90-22. Irs forms 1040 ez 1). Irs forms 1040 ez   Beginning October 1, 2013, Form 114, Report of Foreign Bank and Financial Accounts (FBAR), must be filed instead of Form TD F 90-22. Irs forms 1040 ez 1. Irs forms 1040 ez Form 114 is filed electronically with the Financial Crimes Enforcement Network (FinCEN). Irs forms 1040 ez See the filing instructions at www. Irs forms 1040 ez bsaefiling. Irs forms 1040 ez fincen. Irs forms 1040 ez treas. Irs forms 1040 ez gov/main. Irs forms 1040 ez html. Irs forms 1040 ez   You must file Form 114 if you had any financial interest in, or signature or other authority over a bank, securities, or other financial account in a foreign country. Irs forms 1040 ez You do not need to file the report if the assets are with a U. Irs forms 1040 ez S. Irs forms 1040 ez military banking facility operated by a financial institution or if the combined assets in the account(s) are $10,000 or less during the entire year. Irs forms 1040 ez   More information about the filing of Form 114 can be found in the instructions for the form. Irs forms 1040 ez FinCEN Form 105. Irs forms 1040 ez   You must file Form 105, Report of International Transportation of Currency or Monetary Instruments, if you physically transport, mail, ship, or cause to be physically transported, mailed, or shipped into or out of the United States, currency or other monetary instruments totaling more than $10,000 at one time. Irs forms 1040 ez Certain recipients of currency or monetary instruments also must file Form 105. Irs forms 1040 ez   More information about the filing of Form 105 can be found in the instructions on the back of the form. Irs forms 1040 ez Form 8938. Irs forms 1040 ez   You must file Form 8938 to report the ownership of specified foreign financial assets if the total value of those assets exceeds an applicable threshold amount (the “reporting threshold ”). Irs forms 1040 ez The reporting threshold varies depending on whether you live in the United States, are married, or file a joint income tax return with your spouse. Irs forms 1040 ez Specified foreign financial assets include any financial account maintained by a foreign financial institution and, to the extent held for investment, any stock, securities, or any other interest in a foreign entity and any financial instrument or contract with an issuer or counterparty that is not a U. Irs forms 1040 ez S. Irs forms 1040 ez person. Irs forms 1040 ez   You may have to pay penalties if you are required to file Form 8938 and fail to do so, or if you have an understatement of tax due to any transaction involving an undisclosed foreign financial asset. Irs forms 1040 ez   More information about the filing of Form 8938 can be found in the separate instructions for Form 8938. Irs forms 1040 ez Prev  Up  Next   Home   More Online Publications
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The Irs Forms 1040 Ez

Irs forms 1040 ez Publication 587 - Main Content Table of Contents Qualifying for a DeductionExclusive Use Regular Use Trade or Business Use Principal Place of Business Place To Meet Patients, Clients, or Customers Separate Structure Figuring the DeductionUsing Actual Expenses Using the Simplified Method Daycare Facility Standard meal and snack rates. Irs forms 1040 ez Sale or Exchange of Your HomeGain on Sale Depreciation Basis Adjustment Reporting the Sale More Information Business Furniture and EquipmentListed Property Property Bought for Business Use Personal Property Converted to Business Use Recordkeeping Where To DeductSelf-Employed Persons Employees Partners How To Get Tax HelpLow Income Taxpayer Clinics Worksheet To Figure the Deduction for Business Use of Your HomeInstructions for the Worksheet Worksheets To Figure the Deduction for Business Use of Your Home (Simplified Method) Instructions for the Simplified Method Worksheet Instructions for the Daycare Facility Worksheet Instructions for the Area Adjustment Worksheet Qualifying for a Deduction Generally, you cannot deduct items related to your home, such as mortgage interest, real estate taxes, utilities, maintenance, rent, depreciation, or property insurance, as business expenses. Irs forms 1040 ez However, you may be able to deduct expenses related to the business use of part of your home if you meet specific requirements. Irs forms 1040 ez Even then, the deductible amount of these types of expenses may be limited. Irs forms 1040 ez Use this section and Figure A, later, to decide if you can deduct expenses for the business use of your home. Irs forms 1040 ez To qualify to deduct expenses for business use of your home, you must use part of your home: Exclusively and regularly as your principal place of business (defined later), Exclusively and regularly as a place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, In the case of a separate structure which is not attached to your home, in connection with your trade or business, On a regular basis for certain storage use (see Storage of inventory or product samples , later), For rental use (see Publication 527), or As a daycare facility (see Daycare Facility , later). Irs forms 1040 ez Additional tests for employee use. Irs forms 1040 ez   If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. Irs forms 1040 ez You must meet the tests discussed earlier plus: Your business use must be for the convenience of your employer, and You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer. Irs forms 1040 ez If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home. Irs forms 1040 ez Exclusive Use To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Irs forms 1040 ez The area used for business can be a room or other separately identifiable space. Irs forms 1040 ez The space does not need to be marked off by a permanent partition. Irs forms 1040 ez You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Irs forms 1040 ez Example. Irs forms 1040 ez You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. Irs forms 1040 ez Your family also uses the den for recreation. Irs forms 1040 ez The den is not used exclusively in your trade or business, so you cannot claim a deduction for the business use of the den. Irs forms 1040 ez Exceptions to Exclusive Use You do not have to meet the exclusive use test if either of the following applies. Irs forms 1040 ez You use part of your home for the storage of inventory or product samples (discussed next). Irs forms 1040 ez You use part of your home as a daycare facility, discussed later under Daycare Facility . Irs forms 1040 ez Note. Irs forms 1040 ez With the exception of these two uses, any portion of the home used for business purposes must meet the exclusive use test. Irs forms 1040 ez Storage of inventory or product samples. Irs forms 1040 ez    If you use part of your home for storage of inventory or product samples, you can deduct expenses for the business use of your home without meeting the exclusive use test. Irs forms 1040 ez However, you must meet all the following tests. Irs forms 1040 ez You sell products at wholesale or retail as your trade or business. Irs forms 1040 ez You keep the inventory or product samples in your home for use in your trade or business. Irs forms 1040 ez Your home is the only fixed location of your trade or business. Irs forms 1040 ez You use the storage space on a regular basis. Irs forms 1040 ez The space you use is a separately identifiable space suitable for storage. Irs forms 1040 ez Example. Irs forms 1040 ez Your home is the only fixed location of your business of selling mechanics' tools at retail. Irs forms 1040 ez You regularly use half of your basement for storage of inventory and product samples. Irs forms 1040 ez You sometimes use the area for personal purposes. Irs forms 1040 ez The expenses for the storage space are deductible even though you do not use this part of your basement exclusively for business. Irs forms 1040 ez Regular Use To qualify under the regular use test, you must use a specific area of your home for business on a regular basis. Irs forms 1040 ez Incidental or occasional business use is not regular use. Irs forms 1040 ez You must consider all facts and circumstances in determining whether your use is on a regular basis. Irs forms 1040 ez Trade or Business Use To qualify under the trade-or-business-use test, you must use part of your home in connection with a trade or business. Irs forms 1040 ez If you use your home for a profit-seeking activity that is not a trade or business, you cannot take a deduction for its business use. Irs forms 1040 ez Example. Irs forms 1040 ez You use part of your home exclusively and regularly to read financial periodicals and reports, clip bond coupons, and carry out similar activities related to your own investments. Irs forms 1040 ez You do not make investments as a broker or dealer. Irs forms 1040 ez So, your activities are not part of a trade or business and you cannot take a deduction for the business use of your home. Irs forms 1040 ez Principal Place of Business You can have more than one business location, including your home, for a single trade or business. Irs forms 1040 ez To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that trade or business. Irs forms 1040 ez To determine whether your home is your principal place of business, you must consider: The relative importance of the activities performed at each place where you conduct business, and The amount of time spent at each place where you conduct business. Irs forms 1040 ez Your home office will qualify as your principal place of business if you meet the following requirements. Irs forms 1040 ez You use it exclusively and regularly for administrative or management activities of your trade or business. Irs forms 1040 ez You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Irs forms 1040 ez If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Irs forms 1040 ez However, see the later discussions under Place To Meet Patients, Clients, or Customers and Separate Structure for other ways to qualify to deduct home office expenses. Irs forms 1040 ez Administrative or management activities. Irs forms 1040 ez   There are many activities that are administrative or managerial in nature. Irs forms 1040 ez The following are a few examples. Irs forms 1040 ez Billing customers, clients, or patients. Irs forms 1040 ez Keeping books and records. Irs forms 1040 ez Ordering supplies. Irs forms 1040 ez Setting up appointments. Irs forms 1040 ez Forwarding orders or writing reports. Irs forms 1040 ez Administrative or management activities performed at other locations. Irs forms 1040 ez   The following activities performed by you or others will not disqualify your home office from being your principal place of business. Irs forms 1040 ez You have others conduct your administrative or management activities at locations other than your home. Irs forms 1040 ez (For example, another company does your billing from its place of business. Irs forms 1040 ez ) You conduct administrative or management activities at places that are not fixed locations of your business, such as in a car or a hotel room. Irs forms 1040 ez You occasionally conduct minimal administrative or management activities at a fixed location outside your home. Irs forms 1040 ez You conduct substantial nonadministrative or nonmanagement business activities at a fixed location outside your home. Irs forms 1040 ez (For example, you meet with or provide services to customers, clients, or patients at a fixed location of the business outside your home. Irs forms 1040 ez ) You have suitable space to conduct administrative or management activities outside your home, but choose to use your home office for those activities instead. Irs forms 1040 ez Please click here for the text description of the image. Irs forms 1040 ez Can you deduct business use of the home expenses? Example 1. Irs forms 1040 ez John is a self-employed plumber. Irs forms 1040 ez Most of John's time is spent at customers' homes and offices installing and repairing plumbing. Irs forms 1040 ez He has a small office in his home that he uses exclusively and regularly for the administrative or management activities of his business, such as phoning customers, ordering supplies, and keeping his books. Irs forms 1040 ez John writes up estimates and records of work completed at his customers' premises. Irs forms 1040 ez He does not conduct any substantial administrative or management activities at any fixed location other than his home office. Irs forms 1040 ez John does not do his own billing. Irs forms 1040 ez He uses a local bookkeeping service to bill his customers. Irs forms 1040 ez John's home office qualifies as his principal place of business for deducting expenses for its use. Irs forms 1040 ez He uses the home office for the administrative or managerial activities of his plumbing business and he has no other fixed location where he conducts these administrative or managerial activities. Irs forms 1040 ez His choice to have his billing done by another company does not disqualify his home office from being his principal place of business. Irs forms 1040 ez He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Irs forms 1040 ez Example 2. Irs forms 1040 ez Pamela is a self-employed sales representative for several different product lines. Irs forms 1040 ez She has an office in her home that she uses exclusively and regularly to set up appointments and write up orders and other reports for the companies whose products she sells. Irs forms 1040 ez She occasionally writes up orders and sets up appointments from her hotel room when she is away on business overnight. Irs forms 1040 ez Pamela's business is selling products to customers at various locations throughout her territory. Irs forms 1040 ez To make these sales, she regularly visits customers to explain the available products and take orders. Irs forms 1040 ez Pamela's home office qualifies as her principal place of business for deducting expenses for its use. Irs forms 1040 ez She conducts administrative or management activities there and she has no other fixed location where she conducts substantial administrative or management activities. Irs forms 1040 ez The fact that she conducts some administrative or management activities in her hotel room (not a fixed location) does not disqualify her home office from being her principal place of business. Irs forms 1040 ez She meets all the qualifications, including principal place of business, so she can deduct expenses (subject to certain limitations, explained later) for the business use of her home. Irs forms 1040 ez Example 3. Irs forms 1040 ez Paul is a self-employed anesthesiologist. Irs forms 1040 ez He spends the majority of his time administering anesthesia and postoperative care in three local hospitals. Irs forms 1040 ez One of the hospitals provides him with a small shared office where he could conduct administrative or management activities. Irs forms 1040 ez Paul very rarely uses the office the hospital provides. Irs forms 1040 ez He uses a room in his home that he has converted to an office. Irs forms 1040 ez He uses this room exclusively and regularly to conduct all the following activities. Irs forms 1040 ez Contacting patients, surgeons, and hospitals regarding scheduling. Irs forms 1040 ez Preparing for treatments and presentations. Irs forms 1040 ez Maintaining billing records and patient logs. Irs forms 1040 ez Satisfying continuing medical education requirements. Irs forms 1040 ez Reading medical journals and books. Irs forms 1040 ez Paul's home office qualifies as his principal place of business for deducting expenses for its use. Irs forms 1040 ez He conducts administrative or management activities for his business as an anesthesiologist there and he has no other fixed location where he conducts substantial administrative or management activities for this business. Irs forms 1040 ez His choice to use his home office instead of the one provided by the hospital does not disqualify his home office from being his principal place of business. Irs forms 1040 ez His performance of substantial nonadministrative or nonmanagement activities at fixed locations outside his home also does not disqualify his home office from being his principal place of business. Irs forms 1040 ez He meets all the qualifications, including principal place of business, so he can deduct expenses (subject to certain limitations, explained later) for the business use of his home. Irs forms 1040 ez Example 4. Irs forms 1040 ez Kathleen is employed as a teacher. Irs forms 1040 ez She is required to teach and meet with students at the school and to grade papers and tests. Irs forms 1040 ez The school provides her with a small office where she can work on her lesson plans, grade papers and tests, and meet with parents and students. Irs forms 1040 ez The school does not require her to work at home. Irs forms 1040 ez Kathleen prefers to use the office she has set up in her home and does not use the one provided by the school. Irs forms 1040 ez She uses this home office exclusively and regularly for the administrative duties of her teaching job. Irs forms 1040 ez Kathleen must meet the convenience-of-the-employer test, even if her home qualifies as her principal place of business for deducting expenses for its use. Irs forms 1040 ez Her employer provides her with an office and does not require her to work at home, so she does not meet the convenience-of-the-employer test and cannot claim a deduction for the business use of her home. Irs forms 1040 ez More Than One Trade or Business The same home office can be the principal place of business for two or more separate business activities. Irs forms 1040 ez Whether your home office is the principal place of business for more than one business activity must be determined separately for each of your trade or business activities. Irs forms 1040 ez You must use the home office exclusively and regularly for one or more of the following purposes. Irs forms 1040 ez As the principal place of business for one or more of your trades or businesses. Irs forms 1040 ez As a place to meet or deal with patients, clients, or customers in the normal course of one or more of your trades or businesses. Irs forms 1040 ez If your home office is a separate structure, in connection with one or more of your trades or businesses. Irs forms 1040 ez You can use your home office for more than one business activity, but you cannot use it for any nonbusiness (i. Irs forms 1040 ez e. Irs forms 1040 ez , personal) activities. Irs forms 1040 ez If you are an employee, any use of the home office in connection with your employment must be for the convenience of your employer. Irs forms 1040 ez See Rental to employer , later, if you rent part of your home to your employer. Irs forms 1040 ez Example. Irs forms 1040 ez Tracy White is employed as a teacher. Irs forms 1040 ez Her principal place of work is the school, which provides her office space to do her school work. Irs forms 1040 ez She also has a mail order jewelry business. Irs forms 1040 ez All her work in the jewelry business is done in her home office and the office is used exclusively for that business. Irs forms 1040 ez If she meets all the other tests, she can deduct expenses for the business use of her home for the jewelry business. Irs forms 1040 ez If Tracy also uses the office for work related to her teaching, she must meet the exclusive use test for both businesses to qualify for the deduction. Irs forms 1040 ez As an employee, Tracy must also meet the convenience-of-the-employer test to qualify for the deduction. Irs forms 1040 ez She does not meet this test for her work as a teacher, so she cannot claim a deduction for the business use of her home for either activity. Irs forms 1040 ez Place To Meet Patients, Clients, or Customers If you meet or deal with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business if you meet both the following tests. Irs forms 1040 ez You physically meet with patients, clients, or customers on your premises. Irs forms 1040 ez Their use of your home is substantial and integral to the conduct of your business. Irs forms 1040 ez Doctors, dentists, attorneys, and other professionals who maintain offices in their homes generally will meet this requirement. Irs forms 1040 ez Using your home for occasional meetings and telephone calls will not qualify you to deduct expenses for the business use of your home. Irs forms 1040 ez The part of your home you use exclusively and regularly to meet patients, clients, or customers does not have to be your principal place of business. Irs forms 1040 ez Example. Irs forms 1040 ez June Quill, a self-employed attorney, works 3 days a week in her city office. Irs forms 1040 ez She works 2 days a week in her home office used only for business. Irs forms 1040 ez She regularly meets clients there. Irs forms 1040 ez Her home office qualifies for a business deduction because she meets clients there in the normal course of her business. Irs forms 1040 ez Separate Structure You can deduct expenses for a separate free-standing structure, such as a studio, workshop, garage, or barn, if you use it exclusively and regularly for your business. Irs forms 1040 ez The structure does not have to be your principal place of business or a place where you meet patients, clients, or customers. Irs forms 1040 ez Example. Irs forms 1040 ez John Berry operates a floral shop in town. Irs forms 1040 ez He grows the plants for his shop in a greenhouse behind his home. Irs forms 1040 ez He uses the greenhouse exclusively and regularly in his business, so he can deduct the expenses for its use, subject to certain limitations, explained later. Irs forms 1040 ez Figuring the Deduction After you determine that you meet the tests under Qualifying for a Deduction , you can begin to figure how much you can deduct. Irs forms 1040 ez When figuring the amount you can deduct for the business use of your home, you will use either your actual expenses or a simplified method. Irs forms 1040 ez Electing to use the simplified method. Irs forms 1040 ez   The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Irs forms 1040 ez You choose whether or not to figure your deduction using the simplified method each taxable year. Irs forms 1040 ez See Using the Simplified Method , later. Irs forms 1040 ez Rental to employer. Irs forms 1040 ez   If you rent part of your home to your employer and you use the rented part in performing services for your employer as an employee, your deduction for the business use of your home is limited. Irs forms 1040 ez You can deduct mortgage interest, qualified mortgage insurance premiums, real estate taxes, and personal casualty losses for the rented part, subject to any limitations. Irs forms 1040 ez However, you cannot deduct otherwise allowable trade or business expenses, business casualty losses, or depreciation related to the use of your home (or use the simplified method as an alternative to deducting these actual expenses) in performing services for your employer. Irs forms 1040 ez Using Actual Expenses If you do not or cannot elect to use the simplified method for a home, you will figure your deduction for that home using your actual expenses. Irs forms 1040 ez You will also need to figure the percentage of your home used for business and the limit on the deduction. Irs forms 1040 ez If you are an employee or a partner, or you use your home in your farming business and you file Schedule F (Form 1040), you can use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication, to help you figure your deduction. Irs forms 1040 ez If you use your home in a trade or business and you file Schedule C (Form 1040), you will use Form 8829 to figure your deduction. Irs forms 1040 ez Part-year use. Irs forms 1040 ez   You cannot deduct expenses for the business use of your home incurred during any part of the year you did not use your home for business purposes. Irs forms 1040 ez For example, if you begin using part of your home for business on July 1, and you meet all the tests from that date until the end of the year, consider only your expenses for the last half of the year in figuring your allowable deduction. Irs forms 1040 ez Expenses related to tax-exempt income. Irs forms 1040 ez   Generally, you cannot deduct expenses that are related to tax-exempt allowances. Irs forms 1040 ez However, if you receive a tax-exempt parsonage allowance or a tax-exempt military allowance, your expenses for mortgage interest and real estate taxes are deductible under the normal rules. Irs forms 1040 ez No deduction is allowed for other expenses related to the tax-exempt allowance. Irs forms 1040 ez   If your housing is provided free of charge and the value of the housing is tax exempt, you cannot deduct the rental value of any portion of the housing. Irs forms 1040 ez Actual Expenses You must divide the expenses of operating your home between personal and business use. Irs forms 1040 ez The part of a home operating expense you can use to figure your deduction depends on both of the following. Irs forms 1040 ez Whether the expense is direct, indirect, or unrelated. Irs forms 1040 ez The percentage of your home used for business. Irs forms 1040 ez Table 1, next, describes the types of expenses you may have and the extent to which they are deductible. Irs forms 1040 ez Table 1. Irs forms 1040 ez Types of Expenses  Expense  Description  Deductibility Direct Expenses only for  the business part  of your home. Irs forms 1040 ez Deductible in full. Irs forms 1040 ez *   Examples:  Painting or repairs  only in the area  used for business. Irs forms 1040 ez Exception: May be only partially  deductible in a daycare facility. Irs forms 1040 ez See Daycare Facility , later. Irs forms 1040 ez Indirect Expenses for  keeping up and running your  entire home. Irs forms 1040 ez Deductible based on the percentage of your home used for business. Irs forms 1040 ez *   Examples:  Insurance, utilities, and  general repairs. Irs forms 1040 ez   Unrelated Expenses only for  the parts of your  home not used  for business. Irs forms 1040 ez Not deductible. Irs forms 1040 ez   Examples:  Lawn care or painting  a room not used  for business. Irs forms 1040 ez   *Subject to the deduction limit, discussed later. Irs forms 1040 ez Form 8829 and the Worksheet To Figure the Deduction for Business Use of Your Home have separate columns for direct and indirect expenses. Irs forms 1040 ez Certain expenses are deductible whether or not you use your home for business. Irs forms 1040 ez If you qualify to deduct business use of the home expenses, use the business percentage of these expenses to figure your total business use of the home deduction. Irs forms 1040 ez These expenses include the following. Irs forms 1040 ez Real estate taxes. Irs forms 1040 ez Qualified mortgage insurance premiums. Irs forms 1040 ez Deductible mortgage interest. Irs forms 1040 ez Casualty losses. Irs forms 1040 ez Other expenses are deductible only if you use your home for business. Irs forms 1040 ez You can use the business percentage of these expenses to figure your total business use of the home deduction. Irs forms 1040 ez These expenses generally include (but are not limited to) the following. Irs forms 1040 ez Depreciation (covered under Depreciating Your Home , later). Irs forms 1040 ez Insurance. Irs forms 1040 ez Rent paid for the use of property you do not own but use in your trade or business. Irs forms 1040 ez Repairs. Irs forms 1040 ez Security system. Irs forms 1040 ez Utilities and services. Irs forms 1040 ez Real estate taxes. Irs forms 1040 ez   To figure the business part of your real estate taxes, multiply the real estate taxes paid by the percentage of your home used for business. Irs forms 1040 ez   For more information on the deduction for real estate taxes, see Publication 530, Tax Information for Homeowners. Irs forms 1040 ez Deductible mortgage interest. Irs forms 1040 ez   To figure the business part of your deductible mortgage interest, multiply this interest by the percentage of your home used for business. Irs forms 1040 ez You can include interest on a second mortgage in this computation. Irs forms 1040 ez If your total mortgage debt is more than $1,000,000 or your home equity debt is more than $100,000, your deduction may be limited. Irs forms 1040 ez For more information on what interest is deductible, see Publication 936, Home Mortgage Interest Deduction. Irs forms 1040 ez Qualified mortgage insurance premiums. Irs forms 1040 ez   To figure the business part of your qualified mortgage insurance premiums, multiply the premiums by the percentage of your home used for business. Irs forms 1040 ez You can include premiums for insurance on a second mortgage in this computation. Irs forms 1040 ez If your adjusted gross income is more than $100,000 ($50,000 if your filing status is married filing separately), your deduction may be limited. Irs forms 1040 ez For more information, see Publication 936, and Line 13 in the Instructions for Schedule A (Form 1040). Irs forms 1040 ez Casualty losses. Irs forms 1040 ez    If you have a casualty loss on your home that you use for business, treat the casualty loss as a direct expense, an indirect expense, or an unrelated expense, depending on the property affected. Irs forms 1040 ez A direct expense is the loss on the portion of the property you use only in your business. Irs forms 1040 ez Use the entire loss to figure the business use of the home deduction. Irs forms 1040 ez An indirect expense is the loss on property you use for both business and personal purposes. Irs forms 1040 ez Use only the business portion to figure the deduction. Irs forms 1040 ez An unrelated expense is the loss on property you do not use in your business. Irs forms 1040 ez Do not use any of the loss to figure the deduction. Irs forms 1040 ez Example. Irs forms 1040 ez You meet the rules to take a deduction for an office in your home that is 10% of the total area of your house. Irs forms 1040 ez A storm damages your roof. Irs forms 1040 ez This is an indirect expense as the roof is part of the whole house and is considered to be used both for business and personal purposes. Irs forms 1040 ez You would complete Form 4684, Casualties and Thefts, to report your loss. Irs forms 1040 ez You complete both section A (Personal Use Property) and section B (Business and Income-Producing Property) as your home is used both for business and personal purposes. Irs forms 1040 ez Since you use 90% of your home for personal purposes, use 90% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 2, 3, 5, and 6 of Form 4684. Irs forms 1040 ez Since you use 10% of your home for business purposes, use 10% of the cost or adjusted basis of your home, insurance or other reimbursement, and fair market value, both before and after the storm, to figure the amounts to enter on lines 20, 21, 23, and 24 of Form 4684. Irs forms 1040 ez Forms and worksheets to use. Irs forms 1040 ez   If you are filing Schedule C (Form 1040), get Form 8829 and follow the instructions for casualty losses. Irs forms 1040 ez If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Irs forms 1040 ez You will also need to get Form 4684. Irs forms 1040 ez More information. Irs forms 1040 ez   For more information on casualty losses, see Publication 547, Casualties, Disasters, and Thefts. Irs forms 1040 ez Insurance. Irs forms 1040 ez   You can deduct the cost of insurance that covers the business part of your home. Irs forms 1040 ez However, if your insurance premium gives you coverage for a period that extends past the end of your tax year, you can deduct only the business percentage of the part of the premium that gives you coverage for your tax year. Irs forms 1040 ez You can deduct the business percentage of the part that applies to the following year in that year. Irs forms 1040 ez Rent. Irs forms 1040 ez   If you rent the home you occupy and meet the requirements for business use of the home, you can deduct part of the rent you pay. Irs forms 1040 ez To figure your deduction, multiply your rent payments by the percentage of your home used for business. Irs forms 1040 ez   If you own your home, you cannot deduct the fair rental value of your home. Irs forms 1040 ez However, see Depreciating Your Home , later. Irs forms 1040 ez Repairs. Irs forms 1040 ez   The cost of repairs that relate to your business, including labor (other than your own labor), is a deductible expense. Irs forms 1040 ez For example, a furnace repair benefits the entire home. Irs forms 1040 ez If you use 10% of your home for business, you can deduct 10% of the cost of the furnace repair. Irs forms 1040 ez   Repairs keep your home in good working order over its useful life. Irs forms 1040 ez Examples of common repairs are patching walls and floors, painting, wallpapering, repairing roofs and gutters, and mending leaks. Irs forms 1040 ez However, repairs are sometimes treated as a permanent improvement and are not deductible. Irs forms 1040 ez See Permanent improvements , later, under Depreciating Your Home. Irs forms 1040 ez Security system. Irs forms 1040 ez   If you install a security system that protects all the doors and windows in your home, you can deduct the business part of the expenses you incur to maintain and monitor the system. Irs forms 1040 ez You also can take a depreciation deduction for the part of the cost of the security system relating to the business use of your home. Irs forms 1040 ez Utilities and services. Irs forms 1040 ez   Expenses for utilities and services, such as electricity, gas, trash removal, and cleaning services, are primarily personal expenses. Irs forms 1040 ez However, if you use part of your home for business, you can deduct the business part of these expenses. Irs forms 1040 ez Generally, the business percentage for utilities is the same as the percentage of your home used for business. Irs forms 1040 ez Telephone. Irs forms 1040 ez   The basic local telephone service charge, including taxes, for the first telephone line into your home (i. Irs forms 1040 ez e. Irs forms 1040 ez , landline) is a nondeductible personal expense. Irs forms 1040 ez However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Irs forms 1040 ez Do not include these expenses as a cost of using your home for business. Irs forms 1040 ez Deduct these charges separately on the appropriate form or schedule. Irs forms 1040 ez For example, if you file Schedule C (Form 1040), deduct these expenses on line 25, Utilities (instead of line 30, Expenses for business use of your home). Irs forms 1040 ez Depreciating Your Home If you own your home and qualify to deduct expenses for its business use, you can claim a deduction for depreciation. Irs forms 1040 ez Depreciation is an allowance for the wear and tear on the part of your home used for business. Irs forms 1040 ez You cannot depreciate the cost or value of the land. Irs forms 1040 ez You recover its cost when you sell or otherwise dispose of the property. Irs forms 1040 ez Before you figure your depreciation deduction, you need to know the following information. Irs forms 1040 ez The month and year you started using your home for business. Irs forms 1040 ez The adjusted basis and fair market value of your home (excluding land) at the time you began using it for business. Irs forms 1040 ez The cost of any improvements before and after you began using the property for business. Irs forms 1040 ez The percentage of your home used for business. Irs forms 1040 ez See Business Percentage , later. Irs forms 1040 ez Adjusted basis defined. Irs forms 1040 ez   The adjusted basis of your home is generally its cost, plus the cost of any permanent improvements you made to it, minus any casualty losses or depreciation deducted in earlier tax years. Irs forms 1040 ez For a discussion of adjusted basis, see Publication 551. Irs forms 1040 ez Permanent improvements. Irs forms 1040 ez   A permanent improvement increases the value of property, adds to its life, or gives it a new or different use. Irs forms 1040 ez Examples of improvements are replacing electric wiring or plumbing, adding a new roof or addition, paneling, or remodeling. Irs forms 1040 ez    You must carefully distinguish between repairs and improvements. Irs forms 1040 ez See Repairs , earlier, under Actual Expenses. Irs forms 1040 ez You also must keep accurate records of these expenses. Irs forms 1040 ez These records will help you decide whether an expense is a deductible or a capital (added to the basis) expense. Irs forms 1040 ez However, if you make repairs as part of an extensive remodeling or restoration of your home, the entire job is an improvement. Irs forms 1040 ez Example. Irs forms 1040 ez You buy an older home and fix up two rooms as a beauty salon. Irs forms 1040 ez You patch the plaster on the ceilings and walls, paint, repair the floor, install an outside door, and install new wiring, plumbing, and other equipment. Irs forms 1040 ez Normally, the patching, painting, and floor work are repairs and the other expenses are permanent improvements. Irs forms 1040 ez However, because the work gives your property a new use, the entire remodeling job is a permanent improvement and its cost is added to the basis of the property. Irs forms 1040 ez You cannot deduct any portion of it as a repair expense. Irs forms 1040 ez Adjusting for depreciation deducted in earlier years. Irs forms 1040 ez   Decrease the basis of your property by the depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you properly selected. Irs forms 1040 ez If you deducted less depreciation than you could have under the method you selected, decrease the basis by the amount you could have deducted under that method. Irs forms 1040 ez If you did not deduct any depreciation, decrease the basis by the amount you could have deducted. Irs forms 1040 ez   If you deducted more depreciation than you should have, decrease your basis by the amount you should have deducted, plus the part of the excess depreciation you deducted that actually decreased your tax liability for any year. Irs forms 1040 ez   If you deducted the incorrect amount of depreciation, see Publication 946. Irs forms 1040 ez Fair market value defined. Irs forms 1040 ez   The fair market value of your home is the price at which the property would change hands between a buyer and a seller, neither having to buy or sell, and both having reasonable knowledge of all necessary facts. Irs forms 1040 ez Sales of similar property, on or about the date you begin using your home for business, may be helpful in determining the property's fair market value. Irs forms 1040 ez Figuring the depreciation deduction for the current year. Irs forms 1040 ez   If you began using your home for business before 2013, continue to use the same depreciation method you used in past tax years. Irs forms 1040 ez   If you began using your home for business for the first time in 2013, depreciate the business part as nonresidential real property under the modified accelerated cost recovery system (MACRS). Irs forms 1040 ez Under MACRS, nonresidential real property is depreciated using the straight line method over 39 years. Irs forms 1040 ez For more information on MACRS and other methods of depreciation, see Publication 946. Irs forms 1040 ez   To figure the depreciation deduction, you must first figure the part of the cost of your home that can be depreciated (depreciable basis). Irs forms 1040 ez The depreciable basis is figured by multiplying the percentage of your home used for business by the smaller of the following. Irs forms 1040 ez The adjusted basis of your home (excluding land) on the date you began using your home for business. Irs forms 1040 ez The fair market value of your home (excluding land) on the date you began using your home for business. Irs forms 1040 ez Depreciation table. Irs forms 1040 ez   If 2013 was the first year you used your home for business, you can figure your 2013 depreciation for the business part of your home by using the appropriate percentage from the following table. Irs forms 1040 ez Table 2. Irs forms 1040 ez MACRS Percentage Table for 39-Year Nonresidential Real Property Month First Used for Business Percentage To Use 1 2. Irs forms 1040 ez 461% 2 2. Irs forms 1040 ez 247% 3 2. Irs forms 1040 ez 033% 4 1. Irs forms 1040 ez 819% 5 1. Irs forms 1040 ez 605% 6 1. Irs forms 1040 ez 391% 7 1. Irs forms 1040 ez 177% 8 0. Irs forms 1040 ez 963% 9 0. Irs forms 1040 ez 749% 10 0. Irs forms 1040 ez 535% 11 0. Irs forms 1040 ez 321% 12 0. Irs forms 1040 ez 107%   Multiply the depreciable basis of the business part of your home by the percentage from the table for the first month you use your home for business. Irs forms 1040 ez See Publication 946 for the percentages for the remaining tax years of the recovery period. Irs forms 1040 ez Example. Irs forms 1040 ez In May, George Miller began to use one room in his home exclusively and regularly to meet clients. Irs forms 1040 ez This room is 8% of the square footage of his home. Irs forms 1040 ez He bought the home in 2003 for $125,000. Irs forms 1040 ez He determined from his property tax records that his adjusted basis in the house (exclusive of land) is $115,000. Irs forms 1040 ez In May, the house had a fair market value of $165,000. Irs forms 1040 ez He multiplies his adjusted basis of $115,000 (which is less than the fair market value) by 8%. Irs forms 1040 ez The result is $9,200, his depreciable basis for the business part of the house. Irs forms 1040 ez George files his return based on the calendar year. Irs forms 1040 ez May is the 5th month of his tax year. Irs forms 1040 ez He multiplies his depreciable basis of $9,200 by 1. Irs forms 1040 ez 605% (. Irs forms 1040 ez 01605), the percentage from the table for the 5th month. Irs forms 1040 ez His depreciation deduction is $147. Irs forms 1040 ez 66. Irs forms 1040 ez Depreciating permanent improvements. Irs forms 1040 ez   Add the costs of permanent improvements made before you began using your home for business to the basis of your property. Irs forms 1040 ez Depreciate these costs as part of the cost of your home as explained earlier. Irs forms 1040 ez The costs of improvements made after you begin using your home for business (that affect the business part of your home, such as a new roof) are depreciated separately. Irs forms 1040 ez Multiply the cost of the improvement by the business-use percentage and depreciate the result over the recovery period that would apply to your home if you began using it for business at the same time as the improvement. Irs forms 1040 ez For improvements made this year, the recovery period is 39 years. Irs forms 1040 ez For the percentage to use for the first year, see Table 2, earlier. Irs forms 1040 ez For more information on recovery periods, see Publication 946. Irs forms 1040 ez Business Percentage To find the business percentage, compare the size of the part of your home that you use for business to your whole house. Irs forms 1040 ez Use the resulting percentage to figure the business part of the expenses for operating your entire home. Irs forms 1040 ez You can use any reasonable method to determine the business percentage. Irs forms 1040 ez The following are two commonly used methods for figuring the percentage. Irs forms 1040 ez Divide the area (length multiplied by the width) used for business by the total area of your home. Irs forms 1040 ez If the rooms in your home are all about the same size, you can divide the number of rooms used for business by the total number of rooms in your home. Irs forms 1040 ez Example 1. Irs forms 1040 ez Your office is 240 square feet (12 feet × 20 feet). Irs forms 1040 ez Your home is 1,200 square feet. Irs forms 1040 ez Your office is 20% (240 ÷ 1,200) of the total area of your home. Irs forms 1040 ez Your business percentage is 20%. Irs forms 1040 ez Example 2. Irs forms 1040 ez You use one room in your home for business. Irs forms 1040 ez Your home has 10 rooms, all about equal size. Irs forms 1040 ez Your office is 10% (1 ÷ 10) of the total area of your home. Irs forms 1040 ez Your business percentage is 10%. Irs forms 1040 ez Use lines 1-7 of Form 8829, or lines 1-3 on the Worksheet To Figure the Deduction for Business Use of Your Home (near the end of this publication) to figure your business percentage. Irs forms 1040 ez Deduction Limit If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. Irs forms 1040 ez If your gross income from the business use of your home is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. Irs forms 1040 ez Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation of your home (with depreciation of your home taken last), that are allocable to the business, is limited to the gross income from the business use of your home minus the sum of the following. Irs forms 1040 ez The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). Irs forms 1040 ez These expenses are discussed in detail under Actual Expenses , earlier. Irs forms 1040 ez The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. Irs forms 1040 ez If you are self-employed, do not include in (2) above your deduction for one-half of your self-employment tax. Irs forms 1040 ez Carryover of unallowed expenses. Irs forms 1040 ez   If your deductions are greater than the current year's limit, you can carry over the excess to the next year in which you use actual expenses. Irs forms 1040 ez They are subject to the deduction limit for that year, whether or not you live in the same home during that year. Irs forms 1040 ez Figuring the deduction limit and carryover. Irs forms 1040 ez   If you are an employee or a partner, or you file Schedule F (Form 1040), use the Worksheet To Figure the Deduction for Business Use of Your Home, near the end of this publication. Irs forms 1040 ez If you file Schedule C (Form 1040), figure your deduction limit and carryover on Form 8829. Irs forms 1040 ez Example. Irs forms 1040 ez You meet the requirements for deducting expenses for the business use of your home. Irs forms 1040 ez You use 20% of your home for business. Irs forms 1040 ez In 2013, your business expenses and the expenses for the business use of your home are deducted from your gross income in the following order. Irs forms 1040 ez    Gross income from business $6,000 Minus:   Deductible mortgage interest and real estate taxes (20%) 3,000 Business expenses not related to the use of your home (100%) (business phone, supplies, and depreciation on equipment) 2,000 Deduction limit $1,000 Minus other expenses allocable to business use of home:   Maintenance, insurance, and utilities (20%) 800 Depreciation allowed (20% = $1,600 allowable, but subject to balance of deduction limit) 200 Other expenses up to the deduction limit $1,000 Depreciation carryover to 2014 ($1,600 − $200) (subject to deduction limit in 2014) $1,400   You can deduct all of the business part of your deductible mortgage interest and real estate taxes ($3,000). Irs forms 1040 ez You also can deduct all of your business expenses not related to the use of your home ($2,000). Irs forms 1040 ez Additionally, you can deduct all of the business part of your expenses for maintenance, insurance, and utilities, because the total ($800) is less than the $1,000 deduction limit. Irs forms 1040 ez Your deduction for depreciation for the business use of your home is limited to $200 ($1,000 minus $800) because of the deduction limit. Irs forms 1040 ez You can carry over the $1,400 balance and add it to your depreciation for 2014, subject to your deduction limit in 2014. Irs forms 1040 ez More than one place of business. Irs forms 1040 ez   If part of the gross income from your trade or business is from the business use of part of your home and part is from a place other than your home, you must determine the part of your gross income from the business use of your home before you figure the deduction limit. Irs forms 1040 ez In making this determination, consider the time you spend at each location, the business investment in each location, and any other relevant facts and circumstances. Irs forms 1040 ez If your home office qualifies as your principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business. Irs forms 1040 ez For more information on transportation costs, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Irs forms 1040 ez Using the Simplified Method The simplified method is an alternative to the calculation, allocation, and substantiation of actual expenses. Irs forms 1040 ez In most cases, you will figure your deduction by multiplying $5, the prescribed rate, by the area of your home used for a qualified business use. Irs forms 1040 ez The area you use to figure your deduction is limited to 300 square feet. Irs forms 1040 ez See Simplified Amount , later, for information about figuring the amount of the deduction. Irs forms 1040 ez For more information about the simplified method, see Revenue Procedure 2013-13, 2013-06 I. Irs forms 1040 ez R. Irs forms 1040 ez B. Irs forms 1040 ez 478, available at www. Irs forms 1040 ez irs. Irs forms 1040 ez gov/irb/2013-06_IRB/ar09. Irs forms 1040 ez html. Irs forms 1040 ez Actual expenses and depreciation of your home. Irs forms 1040 ez   If you elect to use the simplified method, you cannot deduct any actual expenses for the business except for business expenses that are not related to the use of the home. Irs forms 1040 ez You also cannot deduct any depreciation (including any additional first-year depreciation) or section 179 expense for the portion of the home that is used for a qualified business use. Irs forms 1040 ez The depreciation deduction allowable for that portion of the home is deemed to be zero for a year you use the simplified method. Irs forms 1040 ez If you figure your deduction for business use of the home using actual expenses in a subsequent year, you will have to use the appropriate optional depreciation table for MACRS to figure your depreciation. Irs forms 1040 ez More information. Irs forms 1040 ez   For more information about claiming depreciation in a subsequent year, see Revenue Procedure 2013-13, 2013-06 I. Irs forms 1040 ez R. Irs forms 1040 ez B. Irs forms 1040 ez 478, available at www. Irs forms 1040 ez irs. Irs forms 1040 ez gov/irb/2013-06_IRB/ar09. Irs forms 1040 ez html. Irs forms 1040 ez See Publication 946 for the optional depreciation tables Although you cannot deduct any depreciation or section 179 expense for the portion of your home used for a qualified business use, you may still claim depreciation or the section 179 expense deduction on other assets used in the business (for example, furniture and equipment). Irs forms 1040 ez Expenses deductible without regard to business use. Irs forms 1040 ez   When using the simplified method, treat as personal expenses those business expenses related to the use of the home that are deductible without regard to whether there is a qualified business use of the home. Irs forms 1040 ez These expenses include mortgage interest, real estate taxes, and casualty losses, subject to any limitations. Irs forms 1040 ez See Where To Deduct , later. Irs forms 1040 ez If you also rent part of your home, you must still allocate these expenses between rental use and personal use (for this purpose, personal use includes business use reported using the simplified method). Irs forms 1040 ez No deduction of carryover of actual expenses. Irs forms 1040 ez   If you used actual expenses to figure your deduction for business use of the home in a prior year and your deduction was limited, you cannot deduct the disallowed amount carried over from the prior year during a year you figure your deduction using the simplified method. Irs forms 1040 ez Instead, you will continue to carry over the disallowed amount to the next year that you use actual expenses to figure your deduction. Irs forms 1040 ez Electing the Simplified Method You choose whether or not to figure your deduction using the simplified method each taxable year. Irs forms 1040 ez Make the election for a home by using the simplified method to figure the deduction for the qualified business use of that home on a timely filed, original federal income tax return. Irs forms 1040 ez An election for a taxable year, once made, is irrevocable. Irs forms 1040 ez A change from using the simplified method in one year to actual expenses in a succeeding taxable year, or vice-versa, is not a change in method of accounting and does not require the consent of the Commissioner. Irs forms 1040 ez Shared use. Irs forms 1040 ez   If you share your home with someone else who also uses the home in a business that qualifies for this deduction, each of you make your own election. Irs forms 1040 ez More than one qualified business use. Irs forms 1040 ez   If you conduct more than one business that qualifies for this deduction in your home, your election to use the simplified method applies to all your qualified business uses of that home. Irs forms 1040 ez More than one home. Irs forms 1040 ez   If you used more than one home during the year (for example, you moved during the year), you can elect to use the simplified method for only one of the homes. Irs forms 1040 ez You must figure the deduction for any other home using actual expenses. Irs forms 1040 ez Simplified Amount Your deduction for the qualified business use of a home is the sum of each amount you figure for a separate qualified business use of your home. Irs forms 1040 ez To figure your deduction for the business use of a home using the simplified method, you will need to know the following information for each qualified business use of the home. Irs forms 1040 ez The allowable area of your home used in conducting the business. Irs forms 1040 ez If you did not conduct the business for the entire year in the home or the area changed during the year, you will need to know the allowable area you used and the number of days you conducted the business for each month. Irs forms 1040 ez The gross income from the business use of your home. Irs forms 1040 ez The amount of the business expenses that are not related to the use of your home. Irs forms 1040 ez If the qualified business use is for a daycare facility that uses space in your home on a regular (but not exclusive) basis, you will also need to know the percentage of time that part of your home is used for daycare. Irs forms 1040 ez To figure the amount you can deduct for qualified business use of your home using the simplified method, follow these 3 steps. Irs forms 1040 ez Multiply the allowable area by $5 (or less than $5 if the qualified business use is for a daycare that uses space in your home on a regular, but not exclusive, basis). Irs forms 1040 ez See Allowable area and Space used regularly for daycare , later. Irs forms 1040 ez Subtract the expenses from the business that are not related to the use of the home from the gross income related to the business use of the home. Irs forms 1040 ez If these expenses are greater than the gross income from the business use of the home, then you cannot take a deduction for this business use of the home. Irs forms 1040 ez See Gross income limitation , later. Irs forms 1040 ez Take the smaller of the amounts from (1) and (2). Irs forms 1040 ez This is the amount you can deduct for this qualified business use of your home using the simplified method. Irs forms 1040 ez If you are an employee or a partner, or you use your home in your farming business and file Schedule F (Form 1040), you can use the Simplified Method Worksheet, near the end of this publication, to help you figure your deduction. Irs forms 1040 ez If you use your home in a trade or business and you file Schedule C (Form 1040), you will use the Simplified Method Worksheet in your Instructions for Schedule C to figure your deduction. Irs forms 1040 ez Allowable area. Irs forms 1040 ez   In most cases, the allowable area is the smaller of the actual area (in square feet) of your home used in conducting the business and 300 square feet. Irs forms 1040 ez Your allowable area may be smaller if you conducted the business as a qualified joint venture with your spouse, the area used by the business was shared with another qualified business use, you used the home for the business for only part of the year, or the area used by the business changed during the year. Irs forms 1040 ez You can use the Area Adjustment Worksheet (for simplified method), near the end of this publication, to help you figure your allowable area for a qualified business use. Irs forms 1040 ez Area used by a qualified joint venture. Irs forms 1040 ez   If the qualified business use of the home is also a qualified joint venture, you and your spouse will figure the deduction for the business use separately. Irs forms 1040 ez Split the actual area used in conducting business between you and your spouse in the same manner you split your other tax attributes. Irs forms 1040 ez Then, each spouse will figure the allowable area separately. Irs forms 1040 ez For more information about qualified joint ventures, see Qualified Joint Venture in the Instructions for Schedule C. Irs forms 1040 ez Shared use. Irs forms 1040 ez   If you share your home with someone else who uses the home to conduct business that also qualifies for this deduction, you may not include the same square feet to figure your deduction as the other person. Irs forms 1040 ez You must allocate the shared space between you and the other person in a reasonable manner. Irs forms 1040 ez Example. Irs forms 1040 ez Kristin and Lindsey are roommates. Irs forms 1040 ez Kristin uses 300 square feet of their home for a qualified business use. Irs forms 1040 ez Lindsey uses 200 square feet of their home for a separate qualified business use. Irs forms 1040 ez The qualified business uses share 100 square feet. Irs forms 1040 ez In addition to the portion that they do not share, Kristin and Lindsey can both claim 50 of the 100 square feet or divide the 100 square feet between them in any reasonable manner. Irs forms 1040 ez If divided evenly, Kristin could claim 250 square feet using the simplified method and Lindsey could claim 150 square feet. Irs forms 1040 ez More than one qualified business use. Irs forms 1040 ez   If you conduct more than one business qualifying for the deduction, you are limited to a maximum of 300 square feet for all of the businesses. Irs forms 1040 ez Allocate the actual square footage used (up to the maximum of 300 square feet) among your qualified business uses in a reasonable manner. Irs forms 1040 ez However, do not allocate more square feet to a qualified business use than you actually use for that business. Irs forms 1040 ez Rental use. Irs forms 1040 ez   The simplified method does not apply to rental use. Irs forms 1040 ez A rental use that qualifies for the deduction must be figured using actual expenses. Irs forms 1040 ez If the rental use and a qualified business use share the same area, you will have to allocate the actual area used between the two uses. Irs forms 1040 ez You cannot use the same area to figure a deduction for the qualified business use as you are using to figure the deduction for the rental use. Irs forms 1040 ez Part-year use or area changes. Irs forms 1040 ez   If your qualified business use was for a portion of the taxable year (for example, a seasonal business or a business that begins during the taxable year) or you changed the square footage of your qualified business use, your deduction is limited to the average monthly allowable square footage. Irs forms 1040 ez You calculate the average monthly allowable square footage by adding the amount of allowable square feet you used in each month and dividing the sum by 12. Irs forms 1040 ez When determining the average monthly allowable square footage, you cannot take more than 300 square feet into account for any one month. Irs forms 1040 ez Additionally, if your qualified business use was less than 15 days in a month, you must use -0- for that month. Irs forms 1040 ez Example 1. Irs forms 1040 ez Andy files his federal income tax return on a calendar year basis. Irs forms 1040 ez On July 20, he began using 420 square feet of his home for a qualified business use. Irs forms 1040 ez He continued to use the 420 square feet until the end of the year. Irs forms 1040 ez His average monthly allowable square footage is 125 square feet, which is figured using 300 square feet for each month August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 0 + 0 + 0 + 300 + 300 + 300 + 300 + 300)/12). Irs forms 1040 ez Example 2. Irs forms 1040 ez Amy files her federal income tax return on a calendar year basis. Irs forms 1040 ez On April 20, she began using 100 square feet of her home for a qualified business use. Irs forms 1040 ez On August 5, she expanded the area of her qualified use to 330 square feet. Irs forms 1040 ez Amy continued to use the 330 square feet until the end of the year. Irs forms 1040 ez Her average monthly allowable square footage is 150 square feet, which is figured using 100 square feet for May through July and 300 square feet for August through December divided by the number of months in the taxable year ((0 + 0 + 0 + 0 + 100 + 100 +100 + 300 + 300 + 300 + 300 + 300)/12). Irs forms 1040 ez Gross income limitation. Irs forms 1040 ez   Your deduction for business use of the home is limited to an amount equal to the gross income derived from the qualified business use of the home reduced by the business deductions that are unrelated to the use of your home. Irs forms 1040 ez If the business deductions that are unrelated to the use of your home are greater than the gross income derived from the qualified business use of your home, then you cannot take a deduction for this qualified business use of your home. Irs forms 1040 ez Business expenses not related to use of the home. Irs forms 1040 ez   These expenses relate to the business activity in the home, but not to the use of the home itself. Irs forms 1040 ez You can still deduct business expenses that are unrelated to the use of the home. Irs forms 1040 ez See Where To Deduct , later. Irs forms 1040 ez Examples of business expenses that are unrelated to the use of the home are advertising, wages, supplies, dues, and depreciation for equipment. Irs forms 1040 ez Space used regularly for daycare. Irs forms 1040 ez   If you do not use the area of your home exclusively for daycare, you must reduce the prescribed rate (maximum $5 per square foot) before figuring your deduction. Irs forms 1040 ez The reduced rate will equal the prescribed rate times a fraction. Irs forms 1040 ez The numerator of the fraction is the number of hours that the space was used during the year for daycare and the denominator is the total number of hours during the year that the space was available for all uses. Irs forms 1040 ez You can use the Daycare Facility Worksheet (for simplified method), near the end of this publication, to help you figure the reduced rate. Irs forms 1040 ez    If you used at least 300 square feet for daycare regularly and exclusively during the year, then you do not need to reduce the prescribed rate or complete the Daycare Facility Worksheet. Irs forms 1040 ez Daycare Facility If you use space in your home on a regular basis for providing daycare, you may be able to claim a deduction for that part of your home even if you use the same space for nonbusiness purposes. Irs forms 1040 ez To qualify for this exception to the exclusive use rule, you must meet both of the following requirements. Irs forms 1040 ez You must be in the trade or business of providing daycare for children, persons age 65 or older, or persons who are physically or mentally unable to care for themselves. Irs forms 1040 ez You must have applied for, been granted, or be exempt from having, a license, certification, registration, or approval as a daycare center or as a family or group daycare home under state law. Irs forms 1040 ez You do not meet this requirement if your application was rejected or your license or other authorization was revoked. Irs forms 1040 ez Figuring the deduction. Irs forms 1040 ez   If you elect to use the simplified method for your home, figure your deduction as described earlier in Using the Simplified Method under Figuring the Deduction. Irs forms 1040 ez    If you are figuring your deduction using actual expenses and you regularly use part of your home for daycare, figure what part is used for daycare, as explained in Business Percentage , earlier, under Figuring the Deduction. Irs forms 1040 ez If you also use that part exclusively for daycare, deduct all the allocable expenses, subject to the deduction limit, as explained earlier. Irs forms 1040 ez   If the use of part of your home as a daycare facility is regular, but not exclusive, you must figure the percentage of time that part of your home is used for daycare. Irs forms 1040 ez A room that is available for use throughout each business day and that you regularly use in your business is considered to be used for daycare throughout each business day. Irs forms 1040 ez You do not have to keep records to show the specific hours the area was used for business. Irs forms 1040 ez You can use the area occasionally for personal reasons. Irs forms 1040 ez However, a room you use only occasionally for business does not qualify for the deduction. Irs forms 1040 ez To find the percentage of time you actually use your home for business, compare the total time used for business to the total time that part of your home can be used for all purposes. Irs forms 1040 ez You can compare the hours of business use in a week with the number of hours in a week (168). Irs forms 1040 ez Or you can compare the hours of business use for the year with the number of hours in the year (8,760 in 2013). Irs forms 1040 ez If you started or stopped using your home for daycare in 2013, you must prorate the number of hours based on the number of days the home was available for daycare. Irs forms 1040 ez Example 1. Irs forms 1040 ez Mary Lake used her basement to operate a daycare business for children. Irs forms 1040 ez She figures the business percentage of the basement as follows. Irs forms 1040 ez Square footage of the basement Square footage of her home = 1,600 3,200 = 50%           She used the basement for daycare an average of 12 hours a day, 5 days a week, for 50 weeks a year. Irs forms 1040 ez During the other 12 hours a day, the family could use the basement. Irs forms 1040 ez She figures the percentage of time the basement was used for daycare as follows. Irs forms 1040 ez Number of hours used for daycare (12 x 5 x 50) Total number of hours in the year (24 x 365) = 3,000 8,760 = 34. Irs forms 1040 ez 25%           Mary can deduct 34. Irs forms 1040 ez 25% of any direct expenses for the basement. Irs forms 1040 ez However, because her indirect expenses are for the entire house, she can deduct only 17. Irs forms 1040 ez 13% of the indirect expenses. Irs forms 1040 ez She figures the percentage for her indirect expenses as follows. Irs forms 1040 ez Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 34. Irs forms 1040 ez 25% Percentage for indirect expenses 17. Irs forms 1040 ez 13% Mary completes Form 8829, Part I, figuring the percentage of her home used for business, including the percentage of time the basement was used. Irs forms 1040 ez In Part II, Mary figures her deductible expenses. Irs forms 1040 ez She uses the following information to complete Part II. Irs forms 1040 ez Gross income from her daycare business $50,000 Expenses not related to the business use of the home $25,000 Tentative profit $25,000 Rent $8,400 Utilities $850 Painting the basement $500 Mary enters her tentative profit, $25,000, on line 8. Irs forms 1040 ez (This figure is the same as the amount on line 29 of her Schedule C (Form 1040). Irs forms 1040 ez ) The expenses she paid for rent and utilities relate to her entire home. Irs forms 1040 ez Therefore, she enters the amount paid for rent on line 18, column (b), and the amount paid for utilities on line 20, column (b). Irs forms 1040 ez She shows the total of these expenses on line 22, column (b). Irs forms 1040 ez For line 23, she multiplies the amount on line 22, column (b) by the percentage on line 7 and enters the result, $1,585. Irs forms 1040 ez Mary paid $500 to have the basement painted. Irs forms 1040 ez The painting is a direct expense. Irs forms 1040 ez However, because she did not use the basement exclusively for daycare, she must multiply $500 by the percentage of time the basement was used for daycare (34. Irs forms 1040 ez 25% – line 6). Irs forms 1040 ez She enters $171 (34. Irs forms 1040 ez 25% × $500) on line 19, column (a). Irs forms 1040 ez She adds line 22, column (a), and line 23 and enters $1,756 ($171 + $1,585) on line 25. Irs forms 1040 ez This is less than her deduction limit (line 15), so she can deduct the entire amount. Irs forms 1040 ez She follows the instructions to complete the rest of Part II and enters $1,756 on lines 33 and 35. Irs forms 1040 ez She then carries the $1,756 to line 30 of her Schedule C (Form 1040). Irs forms 1040 ez Example 2. Irs forms 1040 ez Assume the same facts as in Example 1 except that Mary also has another room that was available each business day for children to take naps in. Irs forms 1040 ez Although she did not keep a record of the number of hours the room was actually used for naps, it was used for part of each business day. Irs forms 1040 ez Since the room was available for business use during regular operating hours each business day and was used regularly in the business, it is considered used for daycare throughout each business day. Irs forms 1040 ez The basement and room are 60% of the total area of her home. Irs forms 1040 ez In figuring her expenses, 34. Irs forms 1040 ez 25% of any direct expenses for the basement and room are deductible. Irs forms 1040 ez In addition, 20. Irs forms 1040 ez 55% (34. Irs forms 1040 ez 25% × 60%) of her indirect expenses are deductible. Irs forms 1040 ez Example 3. Irs forms 1040 ez Assume the same facts as in Example 1 except that Mary stopped using her home for a daycare facility on June 24, 2013. Irs forms 1040 ez She used the basement for daycare an average of 12 hours a day, 5 days a week, but for only 25 weeks of the year. Irs forms 1040 ez During the other 12 hours a day, the family could still use the basement. Irs forms 1040 ez She figures the percentage of time the basement was used for business as follows. Irs forms 1040 ez Number of hours used for daycare (12 x 5 x 25) Total number of hours during period used (24 x 175) = 1,500 4,200 = 35. Irs forms 1040 ez 71%           Mary can deduct 35. Irs forms 1040 ez 71% of any direct expenses for the basement. Irs forms 1040 ez However, because her indirect expenses are for the entire house, she can deduct only 17. Irs forms 1040 ez 86% of the indirect expenses. Irs forms 1040 ez She figures the percentage for her indirect expenses as follows. Irs forms 1040 ez Business percentage of the basement 50% Multiplied by: Percentage of time used for daycare × 35. Irs forms 1040 ez 71% Percentage for indirect expenses 17. Irs forms 1040 ez 86% Meals. Irs forms 1040 ez   If you provide food for your daycare recipients, do not include the expense as a cost of using your home for business. Irs forms 1040 ez Claim it as a separate deduction on your Schedule C (Form 1040). Irs forms 1040 ez You can never deduct the cost of food consumed by you or your family. Irs forms 1040 ez You can deduct as a business expense 100% of the actual cost of food consumed by your daycare recipients (see Standard meal and snack rates , later, for an optional method for eligible children) and generally only 50% of the cost of food consumed by your employees. Irs forms 1040 ez However, you can deduct 100% of the cost of food consumed by your employees if its value can be excluded from their wages as a de minimis fringe benefit. Irs forms 1040 ez For more information on meals that meet these requirements, see Meals in chapter 2 of Publication 15-B, Employer's Tax Guide to Fringe Benefits. Irs forms 1040 ez   If you deduct the actual cost of food for your daycare business, keep a separate record (with receipts) of your family's food costs. Irs forms 1040 ez   Reimbursements you receive from a sponsor under the Child and Adult Care Food Program of the Department of Agriculture are taxable only to the extent they exceed your expenses for food for eligible children. Irs forms 1040 ez If your reimbursements are more than your expenses for food, show the difference as income in Part I of Schedule C (Form 1040). Irs forms 1040 ez If your food expenses are greater than the reimbursements, show the difference as an expense in Part V of Schedule C (Form 1040). Irs forms 1040 ez Do not include payments or expenses for your own children if they are eligible for the program. Irs forms 1040 ez Follow this procedure even if you receive a Form 1099-MISC, Miscellaneous Income, reporting a payment from the sponsor. Irs forms 1040 ez Standard meal and snack rates. Irs forms 1040 ez   If you qualify as a family daycare provider, you can use the standard meal and snack rates, instead of actual costs, to compute the deductible cost of meals and snacks provided to eligible children. Irs forms 1040 ez For these purposes: A family daycare provider is a person engaged in the business of providing family daycare. Irs forms 1040 ez Family daycare is childcare provided to eligible children in the home of the family daycare provider. Irs forms 1040 ez The care must be non-medical, not involve a transfer of legal custody, and generally last less than 24 hours each day. Irs forms 1040 ez Eligible children are minor children receiving family daycare in the home of the family daycare provider. Irs forms 1040 ez Eligible children do not include children who are full-time or part-time residents in the home where the childcare is provided or children whose parents or guardians are residents of the same home. Irs forms 1040 ez Eligible children do not include children who receive daycare services for personal reasons of the provider. Irs forms 1040 ez For example, if a provider provides daycare services for a relative as a favor to that relative, that child is not an eligible child. Irs forms 1040 ez   You can compute the deductible cost of each meal and snack you actually purchased and served to an eligible child during the time period you provided family daycare using the standard meal and snack rates shown in Table 3, later. Irs forms 1040 ez You can use the standard meal and snack rates for a maximum of one breakfast, one lunch, one dinner, and three snacks per eligible child per day. Irs forms 1040 ez If you receive reimbursement for a particular meal or snack, you can deduct only the portion of the applicable standard meal or snack rate that is more than the amount of the reimbursement. Irs forms 1040 ez   You can use either the standard meal and snack rates or actual costs to calculate the deductible cost of food provided to eligible children in the family daycare for any particular tax year. Irs forms 1040 ez If you choose to use the standard meal and snack rates for a particular tax year, you must use the rates for all your deductible food costs for eligible children during that tax year. Irs forms 1040 ez However, if you use the standard meal and snack rates in any tax year, you can use actual costs to compute the deductible cost of food in any other tax year. Irs forms 1040 ez   If you use the standard meal and snack rates, you must maintain records to substantiate the computation of the total amount deducted for the cost of food provided to eligible children. Irs forms 1040 ez The records kept should include the name of each child, dates and hours of attendance in the daycare, and the type and quantity of meals and snacks served. Irs forms 1040 ez This information can be recorded in a log similar to the one shown in Exhibit A, near the end of this publication. Irs forms 1040 ez   The standard meal and snack rates include beverages, but do not include non-food supplies used for food preparation, service, or storage, such as containers, paper products, or utensils. Irs forms 1040 ez These expenses can be claimed as a separate deduction on your Schedule C (Form 1040). Irs forms 1040 ez     Table 3. Irs forms 1040 ez Standard Meal and Snack Rates1 Location of Family Daycare Provider Breakfast Lunch Dinner Snack States other than Alaska an