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Military Turbotax

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Military Turbotax

Military turbotax 4. Military turbotax   Deductions Table of Contents Standard DeductionStandard Deduction for Dependents Itemized DeductionsMedical and Dental Expenses Most taxpayers have a choice of taking a standard deduction or itemizing their deductions. Military turbotax You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions. Military turbotax If you have a choice, you should use the method that gives you the lower tax. Military turbotax Standard Deduction The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. Military turbotax Generally, the standard deduction amounts are adjusted each year for inflation. Military turbotax In most cases, you can use Worksheet 4-1 to figure your standard deduction amount. Military turbotax Persons not eligible for the standard deduction. Military turbotax   Your standard deduction is zero and you should itemize any deductions you have if: You are married and filing a separate return, and your spouse itemizes deductions, You are filing a tax return for a short tax year because of a change in your annual accounting period, or You are a nonresident or dual-status alien during the year. Military turbotax You are considered a dual-status alien if you were both a nonresident alien and a resident alien during the year. Military turbotax   If you are a nonresident alien who is married to a U. Military turbotax S. Military turbotax citizen or resident alien at the end of the year, you can choose to be treated as a U. Military turbotax S. Military turbotax resident. Military turbotax See Publication 519, U. Military turbotax S. Military turbotax Tax Guide for Aliens. Military turbotax If you make this choice, you can take the standard deduction. Military turbotax Decedent's final return. Military turbotax   The amount of the standard deduction for a decedent's final tax return is the same as it would have been had the decedent continued to live. Military turbotax However, if the decedent was not 65 or older at the time of death, the higher standard deduction for age cannot be claimed. Military turbotax Higher standard deduction for age (65 or older). Military turbotax   If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. Military turbotax You are considered age 65 on the day before your 65th birthday. Military turbotax Therefore, you can take a higher standard deduction for 2013 if you were born before January 2, 1949. Military turbotax Higher standard deduction for blindness. Military turbotax   If you are blind on the last day of the year and you do not itemize deductions, you are entitled to a higher standard deduction. Military turbotax You qualify for this benefit if you are totally or partly blind. Military turbotax Not totally blind. Military turbotax   If you are not totally blind, you must get a certified statement from an eye doctor (ophthalmologist or optometrist) that: You cannot see better than 20/200 in the better eye with glasses or contact lenses, or Your field of vision is not more than 20 degrees. Military turbotax   If your eye condition will never improve beyond these limits, the statement should include this fact. Military turbotax You must keep the statement in your records. Military turbotax   If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify. Military turbotax Spouse 65 or older or blind. Military turbotax   You can take the higher standard deduction if your spouse is age 65 or older or blind and: You file a joint return, or You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and an exemption for your spouse could not be claimed by another taxpayer. Military turbotax    You cannot claim the higher standard deduction for an individual other than yourself and your spouse. Military turbotax Example. Military turbotax This example illustrates how to determine your standard deduction using Worksheet 4-1. Military turbotax Bill and Lisa are filing a joint return for 2013. Military turbotax Both are over age 65. Military turbotax Neither is blind, and neither can be claimed as a dependent. Military turbotax They do not itemize deductions, so they use Worksheet 4-1. Military turbotax Because they are married filing jointly, they enter $12,200 on line 1. Military turbotax They check the “No” box on line 2, so they also enter $12,200 on line 4. Military turbotax Because they are both over age 65, they enter $2,400 ($1,200 × 2) on line 5. Military turbotax They enter $14,600 ($12,200 + $2,400) on line 6, so their standard deduction is $14,600. Military turbotax Standard Deduction for Dependents The standard deduction for an individual for whom an exemption can be claimed on another person's tax return is generally limited to the greater of: $1,000, or The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,100). Military turbotax However, the standard deduction may be higher if the individual is 65 or older or blind. Military turbotax If an exemption for you (or your spouse if you are filing jointly) can be claimed on someone else's return, use Worksheet 4-1, if applicable, to determine your standard deduction. Military turbotax Worksheet 4-1. Military turbotax 2013 Standard Deduction Worksheet Caution. Military turbotax If you are married filing separately and your spouse itemizes deductions, or if you are a dual-status alien, do not complete this worksheet. Military turbotax If you were born before January 2, 1949, and/or blind, check the correct number of boxes below. Military turbotax Put the total number of boxes checked in box c and go to line 1. Military turbotax a. Military turbotax You   Born before  January 2, 1949     Blind b. Military turbotax Your spouse, if claiming  spouse's exemption   Born before January 2, 1949     Blind c. Military turbotax Total boxes checked             1. Military turbotax Enter the amount shown below for your filing status. Military turbotax               Single or married filing separately — $6,100 Married filing jointly or Qualifying widow(er) — $12,200 Head of household — $8,950   1. Military turbotax           2. Military turbotax Can you (or your spouse if filing jointly) be claimed as a dependent on someone else's return?  No. Military turbotax Skip line 3; enter the amount from line 1 on line 4. Military turbotax   Yes. Military turbotax Go to line 3. Military turbotax         3. Military turbotax Is your earned income* more than $650?               Yes. Military turbotax Add $350 to your earned income. Military turbotax Enter the total   3. Military turbotax         No. Military turbotax Enter $1,000 4. Military turbotax Enter the smaller of line 1 or line 3 4. Military turbotax   5. Military turbotax If born before January 2, 1949, or blind, multiply the number in box c by $1,200 ($1,500 if single or head of household). Military turbotax Enter the result here. Military turbotax Otherwise, enter -0- 5. Military turbotax   6. Military turbotax Add lines 4 and 5. Military turbotax This is your standard deduction for 2013. Military turbotax 6. Military turbotax   * Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Military turbotax It also includes any amount received as a scholarship that you must include in your income. Military turbotax Generally, your earned income is the total of the amount(s) you reported on Form 1040, lines 7, 12, and 18, minus the amount, if any, on line 27 (or the amount you reported on Form 1040A, line 7). Military turbotax Itemized Deductions Some individuals should itemize their deductions because it will save them money. Military turbotax Others should itemize because they do not qualify for the standard deduction. Military turbotax See the discussion under Standard Deduction , earlier, to decide if it would be to your advantage to itemize deductions. Military turbotax You may be subject to a limit on some of your itemized deductions if your adjusted gross income is more than $150,000. Military turbotax For more information, see Overall limitation, later. Military turbotax Medical and dental expenses, some taxes, certain interest expenses, charitable contributions, casualty and theft losses, and certain other miscellaneous expenses may be itemized as deductions on Schedule A (Form 1040). Military turbotax You may benefit from itemizing your deductions on Schedule A (Form 1040) if you: Cannot take the standard deduction, Had uninsured medical or dental expenses that are more than 10% of your adjusted gross income (or more than 7. Military turbotax 5% of your adjusted gross income if either you or your spouse is age 65 or older), Paid interest on your home, Paid real estate or personal property taxes, Paid mortgage insurance premiums, Paid state and local income or general sales taxes, Had large unreimbursed employee business expenses or other miscellaneous deductions, Had large uninsured casualty or theft losses, Made large contributions to qualified charities (see Publication 526, Charitable Contributions), or Have total itemized deductions that are more than the standard deduction that applies to you. Military turbotax See the Schedule A (Form 1040) instructions for more information. Military turbotax Overall limitation. Military turbotax   You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than: $150,000, if married filing separately, $250,000, if single, $275,000, if head of household, or $300,000, if married filing jointly or qualifying widow(er). Military turbotax  If your adjusted gross income exceeds the applicable amount, you will use the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040) to figure your total itemized deductions. Military turbotax Medical and Dental Expenses You can deduct certain medical and dental expenses you paid for yourself, your spouse, and your dependent(s) if you itemize your deductions on Schedule A (Form 1040). Military turbotax Table 4-1 shows some common items that you can or cannot include in figuring your medical expense deduction. Military turbotax For more information, see the following discussions of selected items, which are presented in alphabetical order. Military turbotax A more extensive list of items and further details can be found in Publication 502, Medical and Dental Expenses. Military turbotax Table 4-1. Military turbotax Medical and Dental Expenses Checklist You can include: You cannot include: Bandages Capital expenses for equipment or improvements to your home needed for medical care (see Publication 502) Certain weight-loss expenses for obesity Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. Military turbotax ) Lead-based paint removal (see Publication 502) Long-term care contracts, qualified (see Publication 502) Meals and lodging provided by a hospital during medical treatment Medical and hospital insurance premiums Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Publication 502) Special items (artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids, crutches, wheelchair, etc. Military turbotax ) Special education for mentally or physically disabled persons (see Publication 502) Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services (see Publication 502) Contributions to Archer MSAs (see Publication 969) Bottled water Diaper service Expenses for your general health (even if following your doctor's advice) such as: —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pretax basis) (see Publication 502) Funeral, burial, or cremation expenses Health savings account payments for medical expenses (see Publication 502) Illegal operation or treatment Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. Military turbotax Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases (see Publication 502) Surgery for purely cosmetic reasons (see Publication 502) Toothpaste, toiletries, cosmetics, etc. Military turbotax Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease You can deduct only the amount of your medical and dental expenses that is more than 10% of your adjusted gross income (or that is more than 7. Military turbotax 5% of your adjusted gross income if you or your spouse is age 65 or older). Military turbotax What to include. Military turbotax   Generally, you can include only the medical and dental expenses you paid this year, regardless of when the services were provided. Military turbotax If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. Military turbotax If you use a pay-by-phone or online account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. Military turbotax You can include medical expenses you charge to your credit card in the year the charge is made. Military turbotax It does not matter when you actually pay the amount charged. Military turbotax Home Improvements You can include in medical expenses amounts you pay for home improvements if their main purpose is medical care for you, your spouse, or your dependent. Military turbotax Only reasonable costs to accommodate a home to your disabled condition (or that of your spouse or your dependent(s) who live with you) are considered medical care. Military turbotax Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. Military turbotax Publication 502 contains additional information and examples, including a capital expense worksheet, to assist you in figuring the amount of the capital expense that you can include in your medical expenses. Military turbotax Also, see Publication 502 for information about deductible operating and upkeep expenses related to such capital expense items, and for information about improvements, for medical reasons, to property rented by a person with disabilities. Military turbotax Household Help You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor. Military turbotax This is a personal expense that is not deductible. Military turbotax However, you may be able to include certain expenses paid to a person providing nursing-type services. Military turbotax For more information, see Nursing Services , later. Military turbotax Also, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Military turbotax For more information, see Qualified long-term care services under Long-Term Care, later. Military turbotax Hospital Services You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. Military turbotax This includes amounts paid for meals and lodging. Military turbotax Also, see Meals and Lodging , later. Military turbotax Long-Term Care You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts. Military turbotax Qualified long-term care services. Military turbotax   Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are: Required by a chronically ill individual, and Provided under a plan of care prescribed by a licensed health care practitioner. Military turbotax Chronically ill individual. Military turbotax    An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions. Military turbotax He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. Military turbotax Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. Military turbotax He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. Military turbotax Maintenance and personal care services. Military turbotax    Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment). Military turbotax Qualified long-term care insurance contracts. Military turbotax   A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. Military turbotax The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses. Military turbotax   The amount of qualified long-term care premiums you can include is limited. Military turbotax You can include the following as medical expenses on Schedule A (Form 1040). Military turbotax Qualified long-term care premiums up to the following amounts. Military turbotax Age 40 or under – $360. Military turbotax Age 41 to 50 – $680. Military turbotax Age 51 to 60 – $1,360. Military turbotax Age 61 to 70 – $3,640. Military turbotax Age 71 or over – $4,550. Military turbotax Unreimbursed expenses for qualified long-term care services. Military turbotax Note. Military turbotax The limit on premiums is for each person. Military turbotax Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if your main reason for being there is to receive medical care. Military turbotax You may be able to include in medical expenses the cost of lodging (but not meals) not provided in a hospital or similar institution. Military turbotax You can include the cost of such lodging while away from home if all of the following requirements are met. Military turbotax The lodging is primarily for, and essential to, medical care. Military turbotax The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. Military turbotax The lodging is not lavish or extravagant under the circumstances. Military turbotax There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. Military turbotax The amount you include in medical expenses for lodging cannot be more than $50 per night for each person. Military turbotax You can include lodging for a person traveling with the person receiving the medical care. Military turbotax For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. Military turbotax (Meals are not included. Military turbotax ) Nursing home. Military turbotax   You can include in medical expenses the cost of medical care in a nursing home or a home for the aged for yourself, your spouse, or your dependent(s). Military turbotax This includes the cost of meals and lodging in the home if a main reason for being there is to get medical care. Military turbotax   Do not include the cost of meals and lodging if the reason for being in the home is personal. Military turbotax However, you can include in medical expenses the part of the cost that is for medical or nursing care. Military turbotax Medical Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. Military turbotax Policies can provide payment for: Hospitalization, surgical fees, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Qualified long-term care insurance contracts (subject to the additional limits included in the discussion on qualified long-term care insurance contracts under Long-Term Care , earlier). Military turbotax If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. Military turbotax The cost of the medical portion must be separately stated in the insurance contract or given to you in a separate statement. Military turbotax Medicare Part A. Military turbotax   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare Part A. Military turbotax The payroll tax paid for Medicare Part A is not a medical expense. Military turbotax If you are not covered under social security (or were not a government employee who paid Medicare tax), you can enroll voluntarily in Medicare Part A. Military turbotax In this situation you can include the premiums you paid for Medicare Part A as a medical expense. Military turbotax Medicare Part B. Military turbotax   Medicare Part B is a supplemental medical insurance. Military turbotax Premiums you pay for Medicare Part B are a medical expense. Military turbotax If you applied for it at age 65 or after you became disabled, you can include in medical expenses the monthly premiums you paid. Military turbotax If you were over age 65 or disabled when you first enrolled, check with your local Social Security Administration office, or go to their website at www. Military turbotax SSA. Military turbotax gov, to find out your premium. Military turbotax Medicare Part D. Military turbotax   Medicare Part D is a voluntary prescription drug insurance program for persons with Medicare Part A or Part B. Military turbotax You can include as a medical expense premiums you pay for Medicare Part D. Military turbotax Prepaid insurance premiums. Military turbotax   Insurance premiums you pay before you are age 65 for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). Military turbotax Medicines You can include in medical expenses amounts you pay for prescribed medicines and drugs. Military turbotax A prescribed drug is one that requires a prescription by a doctor for its use by an individual. Military turbotax You can also include amounts you pay for insulin. Military turbotax Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. Military turbotax Imported medicines and drugs. Military turbotax   If you import medicines or drugs from other countries, see Medicines and Drugs From Other Countries, under What Expenses Are Not Includible, in Publication 502. Military turbotax Nursing Services You can include in medical expenses wages and other amounts you pay for nursing services. Military turbotax The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. Military turbotax This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. Military turbotax These services can be provided in your home or another care facility. Military turbotax Generally, only the amount spent for nursing services is a medical expense. Military turbotax If the attendant also provides personal and household services, amounts paid to the attendant must be divided between the time spent performing household and personal services and the time spent for nursing services. Military turbotax However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. Military turbotax See Maintenance and personal care services under Qualified long-term care services, earlier. Military turbotax Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. Military turbotax See Child and Dependent Care Credit , later, and Publication 503, Child and Dependent Care Expenses. Military turbotax You can also include in medical expenses part of the amount you pay for that attendant's meals. Military turbotax Divide the food expense among the household members to find the cost of the attendant's food. Military turbotax Then divide that cost in the same manner as in the preceding paragraph. Military turbotax If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. Military turbotax This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant. Military turbotax Employment taxes. Military turbotax   You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for a nurse, attendant, or other person who provides medical care. Military turbotax If the attendant also provides personal and household services, you can include as a medical expense only the amount of employment taxes paid for medical services as explained earlier under Nursing Services. Military turbotax For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide. Military turbotax Transportation You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. Military turbotax Car expenses. Military turbotax    You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. Military turbotax You cannot include depreciation, insurance, general repair, or maintenance expenses. Military turbotax   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents a mile. Military turbotax   You can also include parking fees and tolls. Military turbotax You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. Military turbotax You can also include:    Bus, taxi, train, or plane fares or ambulance service, and Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone. Military turbotax Do not include transportation expenses if, for purely personal reasons, you choose to travel to another city for an operation or other medical care prescribed by your doctor. Military turbotax Prev  Up  Next   Home   More Online Publications
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IRS Gives Colorado Flood Victims More Time To Decide When To Claim Losses

IR-2014-35, March 25, 2014  

WASHINGTON — The Internal Revenue Service today provided taxpayers an extension until Oct. 15, 2014, to decide when to claim disaster losses arising from last September’s flooding.

The extension means that eligible individuals and businesses will now have until Oct. 15 to decide whether to claim these losses on either their 2012 or 2013 returns. Without this extension, these taxpayers would have had to make this choice by the original due date for the 2013 return, usually April 15.

Depending upon various income factors, claiming losses on a 2012 return versus a 2013 return could result in greater tax savings for some taxpayers. The extra time is available, regardless of whether a taxpayer requests a tax-filing extension for either year.

Eligible taxpayers are those who suffered uninsured or unreimbursed losses resulting from severe storms, flooding, landslides and mudslides in the 20 federally-designated disaster area counties from Sept. 11 to Sept. 30, 2013. The disaster area counties are Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Crowley, Denver, El Paso, Fremont, Gilpin, Jefferson, Lake, Larimer, Lincoln, Logan, Morgan, Pueblo, Sedgwick, Washington and Weld.

Though taxpayers who miss the new Oct. 15 cut-off will lose the option of claiming their losses for 2012, they will still be able to claim them on an original or amended 2013 return. Further details are in Notice 2014-20, posted today on IRS.gov and also scheduled to be in Internal Revenue Bulletin 2014-15, dated April 7, 2014.

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Page Last Reviewed or Updated: 25-Mar-2014

The Military Turbotax

Military turbotax 7. Military turbotax   Interest Income Table of Contents Reminder Introduction Useful Items - You may want to see: General InformationSSN for joint account. Military turbotax Custodian account for your child. Military turbotax Penalty for failure to supply SSN. Military turbotax Reporting backup withholding. Military turbotax Savings account with parent as trustee. Military turbotax Interest not reported on Form 1099-INT. Military turbotax Nominees. Military turbotax Incorrect amount. Military turbotax Information reporting requirement. Military turbotax Taxable InterestInterest subject to penalty for early withdrawal. Military turbotax Money borrowed to invest in certificate of deposit. Military turbotax U. Military turbotax S. Military turbotax Savings Bonds Education Savings Bond Program U. Military turbotax S. Military turbotax Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Original Issue Discount (OID) When To Report Interest IncomeConstructive receipt. Military turbotax How To Report Interest IncomeSchedule B (Form 1040A or 1040). Military turbotax Reporting tax-exempt interest. Military turbotax U. Military turbotax S. Military turbotax savings bond interest previously reported. Military turbotax Reminder Foreign-source income. Military turbotax  If you are a U. Military turbotax S. Military turbotax citizen with interest income from sources outside the United States (foreign income), you must report that income on your tax return unless it is exempt by U. Military turbotax S. Military turbotax law. Military turbotax This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the foreign payer. Military turbotax Introduction This chapter discusses the following topics. Military turbotax Different types of interest income. Military turbotax What interest is taxable and what interest is nontaxable. Military turbotax When to report interest income. Military turbotax How to report interest income on your tax return. Military turbotax In general, any interest you receive or that is credited to your account and can be withdrawn is taxable income. Military turbotax Exceptions to this rule are discussed later in this chapter. Military turbotax You may be able to deduct expenses you have in earning this income on Schedule A (Form 1040) if you itemize your deductions. Military turbotax See Money borrowed to invest in certificate of deposit , later, and chapter 28. Military turbotax Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends 8815 Exclusion of Interest From Series EE and I U. Military turbotax S. Military turbotax Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Military turbotax S. Military turbotax Savings Bonds Issued After 1989 General Information A few items of general interest are covered here. Military turbotax Recordkeeping. Military turbotax You should keep a list showing sources and interest amounts received during the year. Military turbotax Also, keep the forms you receive showing your interest income (Forms 1099-INT, for example) as an important part of your records. Military turbotax Tax on unearned income of certain children. Military turbotax    Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Military turbotax If so, Form 8615, Tax for Certain Children Who Have Unearned Income, must be completed and attached to the child's tax return. Military turbotax If not, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Military turbotax   Some parents can choose to include the child's interest and dividends on the parent's return. Military turbotax If you can, use Form 8814, Parents' Election To Report Child's Interest and Dividends, for this purpose. Military turbotax   For more information about the tax on unearned income of children and the parents' election, see chapter 31. Military turbotax Beneficiary of an estate or trust. Military turbotax   Interest you receive as a beneficiary of an estate or trust is generally taxable income. Military turbotax You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Military turbotax , from the fiduciary. Military turbotax Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Military turbotax Social security number (SSN). Military turbotax   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Military turbotax This includes payers of interest. Military turbotax If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Military turbotax SSN for joint account. Military turbotax   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Military turbotax (For information on who owns the funds in a joint account, see Joint accounts , later. Military turbotax ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Military turbotax This is because only one name and SSN can be shown on Form 1099. Military turbotax   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Military turbotax For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Military turbotax Custodian account for your child. Military turbotax   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Military turbotax For example, you must give your child's SSN to the payer of interest on an account owned by your child, even though the interest is paid to you as custodian. Military turbotax Penalty for failure to supply SSN. Military turbotax   If you do not give your SSN to the payer of interest, you may have to pay a penalty. Military turbotax See Failure to supply SSN under Penalties in chapter 1. Military turbotax Backup withholding also may apply. Military turbotax Backup withholding. Military turbotax   Your interest income is generally not subject to regular withholding. Military turbotax However, it may be subject to backup withholding to ensure that income tax is collected on the income. Military turbotax Under backup withholding, the payer of interest must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Military turbotax   Backup withholding may also be required if the IRS has determined that you underreported your interest or dividend income. Military turbotax For more information, see Backup Withholding in chapter 4. Military turbotax Reporting backup withholding. Military turbotax   If backup withholding is deducted from your interest income, the payer must give you a Form 1099-INT for the year indicating the amount withheld. Military turbotax The Form 1099-INT will show any backup withholding as “Federal income tax withheld. Military turbotax ” Joint accounts. Military turbotax   If two or more persons hold property (such as a savings account or bond) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest from the property is determined by local law. Military turbotax Income from property given to a child. Military turbotax   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Military turbotax   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Military turbotax Savings account with parent as trustee. Military turbotax   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Military turbotax The savings account legally belongs to the child. Military turbotax The parents are not legally permitted to use any of the funds to support the child. Military turbotax Form 1099-INT. Military turbotax   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Military turbotax This form shows you the interest you received during the year. Military turbotax Keep this form for your records. Military turbotax You do not have to attach it to your tax return. Military turbotax   Report on your tax return the total interest income you receive for the tax year. Military turbotax Interest not reported on Form 1099-INT. Military turbotax   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Military turbotax For example, you may receive distributive shares of interest from partnerships or S corporations. Military turbotax This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deduction, Credits, etc. Military turbotax , or Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Military turbotax Nominees. Military turbotax   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Military turbotax   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on nominee distributions under How To Report Interest Income in chapter 1 of Publication 550, or Schedule B (Form 1040A or 1040) instructions. Military turbotax Incorrect amount. Military turbotax   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Military turbotax The new Form 1099-INT you receive will be marked “Corrected. Military turbotax ” Form 1099-OID. Military turbotax   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Military turbotax For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Military turbotax Exempt-interest dividends. Military turbotax   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Military turbotax (However, see Information reporting requirement , next. Military turbotax ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Military turbotax You do not reduce your basis for distributions that are exempt-interest dividends. Military turbotax Information reporting requirement. Military turbotax   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Military turbotax This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Military turbotax Note. Military turbotax Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Military turbotax See Alternative Minimum Tax (AMT) in chapter 30 for more information. Military turbotax Chapter 1 of Publication 550 contains a discussion on private activity bonds under State or Local Government Obligations. Military turbotax Interest on VA dividends. Military turbotax   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Military turbotax This includes interest paid on dividends on converted United States Government Life Insurance and on National Service Life Insurance policies. Military turbotax Individual retirement arrangements (IRAs). Military turbotax   Interest on a Roth IRA generally is not taxable. Military turbotax Interest on a traditional IRA is tax deferred. Military turbotax You generally do not include it in your income until you make withdrawals from the IRA. Military turbotax See chapter 17. Military turbotax Taxable Interest Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Military turbotax The following are some sources of taxable interest. Military turbotax Dividends that are actually interest. Military turbotax   Certain distributions commonly called dividends are actually interest. Military turbotax You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Military turbotax  The “dividends” will be shown as interest income on Form 1099-INT. Military turbotax Money market funds. Military turbotax   Money market funds pay dividends and are offered by nonbank financial institutions, such as mutual funds and stock brokerage houses. Military turbotax Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Military turbotax Certificates of deposit and other deferred interest accounts. Military turbotax   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Military turbotax You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Military turbotax The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Military turbotax If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Military turbotax Interest subject to penalty for early withdrawal. Military turbotax   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Military turbotax You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Military turbotax See Penalty on early withdrawal of savings in chapter 1 of Publication 550 for more information on how to report the interest and deduct the penalty. Military turbotax Money borrowed to invest in certificate of deposit. Military turbotax   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Military turbotax You must report the total interest you earn on the certificate in your income. Military turbotax If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Military turbotax See Interest Expenses in chapter 3 of Publication 550. Military turbotax Example. Military turbotax You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Military turbotax The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Military turbotax The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Military turbotax The bank also gives you a statement showing that you paid $310 interest for 2013. Military turbotax You must include the $575 in your income. Military turbotax If you itemize your deductions on Schedule A (Form 1040), you can deduct $310, subject to the net investment income limit. Military turbotax Gift for opening account. Military turbotax   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Military turbotax   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Military turbotax For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Military turbotax The value is determined by the cost to the financial institution. Military turbotax Example. Military turbotax You open a savings account at your local bank and deposit $800. Military turbotax The account earns $20 interest. Military turbotax You also receive a $15 calculator. Military turbotax If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Military turbotax You must report $35 interest income on your tax return. Military turbotax Interest on insurance dividends. Military turbotax   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Military turbotax However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Military turbotax Prepaid insurance premiums. Military turbotax   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Military turbotax U. Military turbotax S. Military turbotax obligations. Military turbotax   Interest on U. Military turbotax S. Military turbotax obligations, such as U. Military turbotax S. Military turbotax Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Military turbotax Interest on tax refunds. Military turbotax   Interest you receive on tax refunds is taxable income. Military turbotax Interest on condemnation award. Military turbotax   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Military turbotax Installment sale payments. Military turbotax   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Military turbotax That interest is taxable when you receive it. Military turbotax If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Military turbotax See Unstated Interest and Original Issue Discount in Publication 537, Installment Sales. Military turbotax Interest on annuity contract. Military turbotax   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Military turbotax Usurious interest. Military turbotax   Usurious interest is interest charged at an illegal rate. Military turbotax This is taxable as interest unless state law automatically changes it to a payment on the principal. Military turbotax Interest income on frozen deposits. Military turbotax   Exclude from your gross income interest on frozen deposits. Military turbotax A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state where the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Military turbotax   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Military turbotax If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income in chapter 1 of Publication 550, for information about reporting this interest income exclusion on your tax return. Military turbotax   The interest you exclude is treated as credited to your account in the following year. Military turbotax You must include it in income in the year you can withdraw it. Military turbotax Example. Military turbotax $100 of interest was credited on your frozen deposit during the year. Military turbotax You withdrew $80 but could not withdraw any more as of the end of the year. Military turbotax You must include $80 in your income and exclude $20 from your income for the year. Military turbotax You must include the $20 in your income for the year you can withdraw it. Military turbotax Bonds traded flat. Military turbotax   If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Military turbotax The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Military turbotax When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Military turbotax Interest that accrues after the date of purchase, however, is taxable interest income for the year it is received or accrued. Military turbotax See Bonds Sold Between Interest Dates , later, for more information. Military turbotax Below-market loans. Military turbotax   In general, a below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. Military turbotax See Below-Market Loans in chapter 1 of Publication 550 for more information. Military turbotax U. Military turbotax S. Military turbotax Savings Bonds This section provides tax information on U. Military turbotax S. Military turbotax savings bonds. Military turbotax It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Military turbotax For other information on U. Military turbotax S. Military turbotax savings bonds, write to:  For series EE and I paper savings bonds: Bureau of the Public Debt Division of Customer Assistance P. Military turbotax O. Military turbotax Box 7012 Parkersburg, WV 26106-7012  For series EE and I electronic bonds: Bureau of the Public Debt Division of Customer Assistance P. Military turbotax O. Military turbotax Box 7015 Parkersburg, WV 26106–7015  For series HH/H: Bureau of the Public Debt Division of Customer Assistance P. Military turbotax O. Military turbotax Box 2186 Parkersburg, WV 26106-2186 Or, on the Internet, visit: www. Military turbotax treasurydirect. Military turbotax gov/indiv/indiv. Military turbotax htm. Military turbotax Accrual method taxpayers. Military turbotax   If you use an accrual method of accounting, you must report interest on U. Military turbotax S. Military turbotax savings bonds each year as it accrues. Military turbotax You cannot postpone reporting interest until you receive it or until the bonds mature. Military turbotax Accrual methods of accounting are explained in chapter 1 under Accounting Methods . Military turbotax Cash method taxpayers. Military turbotax   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Military turbotax S. Military turbotax savings bonds when you receive it. Military turbotax The cash method of accounting is explained in chapter 1 under Accounting Methods. Military turbotax But see Reporting options for cash method taxpayers , later. Military turbotax Series HH bonds. Military turbotax    These bonds were issued at face value. Military turbotax Interest is paid twice a year by direct deposit to your bank account. Military turbotax If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Military turbotax   Series HH bonds were first offered in 1980 and last offered in August 2004. Military turbotax Before 1980, series H bonds were issued. Military turbotax Series H bonds are treated the same as series HH bonds. Military turbotax If you are a cash method taxpayer, you must report the interest when you receive it. Military turbotax   Series H bonds have a maturity period of 30 years. Military turbotax Series HH bonds mature in 20 years. Military turbotax The last series H bonds matured in 2009. Military turbotax Series EE and series I bonds. Military turbotax   Interest on these bonds is payable when you redeem the bonds. Military turbotax The difference between the purchase price and the redemption value is taxable interest. Military turbotax Series EE bonds. Military turbotax   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Military turbotax   Before July 1980, series E bonds were issued. Military turbotax The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Military turbotax Paper series EE and series E bonds are issued at a discount. Military turbotax The face value is payable to you at maturity. Military turbotax Electronic series EE bonds are issued at their face value. Military turbotax The face value plus accrued interest is payable to you at maturity. Military turbotax As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Military turbotax   Owners of paper series EE bonds can convert them to electronic bonds. Military turbotax These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Military turbotax Series I bonds. Military turbotax   Series I bonds were first offered in 1998. Military turbotax These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Military turbotax The face value plus all accrued interest is payable to you at maturity. Military turbotax Reporting options for cash method taxpayers. Military turbotax   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Military turbotax Method 1. Military turbotax Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year they mature. Military turbotax (However, see Savings bonds traded , later. Military turbotax )  Note. Military turbotax Series EE bonds issued in 1983 matured in 2013. Military turbotax If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Military turbotax The last series E bonds were issued in 1980 and matured in 2010. Military turbotax If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Military turbotax Method 2. Military turbotax Choose to report the increase in redemption value as interest each year. Military turbotax You must use the same method for all series EE, series E, and series I bonds you own. Military turbotax If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Military turbotax    If you plan to cash your bonds in the same year you will pay for higher education expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Military turbotax To learn how, see Education Savings Bond Program, later. Military turbotax Change from method 1. Military turbotax   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Military turbotax In the year of change you must report all interest accrued to date and not previously reported for all your bonds. Military turbotax   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Military turbotax Change from method 2. Military turbotax   To change from method 2 to method 1, you must request permission from the IRS. Military turbotax Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Military turbotax You have typed or printed the following number at the top: “131. Military turbotax ” It includes your name and social security number under “131. Military turbotax ” It includes the year of change (both the beginning and ending dates). Military turbotax It identifies the savings bonds for which you are requesting this change. Military turbotax It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Military turbotax   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Military turbotax   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Military turbotax On the statement, type or print “Filed pursuant to section 301. Military turbotax 9100-2. Military turbotax ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Military turbotax    By the date you file the original statement with your return, you must also send a signed copy to the address below. Military turbotax   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Military turbotax O. Military turbotax Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Military turbotax   Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW  Washington, DC 20224   Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115, Application for Change in Accounting Method. Military turbotax In that case, follow the form instructions for an automatic change. Military turbotax No user fee is required. Military turbotax Co-owners. Military turbotax   If a U. Military turbotax S. Military turbotax savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Military turbotax One co-owner's funds used. Military turbotax    If you used your funds to buy the bond, you must pay the tax on the interest. Military turbotax This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Military turbotax Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Military turbotax The co-owner who redeemed the bond is a “nominee. Military turbotax ” See Nominee distributions under How To Report Interest Income in chapter 1 of Publication 550 for more information about how a person who is a nominee reports interest income belonging to another person. Military turbotax Both co-owners' funds used. Military turbotax   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Military turbotax Community property. Military turbotax   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Military turbotax If you file separate returns, each of you generally must report one-half of the bond interest. Military turbotax For more information about community property, see Publication 555. Military turbotax Table 7-1. Military turbotax   These rules are also shown in Table 7-1. Military turbotax Ownership transferred. Military turbotax   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Military turbotax But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Military turbotax   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Military turbotax Purchased jointly. Military turbotax   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Military turbotax The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Military turbotax This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Military turbotax   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Military turbotax But the new co-owner will report only his or her share of the interest earned after the transfer. Military turbotax   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Military turbotax    Table 7-1. Military turbotax Who Pays the Tax on U. Military turbotax S. Military turbotax Savings Bond Interest IF . Military turbotax . Military turbotax . Military turbotax THEN the interest must be reported by . Military turbotax . Military turbotax . Military turbotax you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Military turbotax you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Military turbotax you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Military turbotax you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Military turbotax If you file separate returns, both you and your spouse generally report one-half of the interest. Military turbotax Example 1. Military turbotax You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Military turbotax The bond was issued to you and your spouse as co-owners. Military turbotax You both postpone reporting interest on the bond. Military turbotax You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Military turbotax At that time neither you nor your spouse has to report the interest earned to the date of reissue. Military turbotax Example 2. Military turbotax You bought a $1,000 series EE savings bond entirely with your own funds. Military turbotax The bond was issued to you and your spouse as co-owners. Military turbotax You both postpone reporting interest on the bond. Military turbotax You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Military turbotax You must report half the interest earned to the date of reissue. Military turbotax Transfer to a trust. Military turbotax   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Military turbotax However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Military turbotax You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Military turbotax   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Military turbotax See Savings bonds traded , later. Military turbotax Decedents. Military turbotax   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Military turbotax This is explained in chapter 1 of Publication 550. Military turbotax Savings bonds traded. Military turbotax   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Military turbotax (You cannot trade series I bonds for series HH bonds. Military turbotax After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Military turbotax ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Military turbotax When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Military turbotax Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Military turbotax Example. Military turbotax You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Military turbotax You reported the $223 as taxable income on your tax return. Military turbotax At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Military turbotax You hold the series HH bonds until maturity, when you receive $2,500. Military turbotax You must report $300 as interest income in the year of maturity. Military turbotax This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Military turbotax (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Military turbotax ) Choice to report interest in year of trade. Military turbotax   You could have chosen to treat all of the previously unreported accrued interest on the series EE or series E bonds traded for series HH bonds as income in the year of the trade. Military turbotax If you made this choice, it is treated as a change from method 1. Military turbotax See Change from method 1 under Series EE and series I bonds, earlier. Military turbotax Form 1099-INT for U. Military turbotax S. Military turbotax savings bonds interest. Military turbotax   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Military turbotax Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Military turbotax However, your Form 1099-INT may show more interest than you have to include on your income tax return. Military turbotax For example, this may happen if any of the following are true. Military turbotax You chose to report the increase in the redemption value of the bond each year. Military turbotax The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Military turbotax You received the bond from a decedent. Military turbotax The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Military turbotax Ownership of the bond was transferred. Military turbotax The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Military turbotax You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Military turbotax The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Military turbotax (See Co-owners , earlier in this chapter, for more information about the reporting requirements. Military turbotax ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Military turbotax The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Military turbotax (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Military turbotax , for the year of distribution. Military turbotax )   For more information on including the correct amount of interest on your return, see How To Report Interest Income , later. Military turbotax Publication 550 includes examples showing how to report these amounts. Military turbotax    Interest on U. Military turbotax S. Military turbotax savings bonds is exempt from state and local taxes. Military turbotax The Form 1099-INT you receive will indicate the amount that is for U. Military turbotax S. Military turbotax savings bond interest in box 3. Military turbotax Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Military turbotax S. Military turbotax savings bonds during the year if you pay qualified higher educational expenses during the same year. Military turbotax This exclusion is known as the Education Savings Bond Program. Military turbotax You do not qualify for this exclusion if your filing status is married filing separately. Military turbotax Form 8815. Military turbotax   Use Form 8815 to figure your exclusion. Military turbotax Attach the form to your Form 1040 or Form 1040A. Military turbotax Qualified U. Military turbotax S. Military turbotax savings bonds. Military turbotax   A qualified U. Military turbotax S. Military turbotax savings bond is a series EE bond issued after 1989 or a series I bond. Military turbotax The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Military turbotax You must be at least 24 years old before the bond's issue date. Military turbotax For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Military turbotax    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Military turbotax Beneficiary. Military turbotax   You can designate any individual (including a child) as a beneficiary of the bond. Military turbotax Verification by IRS. Military turbotax   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of the Treasury. Military turbotax Qualified expenses. Military turbotax   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Military turbotax   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Military turbotax   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Military turbotax Eligible educational institutions. Military turbotax   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the U. Military turbotax S. Military turbotax Department of Education. Military turbotax Reduction for certain benefits. Military turbotax   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Military turbotax Tax-free part of scholarships and fellowships (see Scholarships and fellowships in chapter 12). Military turbotax Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Military turbotax Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Military turbotax Any tax-free payments (other than gifts or inheritances) received for educational expenses, such as Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Military turbotax Any expense used in figuring the American Opportunity and lifetime learning credits. Military turbotax Amount excludable. Military turbotax   If the total proceeds (interest and principal) from the qualified U. Military turbotax S. Military turbotax savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Military turbotax If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Military turbotax   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Military turbotax The numerator of the fraction is the qualified higher educational expenses you paid during the year. Military turbotax The denominator of the fraction is the total proceeds you received during the year. Military turbotax Example. Military turbotax In February 2013, Mark and Joan, a married couple, cashed a qualified series EE U. Military turbotax S. Military turbotax savings bond they bought in April 1997. Military turbotax They received proceeds of $8,372 representing principal of $5,000 and interest of $3,372. Military turbotax In 2013, they paid $4,000 of their daughter's college tuition. Military turbotax They are not claiming an education credit for that amount, and their daughter does not have any tax-free educational assistance. Military turbotax They can exclude $1,611 ($3,372 × ($4,000 ÷ $8,372)) of interest in 2013. Military turbotax They must pay tax on the remaining $1,761 ($3,372 − $1,611) interest. Military turbotax Modified adjusted gross income limit. Military turbotax   The interest exclusion is limited if your modified adjusted gross income (modified AGI) is: $74,700 to $89,700 for taxpayers filing single or head of household, and $112,050 to $142,050 for married taxpayers filing jointly or for a qualifying widow(er) with dependent child. Military turbotax You do not qualify for the interest exclusion if your modified AGI is equal to or more than the upper limit for your filing status. Military turbotax   Modified AGI, for purposes of this exclusion, is adjusted gross income (Form 1040, line 37, or Form 1040A, line 21) figured before the interest exclusion, and modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion and deduction, Exclusion of income for bona fide residents of American Samoa, Exclusion for income from Puerto Rico, Exclusion for adoption benefits received under an employer's adoption assistance program, Deduction for tuition and fees, Deduction for student loan interest, and Deduction for domestic production activities. Military turbotax   Use the Line 9 Worksheet in the Form 8815 instructions to figure your modified AGI. Military turbotax If you claim any of the exclusion or deduction items listed above (except items 6, 7, and 8), add the amount of the exclusion or deduction (except items 6, 7, and 8) to the amount on line 5 of the worksheet, and enter the total on Form 8815, line 9, as your modified AGI. Military turbotax   If you have investment interest expense incurred to earn royalties and other investment income, see Education Savings Bond Program in chapter 1 of Publication 550. Military turbotax Recordkeeping. Military turbotax If you claim the interest exclusion, you must keep a written record of the qualified U. Military turbotax S. Military turbotax savings bonds you redeem. Military turbotax Your record must include the serial number, issue date, face value, and total redemption proceeds (principal and interest) of each bond. Military turbotax You can use Form 8818 to record this information. Military turbotax You should also keep bills, receipts, canceled checks, or other documentation that shows you paid qualified higher educational expenses during the year. Military turbotax U. Military turbotax S. Military turbotax Treasury Bills, Notes, and Bonds Treasury bills, notes, and bonds are direct debts (obligations) of the U. Military turbotax S. Military turbotax Government. Military turbotax Taxation of interest. Military turbotax   Interest income from Treasury bills, notes, and bonds is subject to federal income tax but is exempt from all state and local income taxes. Military turbotax You should receive Form 1099-INT showing the interest (in box 3) paid to you for the year. Military turbotax   Payments of principal and interest generally will be credited to your designated checking or savings account by direct deposit through the TreasuryDirect® system. Military turbotax Treasury bills. Military turbotax   These bills generally have a 4-week, 13-week, 26-week, or 52-week maturity period. Military turbotax They are generally issued at a discount in the amount of $100 and multiples of $100. Military turbotax The difference between the discounted price you pay for the bills and the face value you receive at maturity is interest income. Military turbotax Generally, you report this interest income when the bill is paid at maturity. Military turbotax If you paid a premium for a bill (more than the face value), you generally report the premium as a section 171 deduction when the bill is paid at maturity. Military turbotax Treasury notes and bonds. Military turbotax   Treasury notes have maturity periods of more than 1 year, ranging up to 10 years. Military turbotax Maturity periods for Treasury bonds are longer than 10 years. Military turbotax Both generally are issued in denominations of $100 to $1 million and generally pay interest every 6 months. Military turbotax Generally, you report this interest for the year paid. Military turbotax For more information, see U. Military turbotax S. Military turbotax Treasury Bills, Notes, and Bonds in chapter 1 of Publication 550. Military turbotax For other information on Treasury notes or bonds, write to:  Bureau of the Public Debt P. Military turbotax O. Military turbotax Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Military turbotax treasurydirect. Military turbotax gov/indiv/indiv. Military turbotax htm. Military turbotax For information on series EE, series I, and series HH savings bonds, see U. Military turbotax S. Military turbotax Savings Bonds , earlier. Military turbotax Treasury inflation-protected securities (TIPS). Military turbotax   These securities pay interest twice a year at a fixed rate, based on a principal amount adjusted to take into account inflation and deflation. Military turbotax For the tax treatment of these securities, see Inflation-Indexed Debt Instruments under Original Issue Discount (OID), in Publication 550. Military turbotax Bonds Sold Between Interest Dates If you sell a bond between interest payment dates, part of the sales price represents interest accrued to the date of sale. Military turbotax You must report that part of the sales price as interest income for the year of sale. Military turbotax If you buy a bond between interest payment dates, part of the purchase price represents interest accrued before the date of purchase. Military turbotax When that interest is paid to you, treat it as a return of your capital investment, rather than interest income, by reducing your basis in the bond. Military turbotax See Accrued interest on bonds under How To Report Interest Income in chapter 1 of Publication 550 for information on reporting the payment. Military turbotax Insurance Life insurance proceeds paid to you as beneficiary of the insured person are usually not taxable. Military turbotax But if you receive the proceeds in installments, you must usually report a part of each installment payment as interest income. Military turbotax For more information about insurance proceeds received in installments, see Publication 525, Taxable and Nontaxable Income. Military turbotax Annuity. Military turbotax   If you buy an annuity with life insurance proceeds, the annuity payments you receive are taxed as pension and annuity income from a nonqualified plan, not as interest income. Military turbotax See chapter 10 for information on pension and annuity income from nonqualified plans. Military turbotax State or Local Government Obligations Interest on a bond used to finance government operations generally is not taxable if the bond is issued by a state, the District of Columbia, a possession of the United States, or any of their political subdivisions. Military turbotax Bonds issued after 1982 (including tribal economic development bonds issued after February 17, 2009) by an Indian tribal government are treated as issued by a state. Military turbotax Interest on these bonds is generally tax exempt if the bonds are part of an issue of which substantially all proceeds are to be used in the exercise of any essential government function. Military turbotax For information on federally guaranteed bonds, mortgage revenue bonds, arbitrage bonds, private activity bonds, qualified tax credit bonds, and Build America bonds, see State or Local Government Obligations in chapter 1 of Publication 550. Military turbotax Information reporting requirement. Military turbotax   If you must file a tax return, you are required to show any tax-exempt interest you received on your return. Military turbotax This is an information reporting requirement only. Military turbotax It does not change tax-exempt interest to taxable interest. Military turbotax Original Issue Discount (OID) Original issue discount (OID) is a form of interest. Military turbotax You generally include OID in your income as it accrues over the term of the debt instrument, whether or not you receive any payments from the issuer. Military turbotax A debt instrument generally has OID when the instrument is issued for a price that is less than its stated redemption price at maturity. Military turbotax OID is the difference between the stated redemption price at maturity and the issue price. Military turbotax All debt instruments that pay no interest before maturity are presumed to be issued at a discount. Military turbotax Zero coupon bonds are one example of these instruments. Military turbotax The OID accrual rules generally do not apply to short-term obligations (those with a fixed maturity date of 1 year or less from date of issue). Military turbotax See Discount on Short-Term Obligations in chapter 1 of Publication 550. Military turbotax De minimis OID. Military turbotax   You can treat the discount as zero if it is less than one-fourth of 1% (. Military turbotax 0025) of the stated redemption price at maturity multiplied by the number of full years from the date of original issue to maturity. Military turbotax This small discount is known as “de minimis” OID. Military turbotax Example 1. Military turbotax You bought a 10-year bond with a stated redemption price at maturity of $1,000, issued at $980 with OID of $20. Military turbotax One-fourth of 1% of $1,000 (stated redemption price) times 10 (the number of full years from the date of original issue to maturity) equals $25. Military turbotax Because the $20 discount is less than $25, the OID is treated as zero. Military turbotax (If you hold the bond at maturity, you will recognize $20 ($1,000 − $980) of capital gain. Military turbotax ) Example 2. Military turbotax The facts are the same as in Example 1, except that the bond was issued at $950. Military turbotax The OID is $50. Military turbotax Because the $50 discount is more than the $25 figured in Example 1, you must include the OID in income as it accrues over the term of the bond. Military turbotax Debt instrument bought after original issue. Military turbotax   If you buy a debt instrument with de minimis OID at a premium, the discount is not includible in income. Military turbotax If you buy a debt instrument with de minimis OID at a discount, the discount is reported under the market discount rules. Military turbotax See Market Discount Bonds in chapter 1 of Publication 550. Military turbotax Exceptions to reporting OID. Military turbotax   The OID rules discussed in this chapter do not apply to the following debt instruments. Military turbotax Tax-exempt obligations. Military turbotax (However, see Stripped tax-exempt obligations under Stripped Bonds and Coupons in chapter 1 of Publication 550). Military turbotax U. Military turbotax S. Military turbotax savings bonds. Military turbotax Short-term debt instruments (those with a fixed maturity date of not more than 1 year from the date of issue). Military turbotax Obligations issued by an individual before March 2, 1984. Military turbotax Loans between individuals if all the following are true. Military turbotax The lender is not in the business of lending money. Military turbotax The amount of the loan, plus the amount of any outstanding prior loans between the same individuals, is $10,000 or less. Military turbotax Avoiding any federal tax is not one of the principal purposes of the loan. Military turbotax Form 1099-OID. Military turbotax   The issuer of the debt instrument (or your broker if you held the instrument through a broker) should give you Form 1099-OID, or a similar statement, if the total OID for the calendar year is $10 or more. Military turbotax Form 1099-OID will show, in box 1, the amount of OID for the part of the year that you held the bond. Military turbotax It also will show, in box 2, the stated interest you must include in your income. Military turbotax A copy of Form 1099-OID will be sent to the IRS. Military turbotax Do not file your copy with your return. Military turbotax Keep it for your records. Military turbotax   In most cases, you must report the entire amount in boxes 1 and 2 of Form 1099-OID as interest income. Military turbotax But see Refiguring OID shown on Form 1099-OID, later in this discussion, for more information. Military turbotax Form 1099-OID not received. Military turbotax   If you had OID for the year but did not receive a Form 1099-OID, you can find tables on IRS. Military turbotax gov that list total OID on certain debt instruments and have information that will help you figure OID. Military turbotax For the latest OID tables, go to www. Military turbotax irs. Military turbotax gov and enter “OID tables” in the Search box. Military turbotax If your debt instrument is not listed, consult the issuer for further information about the accrued OID for the year. Military turbotax Nominee. Military turbotax   If someone else is the holder of record (the registered owner) of an OID instrument belonging to you and receives a Form 1099-OID on your behalf, that person must give you a Form 1099-OID. Military turbotax Refiguring OID shown on Form 1099-OID. Military turbotax   You must refigure the OID shown in box 1 or box 8 of Form 1099-OID if either of the following apply. Military turbotax You bought the debt instrument after its original issue and paid a premium or an acquisition premium. Military turbotax The debt instrument is a stripped bond or a stripped coupon (including certain zero coupon instruments). Military turbotax For information about figuring the correct amount of OID to include in your income, see Figuring OID on Long-Term Debt Instruments in Publication 1212. Military turbotax Refiguring periodic interest shown on Form 1099-OID. Military turbotax   If you disposed of a debt instrument or acquired it from another holder during the year, see Bonds Sold Between Interest Dates , earlier, for information about the treatment of periodic interest that may be shown in box 2 of Form 1099-OID for that instrument. Military turbotax Certificates of deposit (CDs). Military turbotax   If you buy a CD with a maturity of more than 1 year, you must include in income each year a part of the total interest due and report it in the same manner as other OID. Military turbotax   This also applies to similar deposit arrangements with banks, building and loan associations, etc. Military turbotax , including: Time deposits, Bonus plans, Savings certificates, Deferred income certificates, Bonus savings certificates, and Growth savings certificates. Military turbotax Bearer CDs. Military turbotax   CDs issued after 1982 generally must be in registered form. Military turbotax Bearer CDs are CDs not in registered form. Military turbotax They are not issued in the depositor's name and are transferable from one individual to another. Military turbotax   Banks must provide the IRS and the person redeeming a bearer CD with a Form 1099-INT. Military turbotax More information. Military turbotax   See chapter 1 of Publication 550 for more information about OID and related topics, such as market discount bonds. Military turbotax When To Report Interest Income When to report your interest income depends on whether you use the cash method or an accrual method to report income. Military turbotax Cash method. Military turbotax   Most individual taxpayers use the cash method. Military turbotax If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. Military turbotax However, there are special rules for reporting the discount on certain debt instruments. Military turbotax See U. Military turbotax S. Military turbotax Savings Bonds and Original Issue Discount (OID) , earlier. Military turbotax Example. Military turbotax On September 1, 2011, you loaned another individual $2,000 at 12%, compounded annually. Military turbotax You are not in the business of lending money. Military turbotax The note stated that principal and interest would be due on August 31, 2013. Military turbotax In 2013, you received $2,508. Military turbotax 80 ($2,000 principal and $508. Military turbotax 80 interest). Military turbotax If you use the cash method, you must include in income on your 2013 return the $508. Military turbotax 80 interest you received in that year. Military turbotax Constructive receipt. Military turbotax   You constructively receive income when it is credited to your account or made available to you. Military turbotax You do not need to have physical possession of it. Military turbotax For example, you are considered to receive interest, dividends, or other earnings on any deposit or account in a bank, savings and loan, or similar financial institution, or interest on life insurance policy dividends left to accumulate, when they are credited to your account and subject to your withdrawal. Military turbotax This is true even if they are not yet entered in your passbook. Military turbotax   You constructively receive income on the deposit or account even if you must: Make withdrawals in multiples of even amounts, Give a notice to withdraw before making the withdrawal, Withdraw all or part of the account to withdraw the earnings, or Pay a penalty on early withdrawals, unless the interest you are to receive on an early withdrawal or redemption is substantially less than the interest payable at maturity. Military turbotax Accrual method. Military turbotax   If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Military turbotax Interest is earned over the term of the debt instrument. Military turbotax Example. Military turbotax If, in the previous example, you use an accrual method, you must include the interest in your income as you earn it. Military turbotax You would report the interest as follows: 2011, $80; 2012, $249. Military turbotax 60; and 2013, $179. Military turbotax 20. Military turbotax Coupon bonds. Military turbotax   Interest on coupon bonds is taxable in the year the coupon becomes due and payable. Military turbotax It does not matter when you mail the coupon for payment. Military turbotax How To Report Interest Income Generally, you report all your taxable interest income on Form 1040, line 8a; Form 1040A, line 8a; or Form 1040EZ, line 2. Military turbotax You cannot use Form 1040EZ if your taxable interest income is more than $1,500. Military turbotax Instead, you must use Form 1040A or Form 1040. Military turbotax Form 1040A. Military turbotax   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040A and any of the following are true. Military turbotax Your taxable interest income is more than $1,500. Military turbotax You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Military turbotax You received interest from a seller-financed mortgage, and the buyer used the property as a home. Military turbotax You received a Form 1099-INT for U. Military turbotax S. Military turbotax savings bond interest that includes amounts you reported before 2013. Military turbotax You received, as a nominee, interest that actually belongs to someone else. Military turbotax You received a Form 1099-INT for interest on frozen deposits. Military turbotax You are reporting OID in an amount less than the amount shown on Form 1099-OID. Military turbotax You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Military turbotax You acquired taxable bonds after 1987 and choose to reduce interest income from the bonds by any amortizable bond premium (see Bond Premium Amortization in chapter 3 of Publication 550). Military turbotax List each payer's name and the amount of interest income received from each payer on line 1. Military turbotax If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Military turbotax   You cannot use Form 1040A if you must use Form 1040, as described next. Military turbotax Form 1040. Military turbotax   You must use Form 1040 instead of Form 1040A or Form 1040EZ if: You forfeited interest income because of the early withdrawal of a time deposit; You acquired taxable bonds after 1987, you choose to reduce interest income from the bonds by any amortizable bond premium, and you are deducting the excess of bond premium amortization for the accrual period over the qualified stated interest for the period (see Bond Premium Amortization in chapter 3 of Publication 550); or You received tax-exempt interest from private activity bonds issued after August 7, 1986. Military turbotax Schedule B (Form 1040A or 1040). Military turbotax   You must complete Schedule B (Form 1040A or 1040), Part I, if you file Form 1040 and any of the following apply. Military turbotax Your taxable interest income is more than $1,500. Military turbotax You are claiming the interest exclusion under the Education Savings Bond Program (discussed earlier). Military turbotax You received interest from a seller-financed mortgage, and the buyer used the property as a home. Military turbotax You received a Form 1099-INT for U. Military turbotax S. Military turbotax savings bond interest that includes amounts you reported before 2013. Military turbotax You received, as a nominee, interest that actually belongs to someone else. Military turbotax You received a Form 1099-INT for interest on frozen deposits. Military turbotax You received a Form 1099-INT for interest on a bond you bought between interest payment dates. Military turbotax You are reporting OID in an amount less than the amount shown on Form 1099-OID. Military turbotax Statement (2) in the preceding list under Form 1040 is true. Military turbotax In Part I, line 1, list each payer's name and the amount received from each. Military turbotax If you received a Form 1099-INT or Form 1099-OID from a brokerage firm, list the brokerage firm as the payer. Military turbotax Reporting tax-exempt interest. Military turbotax   Total your tax-exempt interest (such as interest or accrued OID on certain state and municipal bonds, including tax-exempt interest on zero coupon municipal bonds) and exempt-interest dividends from a mutual fund as shown on Form 1099-INT, box 8, and on Form 1099-DIV, box 10. Military turbotax Add these amounts to any other tax-exempt interest you received. Military turbotax Report the total on line 8b of Form 1040A or 1040. Military turbotax   If you file Form 1040EZ, enter “TEI” and the amount in the space to the left of line 2. Military turbotax Do not add tax-exempt interest in the total on Form 1040EZ, line 2. Military turbotax   Form 1099-INT, box 9, and Form 1099-DIV, box 11, show the tax-exempt interest subject to the alternative minimum tax on Form 6251. Military turbotax These amounts are already included in the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Military turbotax Do not add the amounts in Form 1099-INT, box 9 and Form 1099-DIV, box 11 to, or subtract them from, the amounts on Form 1099-INT, box 8, and Form 1099-DIV, box 10. Military turbotax    Do not report interest from an individual retirement account (IRA) as tax-exempt interest. Military turbotax Form 1099-INT. Military turbotax   Your taxable interest income, except for interest from U. Military turbotax S. Military turbotax savings bonds and Treasury obligations, is shown in box 1 of Form 1099-INT. Military turbotax Add this amount to any other taxable interest income you received. Military turbotax You must report all of your taxable interest income even if you do not receive a Form 1099-INT. Military turbotax Generally, contact your financial institution if you do not receive a Form 1099-INT by February 15. Military turbotax Your identifying number may be truncated on any paper Form 1099-INT you receive. Military turbotax   If you forfeited interest income because of the early withdrawal of a time deposit, the deductible amount will be shown on Form 1099-INT in box 2. Military turbotax See Penalty on early withdrawal of savings in chapter 1 of Publication 550. Military turbotax   Box 3 of Form 1099-INT shows the interest income you received from U. Military turbotax S. Military turbotax savings bonds, Treasury bills, Treasury notes, and Treasury bonds. Military turbotax Add the amount shown in box 3 to any other taxable interest income you received, unless part of the amount in box 3 was previously included in your interest income. Military turbotax If part of the amount shown in box 3 was previously included in your interest income, see U. Military turbotax S. Military turbotax savings bond interest previously reported , later. Military turbotax   Box 4 of Form 1099-INT will contain an amount if you were subject to backup withholding. Military turbotax Report the amount from box 4 on Form 1040EZ, line 7; on Form 1040A, line 36; or Form 1040, line 62 (federal income tax withheld). Military turbotax   Box 5 of Form 1099-INT shows investment expenses you may be able to deduct as an itemized deduction. Military turbotax See chapter 28 for more information about investment expenses. Military turbotax   If there are entries in boxes 6 and 7 of Form 1099-INT, you must file Form 1040. Military turbotax You may be able to take a credit for the amount shown in box 6 unless you deduct this amount on line 8 of Schedule A (Form 1040). Military turbotax To take the credit, you may have to file Form 1116, Foreign Tax Credit. Military turbotax For more information, see Publication 514, Foreign Tax Credit for Individuals. Military turbotax U. Military turbotax S. Military turbotax savings bond interest previously reported. Military turbotax   If you received a Form 1099-INT for U. Military turbotax S. Military turbotax savings bond interest, the form may show interest you do not have to report. Military turbotax See Form 1099-INT for U. Military turbotax S. Military turbotax savings bonds interest , earlier, under U. Military turbotax S. Military turbotax Savings Bonds. Military turbotax   On Schedule B (Form 1040A or 1040), Part I, line 1, report all the interest shown on your Form 1099-INT. Military turbotax Then follow these steps. Military turbotax Several lines above line 2, enter a subtotal of all interest listed on line 1. Military turbotax Below the subtotal enter “U. Military turbotax S. Military turbotax Savings Bond Interest Previously Reported” and enter amounts previously reported or interest accrued before you received the bond. Military turbotax Subtract these amounts from the subtotal and enter the result on line 2. Military turbotax More information. Military turbotax   For more information about how to report interest income, see chapter 1 of Publication 550 or the instructions for the form you must file. Military turbotax Prev  Up  Next   Home   More Online Publications