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States With No Retirement Income Tax

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States With No Retirement Income Tax

States with no retirement income tax 33. States with no retirement income tax   Credit for the Elderly or the Disabled Table of Contents Introduction Useful Items - You may want to see: Are You Eligible for the Credit?Qualified Individual Income Limits How to Claim the CreditCredit Figured for You Credit Figured by You Introduction If you qualify, you may be able to reduce the tax you owe by taking the credit for the elderly or the disabled which is figured on Schedule R (Form 1040A or 1040). States with no retirement income tax This chapter explains the following. States with no retirement income tax Who qualifies for the credit for the elderly or the disabled. States with no retirement income tax How to claim the credit. States with no retirement income tax You may be able to take the credit for the elderly or the disabled if: You are age 65 or older at the end of 2013, or You retired on permanent and total disability and have taxable disability income. States with no retirement income tax Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 554 Tax Guide for Seniors Form (and Instruction) Schedule R (Form 1040A or 1040) Credit for the Elderly or the Disabled Are You Eligible for the Credit? You can take the credit for the elderly or the disabled if you meet both of the following requirements. States with no retirement income tax You are a qualified individual. States with no retirement income tax Your income is not more than certain limits. States with no retirement income tax You can use Figure 33-A and Table 33-1 as guides to see if you are eligible for the credit. States with no retirement income tax Use Figure 33-A first to see if you are a qualified individual. States with no retirement income tax If you are, go to Table 33-1 to make sure your income is not too high to take the credit. States with no retirement income tax You can take the credit only if you file Form 1040 or Form 1040A. States with no retirement income tax You cannot take the credit if you file Form 1040EZ. States with no retirement income tax Qualified Individual You are a qualified individual for this credit if you are a U. States with no retirement income tax S. States with no retirement income tax citizen or resident alien, and either of the following applies. States with no retirement income tax You were age 65 or older at the end of 2013. States with no retirement income tax You were under age 65 at the end of 2013 and all three of the following statements are true. States with no retirement income tax You retired on permanent and total disability (explained later). States with no retirement income tax You received taxable disability income for 2013. States with no retirement income tax On January 1, 2013, you had not reached mandatory retirement age (defined later under Disability income ). States with no retirement income tax Age 65. States with no retirement income tax   You are considered to be age 65 on the day before your 65th birthday. States with no retirement income tax Therefore, if you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. States with no retirement income tax U. States with no retirement income tax S. States with no retirement income tax Citizen or Resident Alien You must be a U. States with no retirement income tax S. States with no retirement income tax citizen or resident alien (or be treated as a resident alien) to take the credit. States with no retirement income tax Generally, you cannot take the credit if you were a nonresident alien at any time during the tax year. States with no retirement income tax Exceptions. States with no retirement income tax   You may be able to take the credit if you are a nonresident alien who is married to a U. States with no retirement income tax S. States with no retirement income tax citizen or resident alien at the end of the tax year and you and your spouse choose to treat you as a U. States with no retirement income tax S. States with no retirement income tax resident alien. States with no retirement income tax If you make that choice, both you and your spouse are taxed on your worldwide incomes. States with no retirement income tax If you were a nonresident alien at the beginning of the year and a resident alien at the end of the year, and you were married to a U. States with no retirement income tax S. States with no retirement income tax citizen or resident alien at the end of the year, you may be able to choose to be treated as a U. States with no retirement income tax S. States with no retirement income tax resident alien for the entire year. States with no retirement income tax In that case, you may be allowed to take the credit. States with no retirement income tax For information on these choices, see chapter 1 of Publication 519, U. States with no retirement income tax S. States with no retirement income tax Tax Guide for Aliens. States with no retirement income tax Married Persons Generally, if you are married at the end of the tax year, you and your spouse must file a joint return to take the credit. States with no retirement income tax However, if you and your spouse did not live in the same household at any time during the tax year, you can file either a joint return or separate returns and still take the credit. States with no retirement income tax Head of household. States with no retirement income tax   You can file as head of household and qualify to take the credit, even if your spouse lived with you during the first 6 months of the year, if you meet certain tests. States with no retirement income tax See Head of Household in chapter 2 for the tests you must meet. States with no retirement income tax Under Age 65 If you are under age 65 at the end of 2013, you can qualify for the credit only if you are retired on permanent and total disability (discussed next) and have taxable disability income (discussed later under Disability income ). States with no retirement income tax You are retired on permanent and total disability if: You were permanently and totally disabled when you retired, and You retired on disability before the close of the tax year. States with no retirement income tax Even if you do not retire formally, you may be considered retired on disability when you have stopped working because of your disability. States with no retirement income tax If you retired on disability before 1977, and were not permanently and totally disabled at the time, you can qualify for the credit if you were permanently and totally disabled on January 1, 1976, or January 1, 1977. States with no retirement income tax Permanent and total disability. States with no retirement income tax    You are permanently and totally disabled if you cannot engage in any substantial gainful activity because of your physical or mental condition. States with no retirement income tax A qualified physician must certify that the condition has lasted or can be expected to last continuously for 12 months or more, or that the condition can be expected to result in death. States with no retirement income tax See Physician's statement , later. States with no retirement income tax Substantial gainful activity. States with no retirement income tax   Substantial gainful activity is the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit. States with no retirement income tax Full-time work (or part-time work done at your employer's convenience) in a competitive work situation for at least the minimum wage conclusively shows that you are able to engage in substantial gainful activity. States with no retirement income tax   Substantial gainful activity is not work you do to take care of yourself or your home. States with no retirement income tax It is not unpaid work on hobbies, institutional therapy or training, school attendance, clubs, social programs, and similar activities. States with no retirement income tax However, doing this kind of work may show that you are able to engage in substantial gainful activity. States with no retirement income tax    The fact that you have not worked for some time is not, of itself, conclusive evidence that you cannot engage in substantial gainful activity. States with no retirement income tax Sheltered employment. States with no retirement income tax   Certain work offered at qualified locations to physically or mentally impaired persons is considered sheltered employment. States with no retirement income tax These qualified locations are in sheltered workshops, hospitals, and similar institutions, homebound programs, and Department of Veterans Affairs (VA) sponsored homes. States with no retirement income tax   Compared to commercial employment, pay is lower for sheltered employment. States with no retirement income tax Therefore, one usually does not look for sheltered employment if he or she can get other employment. States with no retirement income tax The fact that one has accepted sheltered employment is not proof of the person's ability to engage in substantial gainful activity. States with no retirement income tax Physician's statement. States with no retirement income tax   If you are under age 65, you must have your physician complete a statement certifying that you were permanently and totally disabled on the date you retired. States with no retirement income tax You can use the statement in the Instructions for Schedule R. States with no retirement income tax    Figure 33-A. States with no retirement income tax Are You a Qualified Individual? This image is too large to be displayed in the current screen. States with no retirement income tax Please click the link to view the image. States with no retirement income tax Figure 33-A Are You a Qualified Individual?   You do not have to file this statement with your Form 1040 or Form 1040A, but you must keep it for your records. States with no retirement income tax Veterans. States with no retirement income tax   If the Department of Veterans Affairs (VA) certifies that you are permanently and totally disabled, you can substitute VA Form 21-0172, Certification of Permanent and Total Disability, for the physician's statement you are required to keep. States with no retirement income tax VA Form 21-0172 must be signed by a person authorized by the VA to do so. States with no retirement income tax You can get this form from your local VA regional office. States with no retirement income tax Physician's statement obtained in earlier year. States with no retirement income tax   If you got a physician's statement in an earlier year and, due to your continued disabled condition, you were unable to engage in any substantial gainful activity during 2013, you may not need to get another physician's statement for 2013. States with no retirement income tax For a detailed explanation of the conditions you must meet, see the instructions for Schedule R, Part II. States with no retirement income tax If you meet the required conditions, check the box on your Schedule R, Part II, line 2. States with no retirement income tax   If you checked box 4, 5, or 6 in Part I of Schedule R, enter in the space above the box on line 2 in Part II the first name(s) of the spouse(s) for whom the box is checked. States with no retirement income tax Table 33-1. States with no retirement income tax Income Limits IF your filing status is . States with no retirement income tax . States with no retirement income tax . States with no retirement income tax THEN, even if you qualify (see Figure 33-A ), you CANNOT take the credit if. States with no retirement income tax . States with no retirement income tax . States with no retirement income tax   Your adjusted gross income (AGI)* is equal to or more than. States with no retirement income tax . States with no retirement income tax . States with no retirement income tax     OR the total of your nontaxable social security and other nontaxable pension(s), annuities, or disability income is equal to or more than. States with no retirement income tax . States with no retirement income tax . States with no retirement income tax   single, head of household, or qualifying widow(er) with dependent child   $17,500     $5,000   married filing jointly and only one spouse qualifies in Figure 33-A   $20,000     $5,000   married filing jointly and both spouses qualify in Figure 33-A   $25,000     $7,500   married filing separately and you lived apart from your spouse for all of 2013   $12,500     $3,750   * AGI is the amount on Form 1040A, line 22, or Form 1040, line 38. States with no retirement income tax Disability income. States with no retirement income tax   If you are under age 65, you must also have taxable disability income to qualify for the credit. States with no retirement income tax Disability income must meet both of the following requirements. States with no retirement income tax It must be paid under your employer's accident or health plan or pension plan. States with no retirement income tax It must be included in your income as wages (or payments instead of wages) for the time you are absent from work because of permanent and total disability. States with no retirement income tax Payments that are not disability income. States with no retirement income tax   Any payment you receive from a plan that does not provide for disability retirement is not disability income. States with no retirement income tax Any lump-sum payment for accrued annual leave that you receive when you retire on disability is a salary payment and is not disability income. States with no retirement income tax   For purposes of the credit for the elderly or the disabled, disability income does not include amounts you receive after you reach mandatory retirement age. States with no retirement income tax Mandatory retirement age is the age set by your employer at which you would have had to retire, had you not become disabled. States with no retirement income tax Income Limits To determine if you can claim the credit, you must consider two income limits. States with no retirement income tax The first limit is the amount of your adjusted gross income (AGI). States with no retirement income tax The second limit is the amount of nontaxable social security and other nontaxable pensions, annuities, or disability income you received. States with no retirement income tax The limits are shown in Table 33-1. States with no retirement income tax If your AGI and nontaxable pensions, annuities, or disability income are less than the income limits, you may be able to claim the credit. States with no retirement income tax See How to Claim the Credit , later. States with no retirement income tax If either your AGI or your nontaxable pensions, annuities, or disability income are equal to or more than the income limits, you cannot take the credit. States with no retirement income tax How to Claim the Credit You can figure the credit yourself or the Internal Revenue Service will figure it for you. States with no retirement income tax Credit Figured for You If you choose to have the IRS figure the credit for you, read the following discussion for the form you will file (Form 1040 or 1040A). States with no retirement income tax If you want the IRS to figure your tax, see chapter 30. States with no retirement income tax Form 1040. States with no retirement income tax   If you want the IRS to figure your credit, see Form 1040 Line Entries under Tax Figured by IRS in chapter 30. States with no retirement income tax Form 1040A. States with no retirement income tax   If you want the IRS to figure your credit, see Form 1040A Line Entries under Tax Figured by IRS in chapter 30. States with no retirement income tax Credit Figured by You If you choose to figure the credit yourself, fill out the front of Schedule R. States with no retirement income tax Next, fill out Schedule R, Part III. States with no retirement income tax If you file Form 1040A, enter the amount from Schedule R, line 22, on Form 1040A, line 30. States with no retirement income tax If you file Form 1040, include the amount from Schedule R, line 22, on line 53; check box c, and enter “Sch R” on the line next to that box. States with no retirement income tax For a step-by-step discussion about filling out Part III of Schedule R, see Figuring the Credit Yourself in Publication 524. States with no retirement income tax Limit on credit. States with no retirement income tax   The amount of the credit you can claim is generally limited to the amount of your tax. States with no retirement income tax Use the Credit Limit Worksheet in the Instructions for Schedule R to determine if your credit is limited. States with no retirement income tax Prev  Up  Next   Home   More Online Publications
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The States With No Retirement Income Tax

States with no retirement income tax 3. States with no retirement income tax   Limit on Annual Additions Table of Contents Ministers and church employees. States with no retirement income tax Includible Compensation for Your Most Recent Year of ServiceMost Recent Year of Service Includible Compensation The first component of MAC is the limit on annual additions. States with no retirement income tax This is a limit on the total contributions (elective deferrals, nonelective contributions, and after-tax contributions) that can be made to your 403(b) account. States with no retirement income tax The limit on annual additions generally is the lesser of: $51,000 for 2013 and $52,000 for 2014, or 100% of your includible compensation for your most recent year of service. States with no retirement income tax More than one 403(b) account. States with no retirement income tax If you contributed to more than one 403(b) account, you must combine the contributions made to all 403(b) accounts on your behalf by your employer. States with no retirement income tax Ministers and church employees. States with no retirement income tax   If you are a minister or a church employee, you may be able to increase your limit on annual additions or use different rules when figuring your limit on annual additions. States with no retirement income tax For more information, see chapter 5. States with no retirement income tax Participation in a qualified plan. States with no retirement income tax If you participated in a 403(b) plan and a qualified plan, you must combine contributions made to your 403(b) account with contributions to a qualified plan and simplified employee pensions of all corporations, partnerships, and sole proprietorships in which you have more than 50% control. States with no retirement income tax You can use Part I of Worksheet 1 in chapter 9 to figure your limit on annual additions. States with no retirement income tax Includible Compensation for Your Most Recent Year of Service Definition. States with no retirement income tax   Generally, includible compensation for your most recent year of service is the amount of taxable wages and benefits you received from the employer that maintained a 403(b) account for your benefit during your most recent year of service. States with no retirement income tax When figuring your includible compensation for your most recent year of service, keep in mind that your most recent year of service may not be the same as your employer's most recent annual work period. States with no retirement income tax This can happen if your tax year is not the same as your employer's annual work period. States with no retirement income tax When figuring includible compensation for your most recent year of service, do not mix compensation or service of one employer with compensation or service of another employer. States with no retirement income tax Most Recent Year of Service Your most recent year of service is your last full year of service, ending on the last day of your tax year that you worked for the employer that maintained a 403(b) account on your behalf. States with no retirement income tax Tax year different from employer's annual work period. States with no retirement income tax   If your tax year is not the same as your employer's annual work period, your most recent year of service is made up of parts of at least two of your employer's annual work periods. States with no retirement income tax Example. States with no retirement income tax A professor who reports her income on a calendar-year basis is employed on a full-time basis by a university that operates on an academic year (October through May). States with no retirement income tax To figure her includible compensation for 2013, the professor's most recent year of service is her service from January through May 2013 and from October through December 2013. States with no retirement income tax Figuring Your Most Recent Year of Service To figure your most recent year of service, begin by determining what is a full year of service for your position. States with no retirement income tax A full year of service is equal to full-time employment for your employer's annual work period. States with no retirement income tax After identifying a full year of service, begin counting the service you have provided for your employer starting with the service provided in the current year. States with no retirement income tax Part-time or employed only part of the year. States with no retirement income tax   If you are a part-time or a full-time employee who is employed for only part of the year, your most recent year of service is your service this year and your service for as many previous years as is necessary to total 1 full year of service. States with no retirement income tax To determine your most recent year of service, add the following periods of service: Your service during the year for which you are figuring the limit on annual additions, and Your service during your preceding tax years until the total service equals 1 year of service or you have figured all of your service with the employer. States with no retirement income tax Example. States with no retirement income tax You were employed on a full-time basis from July through December 2011 (1/2 year of service), July through December 2012 (1/2 year of service), and October through December 2013 (1/4 year of service). States with no retirement income tax Your most recent year of service for computing your limit on annual additions for 2013 is the total of your service during 2013 (1/4 year of service), your service during 2012 (1/2 year of service), and your service during the months October through December 2011 (1/4 year of service). States with no retirement income tax Not yet employed for 1 year. States with no retirement income tax   If, at the close of the year, you have not yet worked for your employer for 1 year (including time you worked for the same employer in all earlier years), use the period of time you have worked for the employer as your most recent year of service. States with no retirement income tax Includible Compensation After identifying your most recent year of service, the next step is to identify the includible compensation associated with that full year of service. States with no retirement income tax Includible compensation is not the same as income included on your tax return. States with no retirement income tax Compensation is a combination of income and benefits received in exchange for services provided to your employer. States with no retirement income tax Generally, includible compensation is the amount of income and benefits: Received from the employer who maintains your 403(b) account, and Must be included in your income. States with no retirement income tax Includible compensation includes the following amounts. States with no retirement income tax Elective deferrals (employer's contributions made on your behalf under a salary reduction agreement). States with no retirement income tax Amounts contributed or deferred by your employer under a section 125 cafeteria plan. States with no retirement income tax Amounts contributed or deferred, at the election of the employee, under an eligible section 457 nonqualified deferred compensation plan (state or local government or tax-exempt organization plan). States with no retirement income tax  Note. States with no retirement income tax For information about treating elective deferrals under section 457 plans as Roth contributions, see Publication 575. States with no retirement income tax Wages, salaries, and fees for personal services earned with the employer maintaining your 403(b) account. States with no retirement income tax Income otherwise excluded under the foreign earned income exclusion. States with no retirement income tax Pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan. States with no retirement income tax Includible compensation does not include the following items. States with no retirement income tax Your employer's contributions to your 403(b) account. States with no retirement income tax Compensation earned while your employer was not an eligible employer. States with no retirement income tax Your employer's contributions to a qualified plan that: Are on your behalf, and Are excludable from income. States with no retirement income tax The cost of incidental life insurance. States with no retirement income tax See Cost of Incidental Life Insurance, later. States with no retirement income tax If you are a church employee or a foreign missionary, figure includible compensation using the rules explained in chapter 5. States with no retirement income tax Contributions after retirement. States with no retirement income tax   Nonelective contributions may be made for an employee for up to 5 years after retirement. States with no retirement income tax These contributions would be based on includible compensation for the last year of service before retirement. States with no retirement income tax Cost of Incidental Life Insurance Includible compensation does not include the cost of incidental life insurance. States with no retirement income tax If all of your 403(b) accounts invest only in mutual funds, then you have no incidental life insurance. States with no retirement income tax If you have an annuity contract, a portion of the cost of that contract may be for incidental life insurance. States with no retirement income tax If so, the cost of the insurance is taxable to you in the year contributed and is considered part of your basis when distributed. States with no retirement income tax Your employer will include the cost of your insurance as taxable wages in box 1 of Form W-2. States with no retirement income tax Not all annuity contracts include life insurance. States with no retirement income tax Contact your plan administrator to determine if your contract includes incidental life insurance. States with no retirement income tax If it does, you will need to figure the cost of life insurance each year the policy is in effect. States with no retirement income tax Figuring the cost of incidental life insurance. States with no retirement income tax If you have determined that part of the cost of your annuity contract is for an incidental life insurance premium, you will need to determine the amount of the premium and subtract it from your includible compensation. States with no retirement income tax To determine the amount of the life insurance premiums, you will need to know the following information. States with no retirement income tax The value of your life insurance contract, which is the amount payable upon your death. States with no retirement income tax The cash value of your life insurance contract at the end of the tax year. States with no retirement income tax Your age on your birthday nearest the beginning of the policy year. States with no retirement income tax Your current life insurance protection under an ordinary retirement income life insurance policy, which is the amount payable upon your death minus the cash value of the contract at the end of the year. States with no retirement income tax You can use Worksheet A, in chapter 9, to determine the cost of your incidental life insurance. States with no retirement income tax Example. States with no retirement income tax Your new contract provides that your beneficiary will receive $10,000 if you should die before retirement. States with no retirement income tax Your cash value in the contract at the end of the first year is zero. States with no retirement income tax Your current life insurance protection for the first year is $10,000 ($10,000 − 0). States with no retirement income tax The cash value in the contract at the end of year two is $1,000, and the current life insurance protection for the second year is $9,000 ($10,000 – $1,000). States with no retirement income tax The 1-year cost of the protection can be calculated by using Figure 3-1, Table of One-Year Term Premiums for $1,000 Life Insurance Protection . States with no retirement income tax The premium rate is determined based on your age on your birthday nearest the beginning of the policy year. States with no retirement income tax Figure 3-1. States with no retirement income tax Table of One-Year Term Premiums for $1,000 Life Insurance Protection Age Cost   Age Cost   Age Cost 0 $0. States with no retirement income tax 70   35 $0. States with no retirement income tax 99   70 $20. States with no retirement income tax 62 1 0. States with no retirement income tax 41   36 1. States with no retirement income tax 01   71 22. States with no retirement income tax 72 2 0. States with no retirement income tax 27   37 1. States with no retirement income tax 04   72 25. States with no retirement income tax 07 3 0. States with no retirement income tax 19   38 1. States with no retirement income tax 06   73 27. States with no retirement income tax 57 4 0. States with no retirement income tax 13   39 1. States with no retirement income tax 07   74 30. States with no retirement income tax 18 5 0. States with no retirement income tax 13   40 1. States with no retirement income tax 10   75 33. States with no retirement income tax 05 6 0. States with no retirement income tax 14   41 1. States with no retirement income tax 13   76 36. States with no retirement income tax 33 7 0. States with no retirement income tax 15   42 1. States with no retirement income tax 20   77 40. States with no retirement income tax 17 8 0. States with no retirement income tax 16   43 1. States with no retirement income tax 29   78 44. States with no retirement income tax 33 9 0. States with no retirement income tax 16   44 1. States with no retirement income tax 40   79 49. States with no retirement income tax 23 10 0. States with no retirement income tax 16   45 1. States with no retirement income tax 53   80 54. States with no retirement income tax 56 11 0. States with no retirement income tax 19   46 1. States with no retirement income tax 67   81 60. States with no retirement income tax 51 12 0. States with no retirement income tax 24   47 1. States with no retirement income tax 83   82 66. States with no retirement income tax 74 13 0. States with no retirement income tax 28   48 1. States with no retirement income tax 98   83 73. States with no retirement income tax 07 14 0. States with no retirement income tax 33   49 2. States with no retirement income tax 13   84 80. States with no retirement income tax 35 15 0. States with no retirement income tax 38   50 2. States with no retirement income tax 30   85 88. States with no retirement income tax 76 16 0. States with no retirement income tax 52   51 2. States with no retirement income tax 52   86 99. States with no retirement income tax 16 17 0. States with no retirement income tax 57   52 2. States with no retirement income tax 81   87 110. States with no retirement income tax 40 18 0. States with no retirement income tax 59   53 3. States with no retirement income tax 20   88 121. States with no retirement income tax 85 19 0. States with no retirement income tax 61   54 3. States with no retirement income tax 65   89 133. States with no retirement income tax 40 20 0. States with no retirement income tax 62   55 4. States with no retirement income tax 15   90 144. States with no retirement income tax 30 21 0. States with no retirement income tax 62   56 4. States with no retirement income tax 68   91 155. States with no retirement income tax 80 22 0. States with no retirement income tax 64   57 5. States with no retirement income tax 20   92 168. States with no retirement income tax 75 23 0. States with no retirement income tax 66   58 5. States with no retirement income tax 66   93 186. States with no retirement income tax 44 24 0. States with no retirement income tax 68   59 6. States with no retirement income tax 06   94 206. States with no retirement income tax 70 25 0. States with no retirement income tax 71   60 6. States with no retirement income tax 51   95 228. States with no retirement income tax 35 26 0. States with no retirement income tax 73   61 7. States with no retirement income tax 11   96 250. States with no retirement income tax 01 27 0. States with no retirement income tax 76   62 7. States with no retirement income tax 96   97 265. States with no retirement income tax 09 28 0. States with no retirement income tax 80   63 9. States with no retirement income tax 08   98 270. States with no retirement income tax 11 29 0. States with no retirement income tax 83   64 10. States with no retirement income tax 41   99 281. States with no retirement income tax 05 30 0. States with no retirement income tax 87   65 11. States with no retirement income tax 90       31 0. States with no retirement income tax 90   66 13. States with no retirement income tax 51       32 0. States with no retirement income tax 93   67 15. States with no retirement income tax 20       33 0. States with no retirement income tax 96   68 16. States with no retirement income tax 92       34 0. States with no retirement income tax 98   69 18. States with no retirement income tax 70                       If the current published premium rates per $1,000 of insurance protection charged by an insurer for individual 1-year term life insurance premiums available to all standard risks are lower than those in the preceding table, you can use the lower rates for figuring the cost of insurance in connection with individual policies issued by the same insurer. States with no retirement income tax Example 1. States with no retirement income tax Lynne Green, age 44, and her employer enter into a 403(b) plan that will provide her with a $500 a month annuity upon retirement at age 65. States with no retirement income tax The agreement also provides that if she should die before retirement, her beneficiary will receive the greater of $20,000 or the cash surrender value in the life insurance contract. States with no retirement income tax Using the facts presented we can determine the cost of Lynne's life insurance protection as shown in Table 3-1. States with no retirement income tax Lynne's employer has included $28 for the cost of the life insurance protection in her current year's income. States with no retirement income tax When figuring her includible compensation for this year, Lynne will subtract $28. States with no retirement income tax Table 3-1. States with no retirement income tax Worksheet A. States with no retirement income tax Cost of Incidental Life Insurance Note. States with no retirement income tax Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. States with no retirement income tax This amount will be used to figure includible compensation for your most recent year of service. States with no retirement income tax 1. States with no retirement income tax Enter the value of the contract (amount payable upon your death) 1. States with no retirement income tax $20,000. States with no retirement income tax 00 2. States with no retirement income tax Enter the cash value in the contract at the end of the year 2. States with no retirement income tax 0. States with no retirement income tax 00 3. States with no retirement income tax Subtract line 2 from line 1. States with no retirement income tax This is the value of your current life insurance protection 3. States with no retirement income tax $20,000. States with no retirement income tax 00 4. States with no retirement income tax Enter your age on your birthday nearest the beginning of the policy year 4. States with no retirement income tax 44 5. States with no retirement income tax Enter the 1-year term premium for $1,000 of life insurance based on your age. States with no retirement income tax (From Figure 3-1) 5. States with no retirement income tax $1. States with no retirement income tax 40 6. States with no retirement income tax Divide line 3 by $1,000 6. States with no retirement income tax 20 7. States with no retirement income tax Multiply line 6 by line 5. States with no retirement income tax This is the cost of your incidental life insurance 7. States with no retirement income tax $28. States with no retirement income tax 00 Example 2. States with no retirement income tax Lynne's cash value in the contract at the end of the second year is $1,000. States with no retirement income tax In year two, the cost of Lynne's life insurance is calculated as shown in Table 3-2. States with no retirement income tax In year two, Lynne's employer will include $29. States with no retirement income tax 07 in her current year's income. States with no retirement income tax Lynne will subtract this amount when figuring her includible compensation. States with no retirement income tax Table 3-2. States with no retirement income tax Worksheet A. States with no retirement income tax Cost of Incidental Life Insurance Note. States with no retirement income tax Use this worksheet to figure the cost of incidental life insurance included in your annuity contract. States with no retirement income tax This amount will be used to figure includible compensation for your most recent year of service. States with no retirement income tax 1. States with no retirement income tax Enter the value of the contract (amount payable upon your death) 1. States with no retirement income tax $20,000. States with no retirement income tax 00 2. States with no retirement income tax Enter the cash value in the contract at the end of the year 2. States with no retirement income tax $1,000. States with no retirement income tax 00 3. States with no retirement income tax Subtract line 2 from line 1. States with no retirement income tax This is the value of your current life insurance protection 3. States with no retirement income tax $19,000. States with no retirement income tax 00 4. States with no retirement income tax Enter your age on your birthday nearest the beginning of the policy year 4. States with no retirement income tax 45 5. States with no retirement income tax Enter the 1-year term premium for $1,000 of life insurance based on your age. States with no retirement income tax (From Figure 3-1) 5. States with no retirement income tax $1. States with no retirement income tax 53 6. States with no retirement income tax Divide line 3 by $1,000 6. States with no retirement income tax 19 7. States with no retirement income tax Multiply line 6 by line 5. States with no retirement income tax This is the cost of your incidental life insurance 7. States with no retirement income tax $29. States with no retirement income tax 07 Figuring Includible Compensation for Your Most Recent Year of Service You can use Worksheet B in chapter 9 to determine your includible compensation for your most recent year of service. States with no retirement income tax Example. States with no retirement income tax Floyd has been periodically working full-time for a local hospital since September 2011. States with no retirement income tax He needs to figure his limit on annual additions for 2014. States with no retirement income tax The hospital's normal annual work period for employees in Floyd's general type of work runs from January to December. States with no retirement income tax During the periods that Floyd was employed with the hospital, the hospital has always been eligible to provide a 403(b) plan to employees. States with no retirement income tax Additionally, the hospital has never provided the employees with a 457 deferred compensation plan, a transportation fringe benefit plan, or a cafeteria plan. States with no retirement income tax Floyd has never worked abroad and there is no life insurance provided under the plan. States with no retirement income tax Table 3-3 shows the service Floyd provided to his employer, his compensation for the periods worked, his elective deferrals, and his taxable wages. States with no retirement income tax Table 3-3. States with no retirement income tax Floyd's Compensation Note. States with no retirement income tax This table shows information Floyd will use to figure includible compensation for his most recent year of service. States with no retirement income tax   Year Years of Service Taxable Wages Elective Deferrals 2014 6/12 of  a year $42,000 $2,000 2013 4/12 of  a year $16,000 $1,650 2012 4/12 of  a year $16,000 $1,650 Before Floyd can figure his limit on annual additions, he must figure includible compensation for his most recent year of service. States with no retirement income tax Because Floyd is not planning to work the entire 2014 year, his most recent year of service will include the time he is planning to work in 2014 plus time he worked in the preceding 3 years until the time he worked for the hospital totals 1 year. States with no retirement income tax If the total time he worked is less than 1 year, Floyd will treat it as if it were 1 year. States with no retirement income tax He figures his most recent year of service shown in the following list. States with no retirement income tax Time he will work in 2014 is 6/12 of a year. States with no retirement income tax Time worked in 2013 is 4/12 of a year. States with no retirement income tax All of this time will be used to determine Floyd's most recent year of service. States with no retirement income tax Time worked in 2012 is 4/12 of a year. States with no retirement income tax Floyd only needs 2 months of the 4 months he worked in 2012 to have enough time to total 1 full year. States with no retirement income tax Because he needs only one-half of the actual time he worked, Floyd will use only one-half of his income earned during that period to calculate wages that will be used in figuring his includible compensation. States with no retirement income tax Using the information provided in Table 3-3, wages for Floyd's most recent year of service are $66,000 ($42,000 + $16,000 + $8,000). States with no retirement income tax His includible compensation for his most recent year of service is figured as shown in Table 3-4. States with no retirement income tax After figuring his includible compensation, Floyd determines his limit on annual additions for 2014 to be $52,000, the lesser of his includible compensation, $70,475 (Table 3-4), and the maximum amount of $52,000. States with no retirement income tax Table 3-4. States with no retirement income tax Worksheet B. States with no retirement income tax Includible Compensation for Your Most Recent Year of Service1 Note. States with no retirement income tax Use this worksheet to figure includible compensation for your most recent year of service. States with no retirement income tax 1. States with no retirement income tax Enter your includible wages from the employer maintaining your 403(b) account for your most recent year of service 1. States with no retirement income tax $66,000 2. States with no retirement income tax Enter elective deferrals excluded from your gross income for your most recent year of service2 2. States with no retirement income tax 4,4753 3. States with no retirement income tax Enter amounts contributed or deferred by your employer under a cafeteria plan for your most recent year of service 3. States with no retirement income tax -0- 4. States with no retirement income tax Enter amounts contributed or deferred by your employer according to your election to your 457 account (a nonqualified plan of a state or local government, or of a tax-exempt organization) for your most recent year of service 4. States with no retirement income tax -0- 5. States with no retirement income tax Enter pre-tax contributions (employer's contributions made on your behalf according to your election) to a qualified transportation fringe benefit plan for your most recent year of service 5. States with no retirement income tax -0- 6. States with no retirement income tax Enter your foreign earned income exclusion for your most recent year of service 6. States with no retirement income tax -0- 7. States with no retirement income tax Add lines 1, 2, 3, 4, 5, and 6 7. States with no retirement income tax 70,475 8. States with no retirement income tax Enter the cost of incidental life insurance that is part of your annuity contract for your most recent year of service 8. States with no retirement income tax -0- 9. States with no retirement income tax Enter compensation that was both: Earned during your most recent year of service, and Earned while your employer was not qualified to maintain a 403(b) plan 9. States with no retirement income tax -0- 10. States with no retirement income tax Add lines 8 and 9 10. States with no retirement income tax -0- 11. States with no retirement income tax Subtract line 10 from line 7. States with no retirement income tax This is your includible compensation for your most recent year of service 11. States with no retirement income tax 70,475 1Use estimated amounts if figuring includible compensation before the end of the year. States with no retirement income tax 2Elective deferrals made to a designated Roth account are not excluded from your gross income and should not be included on this line. States with no retirement income tax  3$4,475 ($2,000 + $1,650 + $825). States with no retirement income tax Prev  Up  Next   Home   More Online Publications