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Online ez form Index A Assistance (see Tax help) C Cancellation of indebtedness, Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding Casualty and theft losses, Casualty and Theft Losses Charitable contributions, Temporary Suspension of Limits on Charitable Contributions Child tax credit, Earned Income Credit and Child Tax Credit Clean-up costs, Demolition and Clean-up Costs Copy of tax return, request for, Request for copy of tax return. Online ez form Credits: Child tax, Earned Income Credit and Child Tax Credit Earned income, Earned Income Credit and Child Tax Credit Education, Education Credits Employee retention, Employee Retention Credit Employer housing, Employer Housing Credit and Exclusion Rehabilitation tax, Increase in Rehabilitation Tax Credit D Demolition costs, Demolition and Clean-up Costs Distributions: Home purchase or construction, Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Qualified disaster recovery assistance, Qualified disaster recovery assistance distribution. Online ez form Repayment of, Repayment of Qualified Disaster Recovery Assistance Distributions Taxation of, Taxation of Qualified Disaster Recovery Assistance Distributions E Earned income credit, Earned Income Credit and Child Tax Credit Education credits, Education Credits Eligible retirement plan, Eligible retirement plan. Online ez form Employee retention credit, Employee Retention Credit Employer housing credit, Employer Housing Credit and Exclusion Exemption, additional for housing, Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding F Federal mortgage subsidy, recapture of, Recapture of Federal Mortgage Subsidy Free tax services, How To Get Tax Help H Help (see Tax help) Hope credit (see Education credits) I Involuntary conversion (see Replacement period for nonrecognition of gain) IRAs and other retirement plans, IRAs and Other Retirement Plans L Lifetime learning credit (see Education credits) M Mileage reimbursements, charitable volunteers, Mileage Reimbursements to Charitable Volunteers More information (see Tax help) N Net operating losses, Net Operating Losses P Publications (see Tax help) Q Qualified disaster recovery assistance distribution, Qualified disaster recovery assistance distribution. Online ez form Qualified disaster recovery assistance loss, Qualified disaster recovery assistance loss. Online ez form R Rehabilitation tax credit, Increase in Rehabilitation Tax Credit Relocation, temporary, Tax Relief for Temporary Relocation Replacement period for nonrecognition of gain, Replacement Period for Nonrecognition of Gain Retirement plan, eligible, Eligible retirement plan. Online ez form Retirement plans, IRAs and Other Retirement Plans S Standard mileage rate, charitable use, Standard Mileage Rate for Charitable Use of Vehicles T Tax help, How To Get Tax Help Tax return: Request for copy, Request for copy of tax return. Online ez form Request for transcript, Request for transcript of tax return. Online ez form Taxpayer Advocate, Contacting your Taxpayer Advocate. Online ez form Temporary relocation, Tax Relief for Temporary Relocation Theft losses, Casualty and Theft Losses Transcript of tax return, request for, Request for transcript of tax return. Online ez form TTY/TDD information, How To Get Tax Help Prev  Up     Home   More Online Publications
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Today, it’s quick and easy to get a credit card approved, transfer money from one account to another, renew your driver’s license, fill a prescription from your doctor at your local pharmacy, use store loyalty cards, and purchase products online. But you pay for this convenience by providing more opportunities for your personal information to be changed, stolen, or reported inaccurately. Companies can also use the information you have shared to direct their future marketing efforts or can sell the information to other companies. To help protect your privacy, follow these tips:

  • Look for privacy statements on websites, sales materials, and forms you fill out. If a website claims to follow a set of established voluntary standards, read the standards. Don't assume they provide the level of privacy you want.
  • Ask what information will be collected and how it may be used.
  • Only provide the purchase date, model/serial numbers, and your contact information of warranty registration forms.
  • Discuss privacy with others in your home. Everyone, even children, should understand what information is not appropriate to share on the phone, while using a computer, and in other situations.

Check with your state or local consumer agency to find out whether any state laws that help protect your privacy. Some companies and industry groups have also adopted voluntary policies that address privacy concerns.

Creating Secure Passwords

The number of passwords that you need on a daily basis can be overwhelming. It is tempting to use the same password across several sites; however to get the most protection available, you should use different passwords on each site and change your passwords periodically. The goal for creating passwords is to strike a balance between being something that is easy to remember and unique. Some general tips for creating a secure password include:

  • Use a mix of uppercase and lowercase letters, numbers, and special characters.
  • The longer password, the better it is.
  • Don’t use your name, birthday, license plate, favorite sports teams or other facts that are easily guessed.
  • Create a password based on a phrase. For example “A stitch in time saves nine” can be translated into the password “Ast!Ts9”. where each character represents a word in the phrase.
  • If you must use the same password on several websites, add a prefix or suffix. For example, use “Ast!Ts9:4bnk”for your bank account and “Eml: Ast!Ts9” for your email account.

The Online Ez Form

Online ez form 5. Online ez form   Exemptions, Deductions, and Credits Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Items Related to Excluded Income Exemptions Contributions to Foreign Charitable Organizations Moving ExpensesAllocation of Moving Expenses Forms To File Contributions to Individual Retirement Arrangements Taxes of Foreign Countries and U. Online ez form S. Online ez form PossessionsCredit for Foreign Income Taxes Deduction for Foreign Income Taxes Deduction for Other Foreign Taxes How To Report Deductions Topics - This chapter discusses: The rules concerning items related to excluded income, Exemptions, Contributions to foreign charitable organizations, Moving expenses, Contributions to individual retirement arrangements (IRAs), Taxes of foreign countries and U. Online ez form S. Online ez form possessions, and How to report deductions. Online ez form Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 514 Foreign Tax Credit for Individuals 521 Moving Expenses 523 Selling Your Home 590 Individual Retirement Arrangements (IRAs) 597 Information on the United States—Canada Income Tax Treaty Form (and Instructions) 1116 Foreign Tax Credit 2106 Employee Business Expenses 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 3903 Moving Expenses Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business SS-5 Application for a Social Security Card W-7 Application for IRS Individual Taxpayer Identification Number See chapter 7 for information about getting these publications and forms. Online ez form Items Related to Excluded Income U. Online ez form S. Online ez form citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. Online ez form If you choose to exclude foreign earned income or housing amounts, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. Online ez form This includes any expenses, losses, and other normally deductible items that are allocable to the excluded income. Online ez form You can deduct only those expenses connected with earning includible income. Online ez form These rules apply only to items definitely related to the excluded earned income and they do not apply to other items that are not definitely related to any particular type of gross income. Online ez form These rules do not apply to items such as: Personal exemptions, Qualified retirement contributions, Alimony payments, Charitable contributions, Medical expenses, Mortgage interest, or Real estate taxes on your personal residence. Online ez form For purposes of these rules, your housing deduction is not treated as allocable to your excluded income, but the deduction for self- employment tax is. Online ez form If you receive foreign earned income in a tax year after the year in which you earned it, you may have to file an amended return for the earlier year to properly adjust the amounts of deductions, credits, or exclusions allocable to your foreign earned income and housing exclusions. Online ez form Example. Online ez form In 2012, you had $90,400 of foreign earned income and $9,500 of deductions allocable to your foreign earned income. Online ez form You did not have a housing exclusion. Online ez form Because you excluded all of your foreign earned income, you would not have been able to claim any of the deductions on your 2012 return. Online ez form In 2013, you received a $12,000 bonus for work you did abroad in 2012. Online ez form You can exclude $4,700 of the bonus because the limit on the foreign earned income exclusion for 2012 was $95,100 and you have already excluded $90,400. Online ez form Since you must include $7,300 of the bonus ($12,000 − $4,700) for work you did in 2012 in income, you can file an amended return for 2012 to claim $677 of the deductions. Online ez form This is the deductions allocable to the foreign earned income ($9,500) multiplied by the includible portion of the foreign earned income ($7,300) and divided by the total foreign earned income for 2012 ($102,400). Online ez form Exemptions You can claim an exemption for your nonresident alien spouse on your separate return, provided your spouse has no gross income for U. Online ez form S. Online ez form tax purposes and is not the dependent of another U. Online ez form S. Online ez form taxpayer. Online ez form You also can claim exemptions for individuals who qualify as your dependents. Online ez form To be your dependent, the individual must be a U. Online ez form S. Online ez form citizen, U. Online ez form S. Online ez form national, U. Online ez form S. Online ez form resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins. Online ez form Children. Online ez form   Children usually are citizens or residents of the same country as their parents. Online ez form If you were a U. Online ez form S. Online ez form citizen when your child was born, your child generally is a U. Online ez form S. Online ez form citizen. Online ez form This is true even if the child's other parent is a nonresident alien, the child was born in a foreign country, and the child lives abroad with the other parent. Online ez form   If you have a legally adopted child who is not a U. Online ez form S. Online ez form citizen, U. Online ez form S. Online ez form resident, or U. Online ez form S. Online ez form national, the child meets the citizen requirement if you are a U. Online ez form S. Online ez form citizen or U. Online ez form S. Online ez form national and the child lived with you as a member of your household all year. Online ez form Social security number. Online ez form   You must include on your return the social security number (SSN) of each dependent for whom you claim an exemption. Online ez form To get a social security number for a dependent, apply at a Social Security office or U. Online ez form S. Online ez form consulate. Online ez form You must provide original or certified copies of documents to verify the dependent's age, identity, and citizenship, and complete Form SS-5. Online ez form   If you do not have an SSN for a child who was born in 2013 and died in 2013, attach a copy of the child's birth certificate to your tax return. Online ez form Print “Died” in column (2) of line 6c of your Form 1040 or Form 1040A. Online ez form   If your dependent is a nonresident alien who is not eligible to get a social security number, you must list the dependent's individual taxpayer identification number (ITIN) instead of an SSN. Online ez form To apply for an ITIN, file Form W-7 with the IRS. Online ez form It usually takes 6 to 10 weeks to get an ITIN. Online ez form Enter your dependent's ITIN wherever an SSN is requested on your tax return. Online ez form More information. Online ez form   For more information about exemptions, see Publication 501. Online ez form Contributions to Foreign Charitable Organizations If you make contributions directly to a foreign church or other foreign charitable organization, you generally cannot deduct them. Online ez form Exceptions are explained under Canadian, Mexican, and Israeli charities, later. Online ez form You can deduct contributions to a U. Online ez form S. Online ez form organization that transfers funds to a charitable foreign organization if the U. Online ez form S. Online ez form organization controls the use of the funds by the foreign organization or if the foreign organization is just an administrative arm of the U. Online ez form S. Online ez form organization. Online ez form Canadian, Mexican, and Israeli charities. Online ez form   Under the income tax treaties with Canada, Mexico and Israel, you may be able to deduct contributions to certain Canadian, Mexican, and Israeli charitable organizations. Online ez form Generally, you must have income from sources in Canada, Mexico, or Israel, and the organization must meet certain requirements. Online ez form See Publication 597, Information on the United States-Canada Income Tax Treaty, and Publication 526, Charitable Contributions, for more information. Online ez form Moving Expenses If you moved to a new home in 2013 because of your job or business, you may be able to deduct the expenses of your move. Online ez form Generally, to be deductible, the moving expenses must have been paid or incurred in connection with starting work at a new job location. Online ez form See Publication 521 for a complete discussion of the deduction for moving expenses and information about moves within the United States. Online ez form Foreign moves. Online ez form   A foreign move is a move in connection with the start of work at a new job location outside the United States and its possessions. Online ez form A foreign move does not include a move back to the United States or its possessions. Online ez form Allocation of Moving Expenses When your new place of work is in a foreign country, your moving expenses are directly connected with the income earned in that foreign country. Online ez form If you exclude all or part of the income that you earn at the new location under the foreign earned income exclusion or the foreign housing exclusion, you cannot deduct the part of your moving expense that is allocable to the excluded income. Online ez form Also, you cannot deduct the part of the moving expense related to the excluded income for a move from a foreign country to the United States if you receive a reimbursement that you are able to treat as compensation for services performed in the foreign country. Online ez form Year to which expense is connected. Online ez form   The moving expense is connected with earning the income (including reimbursements, as discussed in chapter 4 under Reimbursement of moving expenses ) either entirely in the year of the move or in 2 years. Online ez form It is connected with earning the income entirely in the year of the move if you qualify for the foreign earned income exclusion under the bona fide residence test or physical presence test for at least 120 days during that tax year. Online ez form   If you do not qualify under either the bona fide residence test or the physical presence test for at least 120 days during the year of the move, the expense is connected with earning the income in 2 years. Online ez form The moving expense is connected with the year of the move and the following year if the move is from the United States to a foreign country. Online ez form The moving expense is connected with the year of the move and the preceding year if the move is from a foreign country to the United States. Online ez form Amount allocable to excluded income. Online ez form   To figure the amount of your moving expense that is allocable to your excluded foreign earned income (and not deductible), you must multiply your total moving expense deduction by a fraction. Online ez form The numerator (top number) of the fraction is the total of your excluded foreign earned income and housing amounts for both years and the denominator (bottom number) of the fraction is your total foreign earned income for both years. Online ez form Example. Online ez form On November 1, 2012, you transfer to Monaco. Online ez form Your tax home is in Monaco, and you are a bona fide resident of Monaco for the entire tax year 2013. Online ez form In 2012, you paid $6,000 for allowable moving expenses for your move from the United States to Monaco. Online ez form You were fully reimbursed (under a nonaccountable plan) for these expenses in the same year. Online ez form The reimbursement is included in your income. Online ez form Your only other income consists of $16,000 wages earned in 2012 after the date of your move, and $100,100 wages earned in Monaco for 2013. Online ez form Because you did not meet the bona fide residence test for at least 120 days during 2012, the year of the move, the moving expenses are for services you performed in both 2012 and the following year, 2013. Online ez form Your total foreign earned income for both years is $122,100, consisting of $16,000 wages for 2012, $100,100 wages for 2013, and $6,000 moving expense reimbursement for both years. Online ez form You have no housing exclusion. Online ez form The total amount you can exclude is $113,190, consisting of the $97,600 full-year exclusion for 2013 and a $15,590 part-year exclusion for 2012 ($95,100 times the fraction of 60 qualifying bona fide residence days over 366 total days in the year). Online ez form To find the part of your moving expenses that is not deductible, multiply your $6,000 total expenses by the fraction $113,190 over $122,100. Online ez form The result, $5,562, is your nondeductible amount. Online ez form    You must report the full amount of the moving expense reimbursement in the year in which you received the reimbursement. Online ez form In the preceding example, this year was 2012. Online ez form You attribute the reimbursement to both 2012 and 2013 only to figure the amount of foreign earned income eligible for exclusion for each year. Online ez form Move between foreign countries. Online ez form   If you move between foreign countries, your moving expense is allocable to income earned in the year of the move if you qualified under either the bona fide residence test or the physical presence test for a period that includes at least 120 days in the year of the move. Online ez form New place of work in U. Online ez form S. Online ez form   If your new place of work is in the United States, the deductible moving expenses are directly connected with the income earned in the United States. Online ez form If you treat a reimbursement from your employer as foreign earned income (see the discussion in chapter 4), you must allocate deductible moving expenses to foreign earned income. Online ez form Storage expenses. Online ez form   These expenses are attributable to work you do during the year in which you incur the storage expenses. Online ez form You cannot deduct the amount allocable to excluded income. Online ez form Moving Expense Attributable to Foreign Earnings in 2 Years If your moving expense deduction is attributable to your foreign earnings in 2 years (the year of the move and the following year), you should request an extension of time to file your return for the year of the move until after the end of the second year. Online ez form By then, you should have all the information needed to properly figure the moving expense deduction. Online ez form See Extensions under When To File and Pay in chapter 1. Online ez form If you do not request an extension, you should figure the part of the moving expense that you cannot deduct because it is allocable to the foreign earned income you are excluding. Online ez form You do this by multiplying the moving expense by a fraction, the numerator (top number) of which is your excluded foreign earned income for the year of the move, and the denominator (bottom number) of which is your total foreign earned income for the year of the move. Online ez form Once you know your foreign earnings and exclusion for the following year, you must either: Adjust the moving expense deduction by filing an amended return for the year of the move, or Recapture any additional unallowable amount as income on your return for the following year. Online ez form If, after you make the final computation, you have an additional amount of allowable moving expense deduction, you can claim this only on an amended return for the year of the move. Online ez form You cannot claim it on the return for the second year. Online ez form Forms To File Report your moving expenses on Form 3903. Online ez form Report your moving expense deduction on line 26 of Form 1040. Online ez form If you must reduce your moving expenses by the amount allocable to excluded income (as explained later under How To Report Deductions ), attach a statement to your return showing how you figured this amount. Online ez form For more information about figuring moving expenses, see Publication 521. Online ez form Contributions to Individual Retirement Arrangements Contributions to your individual retirement arrangements (IRAs) that are traditional IRAs or Roth IRAs are generally limited to the lesser of $5,500 ($6,500 if 50 or older) or your compensation that is includible in your gross income for the tax year. Online ez form In determining compensation for this purpose, do not take into account amounts you exclude under either the foreign earned income exclusion or the foreign housing exclusion. Online ez form Do not reduce your compensation by the foreign housing deduction. Online ez form If you are covered by an employer retirement plan at work, your deduction for your contributions to your traditional IRAs is generally limited based on your modified adjusted gross income. Online ez form This is your adjusted gross income figured without taking into account the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. Online ez form Other modifications are also required. Online ez form For more information on IRAs, see Publication 590. Online ez form Taxes of Foreign Countries and U. Online ez form S. Online ez form Possessions You can take either a credit or a deduction for income taxes paid to a foreign country or a U. Online ez form S. Online ez form possession. Online ez form Taken as a deduction, foreign income taxes reduce your taxable income. Online ez form Taken as a credit, foreign income taxes reduce your tax liability. Online ez form You must treat all foreign income taxes the same way. Online ez form If you take a credit for any foreign income taxes, you cannot deduct any foreign income taxes. Online ez form However, you may be able to deduct other foreign taxes. Online ez form See Deduction for Other Foreign Taxes, later. Online ez form There is no rule to determine whether it is to your advantage to take a deduction or a credit for foreign income taxes. Online ez form In most cases, it is to your advantage to take foreign income taxes as a tax credit, which you subtract directly from your U. Online ez form S. Online ez form tax liability, rather than as a deduction in figuring taxable income. Online ez form However, if foreign income taxes were imposed at a high rate and the proportion of foreign income to U. Online ez form S. Online ez form income is small, a lower final tax may result from deducting the foreign income taxes. Online ez form In any event, you should figure your tax liability both ways and then use the one that is better for you. Online ez form You can make or change your choice within 10 years from the due date for filing the tax return on which you are entitled to take either the deduction or the credit. Online ez form Foreign income taxes. Online ez form   These are generally income taxes you pay to any foreign country or possession of the United States. Online ez form Foreign income taxes on U. Online ez form S. Online ez form return. Online ez form   Foreign income taxes can only be taken as a credit on Form 1040, line 47, or as an itemized deduction on Schedule A. Online ez form These amounts cannot be included as withheld income taxes on Form 1040, line 62. Online ez form Foreign taxes paid on excluded income. Online ez form   You cannot take a credit or deduction for foreign income taxes paid on earnings you exclude from tax under any of the following. Online ez form Foreign earned income exclusion. Online ez form Foreign housing exclusion. Online ez form Possession exclusion. Online ez form If your wages are completely excluded, you cannot deduct or take a credit for any of the foreign taxes paid on your wages. Online ez form   If only part of your wages is excluded, you cannot deduct or take a credit for the foreign income taxes allocable to the excluded part. Online ez form You find the taxes allocable to your excluded wages by applying a fraction to the foreign taxes paid on foreign earned income received during the tax year. Online ez form The numerator (top number) of the fraction is your excluded foreign earned income received during the tax year minus deductible expenses allocable to that income (not including the foreign housing deduction). Online ez form The denominator (bottom number) of the fraction is your total foreign earned income received during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). Online ez form   If foreign law taxes both earned income and some other type of income and the taxes on the other type cannot be separated, the denominator of the fraction is the total amount of income subject to foreign tax minus deductible expenses allocable to that income. Online ez form    If you take a foreign tax credit for tax on income you could have excluded under your choice to exclude foreign earned income or your choice to exclude foreign housing costs, one or both of the choices may be considered revoked. Online ez form Credit for Foreign Income Taxes If you take the foreign tax credit, you may have to file Form 1116 with Form 1040. Online ez form Form 1116 is used to figure the amount of foreign tax paid or accrued that can be claimed as a foreign tax credit. Online ez form Do not include the amount of foreign tax paid or accrued as withheld federal income taxes on Form 1040, line 62. Online ez form The foreign income tax for which you can claim a credit is the amount of legal and actual tax liability you pay or accrue during the year. Online ez form The amount for which you can claim a credit is not necessarily the amount withheld by the foreign country. Online ez form You cannot take a foreign tax credit for income tax you paid to a foreign country that would be refunded by the foreign country if you made a claim for refund. Online ez form Subsidies. Online ez form   If a foreign country returns your foreign tax payments to you in the form of a subsidy, you cannot claim a foreign tax credit based on these payments. Online ez form This rule applies to a subsidy provided by any means that is determined, directly or indirectly, by reference to the amount of tax, or to the base used to figure the tax. Online ez form   Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Online ez form A credit is also not allowed if the subsidy is given to a person related to you, or persons who participated in a transaction or a related transaction with you. Online ez form Limit The foreign tax credit is limited to the part of your total U. Online ez form S. Online ez form tax that is in proportion to your taxable income from sources outside the United States compared to your total taxable income. Online ez form The allowable foreign tax credit cannot be more than your actual foreign tax liability. Online ez form Exemption from limit. Online ez form   You will not be subject to this limit and will not have to file Form 1116 if you meet all three of the following requirements. Online ez form Your only foreign source income for the year is passive income (dividends, interest, royalties, etc. Online ez form ) that is reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT). Online ez form Your foreign taxes for the year that qualify for the credit are not more than $300 ($600 if you are filing a joint return) and are reported on a payee statement. Online ez form You elect this procedure. Online ez form If you make this election, you cannot carry back or carry over any unused foreign tax to or from this year. Online ez form Separate limit. Online ez form   You must figure the limit on a separate basis with regard to “passive category income” and “general category income” (see the instructions for Form 1116). Online ez form Figuring the limit. Online ez form   In figuring taxable income in each category, you take into account only the amount that you must include in income on your federal tax return. Online ez form Do not take any excluded amount into account. Online ez form   To determine your taxable income in each category, deduct expenses and losses that are definitely related to that income. Online ez form   Other expenses (such as itemized deductions or the standard deduction) not definitely related to specific items of income must be apportioned to the foreign income in each category by multiplying them by a fraction. Online ez form The numerator (top number) of the fraction is your gross foreign income in the separate limit category. Online ez form The denominator (bottom number) of the fraction is your gross income from all sources. Online ez form For this purpose, gross income includes income that is excluded under the foreign earned income provisions but does not include any other exempt income. Online ez form You must use special rules for deducting interest expenses. Online ez form For more information on allocating and apportioning your deductions, see Publication 514. Online ez form Exemptions. Online ez form   Do not take the deduction for exemptions for yourself, your spouse, or your dependents in figuring taxable income for purposes of the limit. Online ez form Recapture of foreign losses. Online ez form   If you have an overall foreign loss and the loss reduces your U. Online ez form S. Online ez form source income (resulting in a reduction of your U. Online ez form S. Online ez form tax liability), you must recapture the loss in later years when you have taxable income from foreign sources. Online ez form This is done by treating a part of your taxable income from foreign sources in later years as U. Online ez form S. Online ez form source income. Online ez form This reduces the numerator of the limiting fraction and the resulting foreign tax credit limit. Online ez form Recapture of domestic losses. Online ez form   If you have an overall domestic loss (resulting in no U. Online ez form S. Online ez form tax liability), you cannot claim a foreign tax credit for taxes paid during that year. Online ez form You must recapture the loss in later years when you have U. Online ez form S. Online ez form source taxable income. Online ez form This is done by treating a part of your taxable income from U. Online ez form S. Online ez form sources in later years as foreign source income. Online ez form This increases the numerator of the limiting fraction and the resulting foreign tax credit limit. Online ez form Foreign tax credit carryback and carryover. Online ez form   The amount of foreign income tax not allowed as a credit because of the limit can be carried back 1 year and carried forward 10 years. Online ez form   More information on figuring the foreign tax credit can be found in Publication 514. Online ez form Deduction for Foreign Income Taxes Instead of taking the foreign tax credit, you can deduct foreign income taxes as an itemized deduction on Schedule A (Form 1040). Online ez form You can deduct only foreign income taxes paid on income that is subject to U. Online ez form S. Online ez form tax. Online ez form You cannot deduct foreign taxes paid on earnings you exclude from tax under any of the following. Online ez form Foreign earned income exclusion. Online ez form Foreign housing exclusion. Online ez form Possession exclusion. Online ez form Example. Online ez form You are a U. Online ez form S. Online ez form citizen and qualify to exclude your foreign earned income. Online ez form Your excluded wages in Country X are $70,000 on which you paid income tax of $10,000. Online ez form You received dividends from Country X of $2,000 on which you paid income tax of $600. Online ez form You can deduct the $600 tax payment because the dividends relating to it are subject to U. Online ez form S. Online ez form tax. Online ez form Because you exclude your wages, you cannot deduct the income tax of $10,000. Online ez form If you exclude only a part of your wages, see the earlier discussion under Foreign taxes paid on excluded income. Online ez form Deduction for Other Foreign Taxes You can deduct real property taxes you pay that are imposed on you by a foreign country. Online ez form You take this deduction on Schedule A (Form 1040). Online ez form You cannot deduct other foreign taxes, such as personal property taxes, unless you incurred the expenses in a trade or business or in the production of income. Online ez form On the other hand, you generally can deduct personal property taxes when you pay them to U. Online ez form S. Online ez form possessions. Online ez form But if you claim the possession exclusion, see Publication 570. Online ez form The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. Online ez form You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes imposed by a foreign country. Online ez form How To Report Deductions If you exclude foreign earned income or housing amounts, how you show your deductions on your tax return and how you figure the amount allocable to your excluded income depends on whether the expenses are used in figuring adjusted gross income (Form 1040, line 38) or are itemized deductions. Online ez form If you have deductions used in figuring adjusted gross income, enter the total amount for each of these items on the appropriate lines and schedules of Form 1040. Online ez form Generally, you figure the amount of a deduction related to the excluded income by multiplying the deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. Online ez form Enter the amount of the deduction(s) related to excluded income on line 44 of Form 2555. Online ez form If you have itemized deductions related to excluded income, enter on Schedule A (Form 1040) only the part not related to excluded income. Online ez form You figure that amount by subtracting from the total deduction the amount related to excluded income. Online ez form Generally, you figure the amount that is related to the excluded income by multiplying the total deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. Online ez form Attach a statement to your return showing how you figured the deductible amount. Online ez form Example 1. Online ez form You are a U. Online ez form S. Online ez form citizen employed as an accountant. Online ez form Your tax home is in Germany for the entire tax year. Online ez form You meet the physical presence test. Online ez form Your foreign earned income for the year was $122,000 and your investment income was $10,380. Online ez form After excluding $97,600, your AGI is $34,780. Online ez form You had unreimbursed business expenses of $2,500 for travel and entertainment in earning your foreign income, of which $500 was for meals and entertainment. Online ez form These expenses are deductible only as miscellaneous deductions on Schedule A (Form 1040). Online ez form You also have $500 of miscellaneous expenses that are not related to your foreign income that you enter on line 23 of Schedule A. Online ez form You must fill out Form 2106. Online ez form On that form, reduce your deductible meal and entertainment expenses by 50% ($250). Online ez form You must reduce the remaining $2,250 of travel and entertainment expenses by 80% ($1,800) because you excluded 80% ($97,600/$122,000) of your foreign earned income. Online ez form You carry the remaining total of $450 to line 21 of Schedule A. Online ez form Add the $450 to the $500 that you have on line 23 and enter the total ($950) on line 24. Online ez form On line 26 of Schedule A, enter $696, which is 2% of your adjusted gross income of $34,780 (line 38, Form 1040) and subtract it from the amount on line 24. Online ez form Enter $254 on line 27 of Schedule A. Online ez form Example 2. Online ez form You are a U. Online ez form S. Online ez form citizen, have a tax home in Spain, and meet the physical presence test. Online ez form You are self-employed and personal services produce the business income. Online ez form Your gross income was $116,931, business expenses $66,895, and net income (profit) $50,036. Online ez form You choose the foreign earned income exclusion and exclude $97,600 of your gross income. Online ez form Since your excluded income is 83. Online ez form 47% of your total income, 83. Online ez form 47% of your business expenses are not deductible. Online ez form Report your total income and expenses on Schedule C (Form 1040). Online ez form On Form 2555 you will show the following: Line 20a, $116,931, gross income, Lines 42 and 43, $97,600, foreign earned income exclusion, and Line 44, $55,837 (83. Online ez form 47% × $66,895) business expenses attributable to the exclusion. Online ez form In this situation (Example 2), you cannot use Form 2555-EZ since you had self-employment income and business expenses. Online ez form Example 3. Online ez form Assume in Example 2 that both capital and personal services combine to produce the business income. Online ez form No more than 30% of your net income, or $15,011, assuming that this amount is a reasonable allowance for your services, is considered earned and can be excluded. Online ez form Your exclusion of $15,011 is 12. Online ez form 84% of your gross income ($15,011 ÷ $116,931). Online ez form Because you excluded 12. Online ez form 84% of your total income, $8,589 (. Online ez form 1284 x $66,895) of your business expenses is attributable to the excluded income and is not deductible. Online ez form Example 4. Online ez form You are a U. Online ez form S. Online ez form citizen, have a tax home in Brazil, and meet the physical presence test. Online ez form You are self-employed and both capital and personal services combine to produce business income. Online ez form Your gross income was $146,000, business expenses were $172,000, and your net loss was $26,000. Online ez form A reasonable allowance for the services you performed for the business is $77,000. Online ez form Because you incurred a net loss, the earned income limit of 30% of your net profit does not apply. Online ez form The $77,000 is foreign earned income. Online ez form If you choose to exclude the $77,000, you exclude 52. Online ez form 74% of your gross income ($77,000 ÷ $146,000), and 52. Online ez form 74% of your business expenses ($90,713) is attributable to that income and is not deductible. Online ez form Show your total income and expenses on Schedule C (Form 1040). Online ez form On Form 2555, exclude $77,000 and show $90,713 on line 44. Online ez form Subtract line 44 from line 43, and enter the difference as a negative (in parentheses) on line 45. Online ez form Because this amount is negative, enter it as a positive (no parentheses) on line 21, Form 1040, and combine it with your other income to arrive at total income on line 22 of Form 1040. Online ez form In this situation (Example 4), you would probably not want to choose the foreign earned income exclusion if this was the first year you were eligible. Online ez form If you had chosen the exclusion in an earlier year, you might want to revoke the choice for this year. Online ez form To do so would mean that you could not claim the exclusion again for the next 5 tax years without IRS approval. Online ez form See Choosing the Exclusion in chapter 4. Online ez form Example 5. Online ez form You are a U. Online ez form S. Online ez form citizen, have a tax home in Panama, and meet the bona fide residence test. Online ez form You have been performing services for clients as a partner in a firm that provides services exclusively in Panama. Online ez form Capital investment is not material in producing the partnership's income. Online ez form Under the terms of the partnership agreement, you are to receive 50% of the net profits. Online ez form The partnership received gross income of $244,000 and incurred operating expenses of $98,250. Online ez form Of the net profits of $145,750, you received $72,875 as your distributive share. Online ez form You choose to exclude $97,600 of your share of the gross income. Online ez form Because you exclude 80% ($97,600 ÷ $122,000) of your share of the gross income, you cannot deduct $39,300, 80% of your share of the operating expenses (. Online ez form 80 × $49,125). Online ez form Report $72,875, your distributive share of the partnership net profit, on Schedule E (Form 1040), Supplemental Income and Loss. Online ez form On Form 2555, show $97,600 on line 42 and show $39,300 on line 44. Online ez form Your exclusion on Form 2555 is $58,300. Online ez form In this situation (Example 5), you cannot use Form 2555-EZ since you had earned income other than salaries and wages and you had business expenses. Online ez form Prev  Up  Next   Home   More Online Publications