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1040 S

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1040 S

1040 s Index A Affiliated corporations, Aircraft used by affiliated corporations. 1040 s Agri-biodiesel, defined, Agri-biodiesel. 1040 s Air transportation taxes, Air Transportation Taxes 225-mile-zone rule, Taxable transportation. 1040 s Alaska, Transportation between the continental U. 1040 s S. 1040 s and Alaska or Hawaii. 1040 s , Transportation within Alaska or Hawaii. 1040 s , Alaska and Hawaii. 1040 s Baggage, Excess baggage. 1040 s Bonus tickets, Bonus tickets. 1040 s Credits or refunds, Credits or refunds. 1040 s Exemptions, Exemptions. 1040 s Export, Exportation. 1040 s Fixed-wing aircraft, Fixed-wing aircraft uses. 1040 s Hawaii, Transportation between the continental U. 1040 s S. 1040 s and Alaska or Hawaii. 1040 s , Transportation within Alaska or Hawaii. 1040 s , Alaska and Hawaii. 1040 s Helicopters, Certain helicopter uses. 1040 s , Transportation of Property by Air International air travel facilities, International Air Travel Facilities Military personnel, Military personnel on international trips. 1040 s Package tours, Package tours. 1040 s Persons by air, Transportation of Persons by Air Persons liable, Liability for tax. 1040 s , Liability for tax. 1040 s Property by air, Transportation of Property by Air Tax rates, Transportation of Persons by Air Taxable transportation, Taxable transportation. 1040 s Travel agency, Liability for tax. 1040 s Uninterrupted international, Uninterrupted international air transportation. 1040 s Aircraft, Fixed-wing aircraft uses. 1040 s Affiliated corporations, Aircraft used by affiliated corporations. 1040 s Small planes, Small aircraft. 1040 s Aircraft museum, In an aircraft or vehicle owned by an aircraft museum (No. 1040 s 15). 1040 s Alaska Air transportation taxes, Transportation between the continental U. 1040 s S. 1040 s and Alaska or Hawaii. 1040 s Tax on diesel fuel or kerosene, Removal for sale or use in Alaska. 1040 s Alcohol and tobacco taxes, Excise Taxes Not Covered Alternative fuel credit, Alternative fuel credit. 1040 s Alternative fuel, defined, Other fuels. 1040 s American Red Cross, International organizations and the American Red Cross. 1040 s Answering service, Answering services. 1040 s Appeal procedures, Examination and Appeal Procedures Approved refinery, defined, Approved terminal or refinery. 1040 s Approved terminal, defined, Approved terminal or refinery. 1040 s Arrow shafts, Arrow Shafts Assistance (see Tax help) Aviation gasoline, defined, Aviation gasoline. 1040 s B Back-up tax, Back-up Tax Biodiesel, defined, Biodiesel. 1040 s Blended taxable fuel, defined, Blended taxable fuel. 1040 s Blender, defined, Blender. 1040 s Blocked pump, Blocked pump. 1040 s Blood collector organizations, qualified, Exclusive use by a qualified blood collector organization (No. 1040 s 11). 1040 s , Qualified blood collector organizations. 1040 s Boats, In a boat engaged in commercial fishing (No. 1040 s 4). 1040 s Bonus tickets, Bonus tickets. 1040 s Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Bulk transfer, defined, Bulk transfer. 1040 s Bulk transfer/terminal system, defined, Bulk transfer/terminal system. 1040 s Buses, In certain intercity and local buses (No. 1040 s 5). 1040 s , In a qualified local bus (No. 1040 s 6). 1040 s , In a school bus (No. 1040 s 7). 1040 s Tire tax, Qualifying intercity or local bus. 1040 s C Cellulosic biofuel, Cellulosic biofuel. 1040 s Chemicals, ozone-depleting, Environmental Taxes Claims Claiming a credit, Claiming a Credit on Form 4136 Claiming a refund, Claiming A Refund Filing claims, Filing Claims Coal Blending, Blending. 1040 s Exemptions, Exemption from tax. 1040 s Producer, Coal Production, Coal production. 1040 s Selling price, Determining tonnage or selling price. 1040 s Tax rates, Tax rates. 1040 s Coin-operated telephones, Coin-operated telephones. 1040 s Comments, Comments and suggestions. 1040 s Commercial aviation, In commercial aviation (other than foreign trade). 1040 s Commercial fishing, In a boat engaged in commercial fishing (No. 1040 s 4). 1040 s Commercial waterway transportation, Commercial waterway transportation. 1040 s Communications taxes Credits or refunds, Credits or Refunds Exemptions, Exemptions Figuring the tax, Figuring the tax. 1040 s Local telephone service, Local telephone service. 1040 s Local-only service, Local-only service. 1040 s Private communication service, Private communication service. 1040 s Teletypewriter exchange service, Teletypewriter exchange service. 1040 s Credit card purchases Aviation gasoline, Credit card purchases. 1040 s Gasoline, Credit card purchases. 1040 s Kerosene for use in aviation, Credit card purchases. 1040 s Undyed diesel fuel, Credit Card Purchases. 1040 s Undyed kerosene, Credit Card Purchases. 1040 s Credit or refund Gas guzzler tax, Credit or refund. 1040 s Manufacturers taxes, Credits or Refunds Resale of tax-paid semitrailers, Tax on resale of tax-paid trailers and semitrailers. 1040 s Retail tax, Credits or refunds. 1040 s Tire tax, Credit or refund. 1040 s Vaccines, Credit or refund. 1040 s Credits, Claiming a Credit on Form 4136 D Deposits Net tax liability, Amount of Deposits Deposits, How to make, How To Make Deposits Diesel fuel Definitions, Diesel Fuel and Kerosene Exported, Diesel Fuel and Kerosene Diesel-water fuel emulsion, defined, Diesel-water fuel emulsion. 1040 s Dyed diesel fuel, Dyed Diesel Fuel and Dyed Kerosene Dyed kerosene, Dyed Diesel Fuel and Dyed Kerosene E Electric outboard motors, Electric outboard boat motors. 1040 s Enterer, defined, Enterer. 1040 s Entry, defined, Entry. 1040 s Environmental taxes Credit or refund, Credits or refunds. 1040 s Exceptions, Exceptions. 1040 s Ozone-depleting chemicals (ODCs), Environmental Taxes United States (defined), Environmental Taxes Examination procedures, Examination and Appeal Procedures Excluded liquid, Diesel Fuel and Kerosene Exempt articles, retail tax, Articles exempt from tax. 1040 s Exempt communication services American Red Cross, International organizations and the American Red Cross. 1040 s Answering service, Answering services. 1040 s Coin-operated telephones, Coin-operated telephones. 1040 s Installation charges, Installation charges. 1040 s International organizations, International organizations and the American Red Cross. 1040 s Mobile radio telephone service, Mobile radio telephone service. 1040 s News services, News services. 1040 s Nonprofit educational organizations, Nonprofit educational organizations. 1040 s Nonprofit hospitals, Nonprofit hospitals. 1040 s Private communication service, Private communication service. 1040 s Qualified blood collector organizations, Qualified blood collector organizations. 1040 s Radio broadcasts, News services. 1040 s Security systems, Telephone-operated security systems. 1040 s Exempt sales, heavy trucks, Sales exempt from tax. 1040 s Exemptions Air transportation taxes, Exemptions. 1040 s Bonus tickets, Bonus tickets. 1040 s Coal, Exemption from tax. 1040 s Communications taxes, Exemptions Federal government, Federal, state, and local government. 1040 s Fixed-wing aircraft, Fixed-wing aircraft uses. 1040 s For export, Exemptions Further manufacturing, Exemptions Helicopters, Certain helicopter uses. 1040 s Indian handicrafts, Exemptions Indian tribal governments, Federal, state, and local government. 1040 s Military personnel, Military personnel on international trips. 1040 s Nonprofit educational organizations, Federal, state, and local government. 1040 s , Exemptions Qualified blood collector organizations, Exemptions State and local governments, Federal, state, and local government. 1040 s , Exemptions Taxable tires, Tires exempt from tax. 1040 s Vessel supplies, Exemptions Export, Export (No. 1040 s 3). 1040 s Exported taxable fuel, Exported taxable fuel. 1040 s F Farming, On a farm for farming purposes (No. 1040 s 1). 1040 s Federal government, Federal, state, and local government. 1040 s Fishing, In a boat engaged in commercial fishing (No. 1040 s 4). 1040 s Fishing rods and fishing poles. 1040 s , Fishing rods and fishing poles. 1040 s Fishing tackle boxes, Fishing tackle boxes. 1040 s Fixed-wing aircraft, Fixed-wing aircraft uses. 1040 s Floor stocks tax Ozone-depleting chemicals, Floor Stocks Tax Floor stocks, ODCs, Environmental Taxes Foreign trade, In foreign trade (No. 1040 s 9). 1040 s Form 1363, Exportation. 1040 s 4136, Claiming a Credit on Form 4136 6197, Gas Guzzler Tax, Form 6197. 1040 s , Attachments to Form 720. 1040 s 637, Reminders 6627, Environmental Taxes, Attachments to Form 720. 1040 s 720, Claiming A Refund, Form 6197. 1040 s , Filing Form 720 720X, Form 720X. 1040 s 8849, Claiming A Refund 8864, Biodiesel Sold as But Not Used as Fuel Form 720 Attachments, Attachments to Form 720. 1040 s Due dates, Due dates. 1040 s Final return, Final return. 1040 s Schedule A, Filing Form 720 Schedule C, Filing Form 720 Schedule T, Filing Form 720 Free tax services, How To Get Tax Help Fuels Alternative fuel, Other Fuels (Including Alternative Fuels) Diesel, Diesel Fuel and Kerosene Diesel-water fuel emulsion, Diesel-Water Fuel Emulsion For use in aviation, Kerosene for Use in Aviation Gasoline, Gasoline and Aviation Gasoline Kerosene, Diesel Fuel and Kerosene Other Fuels, Other Fuels (Including Alternative Fuels) Used on inland waterways, Fuels Used on Inland Waterways G Gambling, Taxable situations. 1040 s Gas guzzler tax Automobiles, Automobiles. 1040 s Credit or refund, Credit or refund. 1040 s Limousines, Automobiles. 1040 s Vehicles not subject to tax, Vehicles not subject to tax. 1040 s Gasoline blendstocks, Gasoline Blendstocks Gasoline, defined, Gasoline. 1040 s H Hawaii, air transportation taxes, Transportation between the continental U. 1040 s S. 1040 s and Alaska or Hawaii. 1040 s Heavy Motor Vehicle User Fee, Excise Taxes Not Covered Heavy trucks First retail sale, defined, First retail sale defined. 1040 s Further manufacture, Further manufacture. 1040 s Installment sales, Installment sales. 1040 s Parts or accessories, Parts or accessories. 1040 s Presumptive retail sales price, Presumptive retail sales price. 1040 s Related persons, Related person. 1040 s Separate purchases, Separate purchase. 1040 s Tax base, Determination of tax base. 1040 s Tax rate, Retail Tax on Heavy Trucks, Trailers, and Tractors Helicopter, Certain helicopter uses. 1040 s Help (see Tax help) Highway vehicle, Highway vehicle. 1040 s , In a highway vehicle owned by the United States that is not used on a highway (No. 1040 s 12). 1040 s Highway vehicle (Diesel-powered), Diesel-powered highway vehicle. 1040 s I Identifying number, Taxpayer identification number. 1040 s Imported taxable products (ODCs), Imported Taxable Products Income, include in, Including the Credit or Refund in Income Indoor tanning services, Indoor Tanning Services Tax Information returns, liquid products, Information Returns Inland waterways, Fuels Used on Inland Waterways Intercity and local buses, In certain intercity and local buses (No. 1040 s 5). 1040 s Interest and penalties, Penalties and Interest International air travel facilities, International Air Travel Facilities K Kerosene Definitions, Diesel Fuel and Kerosene Exported, Diesel Fuel and Kerosene For use in aviation, Kerosene for Use in Aviation L Liquid products, information returns, Information Returns Local telephone service, Local telephone service. 1040 s Local-only service, Local-only service. 1040 s M Manufacturer, defined, Manufacturer. 1040 s Manufacturers taxes Arrow shafts, Arrow Shafts Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Coal, Coal Credits or refunds, Credits or Refunds Exemptions, Exemptions Gas guzzler tax, Gas Guzzler Tax Lease, Lease considered sale. 1040 s Lease payments, Partial payments. 1040 s Partial payments, Partial payments. 1040 s Registration, Registration requirements. 1040 s Related person, Related person. 1040 s Requirements for exempt sales, Requirements for Exempt Sales Sale, Sale. 1040 s Sport fishing equipment, Sport Fishing Equipment Taxable Tires, Taxable Tires Vaccines, Vaccines Medical device tax, Taxable medical devices. 1040 s Military aircraft, In military aircraft (No. 1040 s 16). 1040 s Mobile radio telephone service, Mobile radio telephone service. 1040 s N News services, News services. 1040 s Nonprofit educational organization, Exclusive use by a nonprofit educational organization (No. 1040 s 13). 1040 s Nonprofit educational organization use and state use, Nonprofit educational organization and state use. 1040 s Nonprofit educational organizations, Nonprofit educational organizations. 1040 s , Federal, state, and local government. 1040 s Nontaxable uses, definitions, Definitions of Nontaxable Uses Nontaxable uses, type of use table, Definitions of Nontaxable Uses O Obligations not in registered form, Obligations Not in Registered Form Off-highway use, Off-highway business use (No. 1040 s 2). 1040 s Oil spill liability, Environmental Taxes Other Fuels (Including Alternative Fuels), Other Fuels (Including Alternative Fuels) Other fuels, defined, Other fuels. 1040 s Ozone-depleting chemicals Floor stocks tax, Floor Stocks Tax Imported taxable products, Imported Taxable Products P Patient-centered outcomes research fee, Patient-Centered Outcomes Research Fee Payment of taxes, Payment of Taxes Penalties Dyed diesel fuel, Penalty. 1040 s Dyed kerosene, Penalty. 1040 s Pipeline operator, defined, Pipeline operator. 1040 s Position holder, defined, Position holder. 1040 s Publications (see Tax help) Q Qualified local bus, In a qualified local bus (No. 1040 s 6). 1040 s R Rack, defined, Rack. 1040 s Radio broadcasts, News services. 1040 s Records, Refiner, defined, Refiner. 1040 s Refinery, defined, Refinery. 1040 s Refunds, Claiming A Refund Refunds of second tax, Refunds of Second Tax Registered ultimate vendor, Sales by Registered Ultimate Vendors, Registered ultimate vendor. 1040 s Registrant, Taxable fuel registrant. 1040 s Registrant, defined, Registrant. 1040 s Registration, Registration Requirements Form 637, Reminders Registration-required obligations, Obligations Not in Registered Form Related persons Heavy trucks, Related person. 1040 s Sport fishing equipment, Related person. 1040 s Removal, defined, Removal. 1040 s Retail tax Credits or refunds, Credits or refunds. 1040 s Heavy trucks, Retail Tax on Heavy Trucks, Trailers, and Tractors Rulings Program, Rulings Program Rural airports, Rural airports. 1040 s S Sale, defined, Sale. 1040 s Sales by registered ultimate vendors, gasoline, Sales by registered ultimate vendors. 1040 s Sales by registered ultimate vendors, kerosene for use in aviation, Sales by Registered Ultimate Vendors Sales price Bonus goods, Bonus goods. 1040 s Cost of transportation, Manufacturers taxes based on sale price. 1040 s Delivery costs, Manufacturers taxes based on sale price. 1040 s Discounts, Manufacturers taxes based on sale price. 1040 s Installation costs, Manufacturers taxes based on sale price. 1040 s Insurance costs, Manufacturers taxes based on sale price. 1040 s Local advertising charges, Manufacturers taxes based on sale price. 1040 s Manufacturers excise tax, Manufacturers taxes based on sale price. 1040 s Rebates, Manufacturers taxes based on sale price. 1040 s Retail dealer preparation costs, Manufacturers taxes based on sale price. 1040 s Warranty charges, Manufacturers taxes based on sale price. 1040 s School bus, In a school bus (No. 1040 s 7). 1040 s Second generation biofuel, Second generation biofuel. 1040 s Security systems, Telephone-operated security systems. 1040 s Ship passenger tax, Ship Passenger Tax Special September rule, When to deposit, Special rule for deposits of taxes in September. 1040 s Sport fishing equipment List of equipment, Sport Fishing Equipment Resales, Certain equipment resale. 1040 s State and local governments, Federal, state, and local government. 1040 s State or local governments, Exclusive use by a state, political subdivision of a state, or the District of Columbia (No. 1040 s 14). 1040 s State or nonprofit educational organization use, Sales by registered ultimate vendors. 1040 s State use, Registered ultimate vendor (state use). 1040 s , State use. 1040 s State, defined, State. 1040 s Suggestions, Comments and suggestions. 1040 s T Tanning tax, Indoor Tanning Services Tax Tax help, How To Get Tax Help Tax rate, Electric outboard boat motors. 1040 s Air transportation of persons, Transportation of Persons by Air Air transportation of property, Transportation of Property by Air Arrow shafts, Arrow Shafts Bows, Quivers, Broadheads, and Points, Bows, Quivers, Broadheads, and Points Coal, Tax rates. 1040 s Electric outboard motor, Electric outboard boat motors. 1040 s International air travel facilities, International Air Travel Facilities Obligations not in registered form, Obligations Not in Registered Form Policies issued by foreign persons, Foreign Insurance Taxes Ship passenger tax, Ship Passenger Tax Sport fishing equipment, Sport Fishing Equipment Trucks, Retail Tax on Heavy Trucks, Trailers, and Tractors Taxable fuel registrant, Taxable fuel registrant. 1040 s Taxable Tires Manufacturers taxes, Taxable Tires Taxable tires Exemptions, Tires exempt from tax. 1040 s Taxes, Payment of, Payment of Taxes Taxpayer identification number, Taxpayer identification number. 1040 s Teletypewriter exchange service, Teletypewriter exchange service. 1040 s Terminal operator, defined, Terminal operator. 1040 s Terminal, defined, Terminal. 1040 s Throughputter, defined, Throughputter. 1040 s Tires Credit against heavy truck tax, Tire credit. 1040 s Credit or refund of tax, Credit or refund. 1040 s Train, Use in a train. 1040 s Train (Diesel-powered), Diesel-powered train. 1040 s Transmix, Diesel Fuel and Kerosene Travel agency, Liability for tax. 1040 s TTY/TDD information, How To Get Tax Help Two-party exchanges, Two-party exchanges. 1040 s , Two-party exchanges. 1040 s U Ultimate purchaser, Ultimate purchaser. 1040 s Uninterrupted international air transportation, Uninterrupted international air transportation. 1040 s , Military personnel on international trips. 1040 s Used other than as a fuel Diesel fuel and kerosene, For diesel fuel and kerosene (other than kerosene used in aviation) used other than as a fuel (No. 1040 s 8). 1040 s Uses, nontaxable Alternative fuels, Other Fuels (Including Alternative Fuels) Aviation gasoline, Gasoline and Aviation Gasoline Diesel fuel, Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation) Diesel-water fuel emulsion, Diesel-Water Fuel Emulsion Gasoline, Gasoline and Aviation Gasoline Kerosene, Undyed Diesel Fuel and Undyed Kerosene (Other Than Kerosene Used in Aviation) Kerosene for use in aviation, Ultimate purchasers. 1040 s Liquefied petroleum gas (LPG), Other Fuels (Including Alternative Fuels) Other Fuels, Other Fuels (Including Alternative Fuels) V Vaccines Credit or refund, Credit or refund. 1040 s Manufacturers tax, What's New, Vaccines Vehicles Gas guzzler, Gas Guzzler Tax Imported, Imported automobiles. 1040 s Law enforcement, Vehicles not subject to tax. 1040 s Vendors, registered ultimate, Sales by Registered Ultimate Vendors, Registered ultimate vendor. 1040 s Vessel operator, defined, Vessel operator. 1040 s W Wagering and occupational wagering fee, Excise Taxes Not Covered When to deposit, When To Make Deposits Prev  Up     Home   More Online Publications
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Are My Social Security or Railroad Retirement Tier I Benefits Taxable?
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Do I Have Cancellation of Debt Income on My Personal Residence?
Determine if you have to include in income any of the debt that was cancelled on your principal residence.

Is My Pension or Annuity Payment Taxable?
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Page Last Reviewed or Updated: 14-Feb-2014

The 1040 S

1040 s 1. 1040 s   Investment Income Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: General InformationSSN for joint account. 1040 s Custodian account for your child. 1040 s Penalty for failure to supply SSN. 1040 s Certification. 1040 s Underreported interest and dividends. 1040 s How to stop backup withholding due to underreporting. 1040 s How to stop backup withholding due to an incorrect identification number. 1040 s Reporting backup withholding. 1040 s Nonresident aliens. 1040 s Penalties. 1040 s Savings account with parent as trustee. 1040 s Interest IncomeInterest not reported on Form 1099-INT. 1040 s Nominees. 1040 s Incorrect amount. 1040 s Information reporting requirement. 1040 s Taxable Interest — General Below-Market Loans U. 1040 s S. 1040 s Savings Bonds U. 1040 s S. 1040 s Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Discount on Debt InstrumentsOriginal Issue Discount (OID) Market Discount Bonds Discount on Short-Term Obligations Election To Report All Interest as OID When To Report Interest IncomeConstructive receipt. 1040 s How To Report Interest IncomeSchedule B (Form 1040A or 1040). 1040 s Worksheet for savings bonds distributed from a retirement or profit-sharing plan. 1040 s File Form 1099-INT with the IRS. 1040 s Dividends and Other DistributionsDividends not reported on Form 1099-DIV. 1040 s Nominees. 1040 s Ordinary Dividends Capital Gain Distributions Nondividend Distributions Liquidating Distributions Distributions of Stock and Stock Rights Other Distributions How To Report Dividend IncomeElection. 1040 s Independent contractor. 1040 s Investment interest deducted. 1040 s Exception 1. 1040 s Exception 2. 1040 s Undistributed capital gains. 1040 s File Form 1099-DIV with the IRS. 1040 s Stripped Preferred Stock REMICs, FASITs, and Other CDOsREMICs Collateralized Debt Obligations (CDOs) FASITs S CorporationsLimit on losses and deductions. 1040 s Passive activity losses. 1040 s Form 8582. 1040 s Investment ClubsInvestments in name of member. 1040 s Tax Treatment of the Club Topics - This chapter discusses: Interest Income , Discount on Debt Instruments , When To Report Interest Income , How To Report Interest Income , Dividends and Other Distributions , How To Report Dividend Income , Stripped Preferred Stock , Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) , S Corporations , and Investment Clubs . 1040 s Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 537 Installment Sales 590 Individual Retirement Arrangements (IRAs) 925 Passive Activity and At-Risk Rules 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses 1040 U. 1040 s S. 1040 s Individual Income Tax Return 1040A U. 1040 s S. 1040 s Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1099 General Instructions for Certain Information Returns 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 3115 Application for Change in Accounting Method 6251 Alternative Minimum Tax — Individuals 8582 Passive Activity Loss Limitations 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 8815 Exclusion of Interest From Series EE and I U. 1040 s S. 1040 s Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. 1040 s S. 1040 s Savings Bonds Issued After 1989 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets 8960 Net Investment Income Tax—Individuals, Estates, and Trusts See chapter 5, How To Get Tax Help , for information about getting these publications and forms. 1040 s General Information A few items of general interest are covered here. 1040 s Recordkeeping. 1040 s You should keep a list showing sources and investment income amounts you receive during the year. 1040 s Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. 1040 s Net investment income tax (NIIT). 1040 s   Beginning in 2013, you may be subject to the NIIT. 1040 s The NIIT is a 3. 1040 s 8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. 1040 s    Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000    For more information, see Form 8960 and Instructions for Form 8960. 1040 s Tax on unearned income of certain children. 1040 s   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. 1040 s This may happen if all of the following are true. 1040 s The child had more than $2,000 of unearned income. 1040 s The child is required to file a tax return. 1040 s The child was: Under age 18 at the end of 2013, Age 18 at the end of 2013 and did not have earned income that was more than half of the child's support, or A full-time student over age 18 and under age 24 at the end of 2013 and did not have earned income that was more than half of the child's support. 1040 s At least one of the child's parents was alive at the end of 2013. 1040 s The child does not file a joint return for 2013. 1040 s A child born on January 1, 1996, is considered to be age 18 at the end of 2013; a child born on January 1, 1995, is considered to be age 19 at the end of 2013; a child born on January 1, 1990, is considered to be age 24 at the end of 2013. 1040 s   If all of these statements are true, Form 8615 must be completed and attached to the child's tax return. 1040 s If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. 1040 s    However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. 1040 s Use Form 8814 for this purpose. 1040 s   For more information about the tax on unearned income of children and the parents' election, see Publication 929, Tax Rules for Children and Dependents. 1040 s Beneficiary of an estate or trust. 1040 s   Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income. 1040 s You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. 1040 s , from the fiduciary. 1040 s Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. 1040 s Social security number (SSN). 1040 s   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. 1040 s This includes payers of interest and dividends. 1040 s If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. 1040 s SSN for joint account. 1040 s   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. 1040 s (For information on who owns the funds in a joint account, see Joint accounts , later. 1040 s ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. 1040 s This is because only one name and SSN can be shown on Form 1099. 1040 s   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. 1040 s 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. 1040 s Custodian account for your child. 1040 s   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. 1040 s For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian. 1040 s Penalty for failure to supply SSN. 1040 s   You will be subject to a penalty if, when required, you fail to: Include your SSN on any return, statement, or other document, Give your SSN to another person who must include it on any return, statement, or other document, or Include the SSN of another person on any return, statement, or other document. 1040 s The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year. 1040 s   You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect. 1040 s   If you fail to supply an SSN, you may also be subject to backup withholding. 1040 s Backup withholding. 1040 s   Your investment income is generally not subject to regular withholding. 1040 s However, it may be subject to backup withholding to ensure that income tax is collected on the income. 1040 s Under backup withholding, the bank, broker, or other payer of interest, original issue discount (OID), dividends, cash patronage dividends, or royalties must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. 1040 s   Backup withholding applies if: You do not give the payer your identification number (either a social security number or an employer identification number) in the required manner, The IRS notifies the payer that you gave an incorrect identification number, The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you have underreported interest or dividends on your income tax return, or You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3). 1040 s Certification. 1040 s   For new accounts paying interest or dividends, you must certify under penalties of perjury that your SSN is correct and that you are not subject to backup withholding. 1040 s Your payer will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or similar form, to make this certification. 1040 s If you fail to make this certification, backup withholding may begin immediately on your new account or investment. 1040 s Underreported interest and dividends. 1040 s   You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that: You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return. 1040 s How to stop backup withholding due to underreporting. 1040 s   If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. 1040 s You must show that at least one of the following situations applies. 1040 s No underreporting occurred. 1040 s You have a bona fide dispute with the IRS about whether underreporting occurred. 1040 s Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future. 1040 s You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments. 1040 s   If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier. 1040 s How to stop backup withholding due to an incorrect identification number. 1040 s   If you have been notified by a payer that you are subject to backup withholding because you have provided an incorrect SSN or employer identification number, you can stop it by following the instructions the payer gives you. 1040 s Reporting backup withholding. 1040 s   If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. 1040 s The information return will show any backup withholding as “Federal income tax withheld. 1040 s ” Nonresident aliens. 1040 s    Generally, payments made to nonresident aliens are not subject to backup withholding. 1040 s You can use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to certify exempt status. 1040 s However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. 1040 s For information on the 30% rate, see Publication 519, U. 1040 s S. 1040 s Tax Guide for Aliens. 1040 s Penalties. 1040 s   There are civil and criminal penalties for giving false information to avoid backup withholding. 1040 s The civil penalty is $500. 1040 s The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both. 1040 s Where to report investment income. 1040 s   Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. 1040 s But see the rest of this publication for detailed information about reporting investment income. 1040 s Joint accounts. 1040 s   If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law. 1040 s Community property states. 1040 s   If you are married and receive a distribution that is community income, one-half of the distribution is generally considered to be received by each spouse. 1040 s If you file separate returns, you must each report one-half of any taxable distribution. 1040 s See Publication 555, Community Property, for more information on community income. 1040 s   If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions. 1040 s Example. 1040 s You and your spouse have a joint money market account. 1040 s Under state law, half the income from the account belongs to you, and half belongs to your spouse. 1040 s If you file separate returns, you each report half the income. 1040 s Income from property given to a child. 1040 s   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. 1040 s   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. 1040 s Savings account with parent as trustee. 1040 s   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. 1040 s The savings account legally belongs to the child. 1040 s The parents are not legally permitted to use any of the funds to support the child. 1040 s Table 1-1. 1040 s Where To Report Common Types of Investment Income (For detailed information about reporting investment income, see the rest of this publication, especially How To Report Interest Income and How To Report Dividend Income in chapter 1. 1040 s ) Type of Income If you file Form 1040, report on . 1040 s . 1040 s . 1040 s If you can file Form 1040A, report on . 1040 s . 1040 s . 1040 s If you can file Form 1040EZ, report on . 1040 s . 1040 s . 1040 s Tax-exempt interest (Form 1099-INT, box 8) Line 8b Line 8b Space to the left of line 2 (enter “TEI” and the amount) Taxable interest that totals $1,500 or less Line 8a (You may need to file Schedule B as well. 1040 s ) Line 8a (You may need to file Schedule B as well. 1040 s ) Line 2 Taxable interest that totals more than $1,500 Line 8a; also use Schedule B, line 1 Line 8a; also use Schedule B, line 1   Savings bond interest you will exclude because of higher education expenses Schedule B; also use Form 8815 Schedule B; also use Form 8815   Ordinary dividends that total $1,500 or less Line 9a (You may need to file Schedule B as well. 1040 s ) Line 9a (You may need to file Schedule B as well. 1040 s )   Ordinary dividends that total more than $1,500 Line 9a; also use Schedule B, line 5 Line 9a; also use Schedule B, line 5   Qualified dividends (if you do not have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2 Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2   Qualified dividends (if you have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, line 2 You cannot use Form 1040A    You cannot use Form 1040EZ Capital gain distributions (if you do not have to file Schedule D) Line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3 Line 10; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3   Capital gain distributions (if you have to file Schedule D) Schedule D, line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     Section 1250, 1202, or collectibles gain (Form 1099-DIV, box 2b, 2c, or 2d) Form 8949 and Schedule D     Nondividend distributions (Form 1099-DIV, box 3) Generally not reported*     Undistributed capital gains (Form 2439, boxes 1a - 1d) Schedule D     Gain or loss from sales of stocks or bonds Line 13; also use Form 8949, Schedule D, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet You cannot use Form 1040A   Gain or loss from exchanges of like-kind investment property Line 13; also use Schedule D, Form 8824, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     *Report any amounts in excess of your basis in your mutual fund shares on Form 8949. 1040 s Use Part II if you held the shares more than 1 year. 1040 s Use Part I if you held your mutual fund shares 1 year or less. 1040 s For details on Form 8949, see Reporting Capital Gains and Losses in chapter 4, and the Instructions for Form 8949. 1040 s Accuracy-related penalty. 1040 s   An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence or disregard of rules or regulations or substantial understatement of tax. 1040 s For information on the penalty and any interest that applies, see Penalties in chapter 2. 1040 s Interest Income This section discusses the tax treatment of different types of interest income. 1040 s In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable income. 1040 s (It does not have to be entered in your passbook. 1040 s ) Exceptions to this rule are discussed later. 1040 s Form 1099-INT. 1040 s   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. 1040 s This form shows you the interest you received during the year. 1040 s Keep this form for your records. 1040 s You do not have to attach it to your tax return. 1040 s   Report on your tax return the total interest income you receive for the tax year. 1040 s Interest not reported on Form 1099-INT. 1040 s   Even if you do not receive Form 1099-INT, you must still report all of your interest income. 1040 s For example, you may receive distributive shares of interest from partnerships or S corporations. 1040 s This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. 1040 s , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. 1040 s Nominees. 1040 s   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. 1040 s   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on Nominee distributions , later, under How To Report Interest Income. 1040 s Incorrect amount. 1040 s   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. 1040 s The new Form 1099-INT you receive will be marked “Corrected. 1040 s ” Form 1099-OID. 1040 s   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. 1040 s For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. 1040 s Exempt-interest dividends. 1040 s   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. 1040 s (However, see Information reporting requirement , next. 1040 s ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. 1040 s You do not reduce your basis for distributions that are exempt-interest dividends. 1040 s Information reporting requirement. 1040 s   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. 1040 s This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. 1040 s See How To Report Interest Income , later. 1040 s Note. 1040 s Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. 1040 s The exempt-interest dividends subject to the alternative minimum tax are shown in box 11 of Form 1099-DIV. 1040 s See Form 6251 and its instructions for more information about this tax. 1040 s Private activity bonds are discussed later under State or Local Government Obligations. 1040 s Interest on VA dividends. 1040 s   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. 1040 s This includes interest paid on dividends on converted United States Government Life Insurance policies and on National Service Life Insurance policies. 1040 s Individual retirement arrangements (IRAs). 1040 s   Interest on a Roth IRA generally is not taxable. 1040 s Interest on a traditional IRA is tax deferred. 1040 s You generally do not include it in your income until you make withdrawals from the IRA. 1040 s See Publication 590 for more information. 1040 s Taxable Interest — General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. 1040 s The following are some sources of taxable interest. 1040 s Dividends that are actually interest. 1040 s   Certain distributions commonly called dividends are actually interest. 1040 s 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. 1040 s  The “dividends” will be shown as interest income on Form 1099-INT. 1040 s Money market funds. 1040 s   Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokerage houses, and pay dividends. 1040 s Generally, amounts you receive from money market funds should be reported as dividends, not as interest. 1040 s Certificates of deposit and other deferred interest accounts. 1040 s   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. 1040 s 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. 1040 s The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. 1040 s If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. 1040 s Interest subject to penalty for early withdrawal. 1040 s   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. 1040 s You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. 1040 s See Penalty on early withdrawal of savings under How To Report Interest Income, later, for more information on how to report the interest and deduct the penalty. 1040 s Money borrowed to invest in certificate of deposit. 1040 s   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. 1040 s You must report the total interest you earn on the certificate in your income. 1040 s If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. 1040 s See Interest Expenses in chapter 3. 1040 s Example. 1040 s 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. 1040 s 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. 1040 s The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. 1040 s The bank also gives you a statement showing that you paid $310 interest for 2013. 1040 s You must include the $575 in your income. 1040 s If you itemize your deductions on Schedule A (Form 1040), Itemized Deductions, you can deduct $310, subject to the net investment income limit. 1040 s Gift for opening account. 1040 s   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. 1040 s   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. 1040 s For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. 1040 s The value is determined by the cost to the financial institution. 1040 s Example. 1040 s You open a savings account at your local bank and deposit $800. 1040 s The account earns $20 interest. 1040 s You also receive a $15 calculator. 1040 s 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. 1040 s You must report $35 interest income on your tax return. 1040 s Interest on insurance dividends. 1040 s   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. 1040 s 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. 1040 s Prepaid insurance premiums. 1040 s   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. 1040 s U. 1040 s S. 1040 s obligations. 1040 s   Interest on U. 1040 s S. 1040 s obligations, such as U. 1040 s S. 1040 s Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. 1040 s Interest on tax refunds. 1040 s   Interest you receive on tax refunds is taxable income. 1040 s Interest on condemnation award. 1040 s   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. 1040 s Installment sale payments. 1040 s   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. 1040 s That interest is taxable when you receive it. 1040 s If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. 1040 s See Unstated Interest and Original Issue Discount (OID) in Publication 537. 1040 s Interest on annuity contract. 1040 s   Accumulated interest on an annuity contract you sell before its maturity date is taxable. 1040 s Usurious interest. 1040 s   Usurious interest is interest charged at an illegal rate. 1040 s This is taxable as interest unless state law automatically changes it to a payment on the principal. 1040 s Interest income on frozen deposits. 1040 s   Exclude from your gross income interest on frozen deposits. 1040 s 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 in which the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. 1040 s   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). 1040 s 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 for information about reporting this interest income exclusion on your tax return. 1040 s   The interest you exclude is treated as credited to your account in the following year. 1040 s You must include it in income in the year you can withdraw it. 1040 s Example. 1040 s $100 of interest was credited on your frozen deposit during the year. 1040 s You withdrew $80 but could not withdraw any more as of the end of the year. 1040 s You must include $80 in your income and exclude $20 from your income for the year. 1040 s You must include the $20 in your income for the year you can withdraw it. 1040 s Bonds traded flat. 1040 s    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. 1040 s The defaulted or unpaid interest is not income and is not taxable as interest if paid later. 1040 s When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. 1040 s Interest that accrues after the date of purchase, however, is taxable interest income for the year received or accrued. 1040 s See Bonds Sold Between Interest Dates , later in this chapter. 1040 s Below-Market Loans If you make a below-market gift or demand loan, you must report as interest income any forgone interest (defined later) from that loan. 1040 s The below-market loan rules and exceptions are described in this section. 1040 s For more information, see section 7872 of the Internal Revenue Code and its regulations. 1040 s If you receive a below-market loan, you may be able to deduct the forgone interest as well as any interest you actually paid, but not if it is personal interest. 1040 s Loans subject to the rules. 1040 s   The rules for below-market loans apply to: Gift loans, Pay-related loans, Corporation-shareholder loans, Tax avoidance loans, and Certain loans made to qualified continuing care facilities under a continuing care contract. 1040 s A pay-related loan is any below-market loan between an employer and an employee or between an independent contractor and a person for whom the contractor provides services. 1040 s A tax avoidance loan is any below-market loan where the avoidance of federal tax is one of the main purposes of the interest arrangement. 1040 s Forgone interest. 1040 s   For any period, forgone interest is: The amount of interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. 1040 s Applicable federal rate. 1040 s   Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. 1040 s Some IRS offices have these bulletins available for research. 1040 s See chapter 5, How To Get Tax Help , for other ways to get this information. 1040 s Rules for below-market loans. 1040 s   The rules that apply to a below-market loan depend on whether the loan is a gift loan, demand loan, or term loan. 1040 s Gift and demand loans. 1040 s   A gift loan is any below-market loan where the forgone interest is in the nature of a gift. 1040 s   A demand loan is a loan payable in full at any time upon demand by the lender. 1040 s A demand loan is a below-market loan if no interest is charged or if interest is charged at a rate below the applicable federal rate. 1040 s   A demand loan or gift loan that is a below-market loan is generally treated as an arm's-length transaction in which the lender is treated as having made: A loan to the borrower in exchange for a note that requires the payment of interest at the applicable federal rate, and An additional payment to the borrower in an amount equal to the forgone interest. 1040 s The borrower is generally treated as transferring the additional payment back to the lender as interest. 1040 s The lender must report that amount as interest income. 1040 s   The lender's additional payment to the borrower is treated as a gift, dividend, contribution to capital, pay for services, or other payment, depending on the substance of the transaction. 1040 s The borrower may have to report this payment as taxable income, depending on its classification. 1040 s These transfers are considered to occur annually, generally on December 31. 1040 s Term loans. 1040 s   A term loan is any loan that is not a demand loan. 1040 s A term loan is a below-market loan if the amount of the loan is more than the present value of all payments due under the loan. 1040 s   A lender who makes a below-market term loan other than a gift loan is treated as transferring an additional lump-sum cash payment to the borrower (as a dividend, contribution to capital, etc. 1040 s ) on the date the loan is made. 1040 s The amount of this payment is the amount of the loan minus the present value, at the applicable federal rate, of all payments due under the loan. 1040 s An equal amount is treated as original issue discount (OID). 1040 s The lender must report the annual part of the OID as interest income. 1040 s The borrower may be able to deduct the OID as interest expense. 1040 s See Original Issue Discount (OID) , later. 1040 s Exceptions to the below-market loan rules. 1040 s   Exceptions to the below-market loan rules are discussed here. 1040 s Exception for loans of $10,000 or less. 1040 s   The rules for below-market loans do not apply to any day on which the total outstanding amount of loans between the borrower and lender is $10,000 or less. 1040 s This exception applies only to: Gift loans between individuals if the gift loan is not directly used to buy or carry income-producing assets, and Pay-related loans or corporation-shareholder loans if the avoidance of federal tax is not a principal purpose of the interest arrangement. 1040 s This exception does not apply to a term loan described in (2) earlier that previously has been subject to the below-market loan rules. 1040 s Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. 1040 s Exception for loans to continuing care facilities. 1040 s   Loans to qualified continuing care facilities under continuing care contracts are not subject to the rules for below-market loans for the calendar year if the lender or the lender's spouse is age 62 or older at the end of the year. 1040 s For the definitions of qualified continuing care facility and continuing care contract, see Internal Revenue Code section 7872(h). 1040 s Exception for loans without significant tax effect. 1040 s   Loans are excluded from the below-market loan rules if their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. 1040 s These loans include: Loans made available by the lender to the general public on the same terms and conditions that are consistent with the lender's customary business practice; Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public; Certain employee-relocation loans; Certain loans from a foreign person, unless the interest income would be effectively connected with the conduct of a U. 1040 s S. 1040 s trade or business and would not be exempt from U. 1040 s S. 1040 s tax under an income tax treaty; Gift loans to a charitable organization, contributions to which are deductible, if the total outstanding amount of loans between the organization and lender is $250,000 or less at all times during the tax year; and Other loans on which the interest arrangement can be shown to have no significant effect on the federal tax liability of the lender or the borrower. 1040 s For a loan described in (6) above, all the facts and circumstances are used to determine if the interest arrangement has a significant effect on the federal tax liability of the lender or borrower. 1040 s Some factors to be considered are: Whether items of income and deduction generated by the loan offset each other; The amount of these items; The cost to you of complying with the below-market loan rules, if they were to apply; and Any reasons other than taxes for structuring the transaction as a below-market loan. 1040 s If you structure a transaction to meet this exception and one of the principal purposes of that structure is the avoidance of federal tax, the loan will be considered a tax-avoidance loan, and this exception will not apply. 1040 s Limit on forgone interest for gift loans of $100,000 or less. 1040 s   For gift loans between individuals, if the outstanding loans between the lender and borrower total $100,000 or less, the forgone interest to be included in income by the lender and deducted by the borrower is limited to the amount of the borrower's net investment income for the year. 1040 s If the borrower's net investment income is $1,000 or less, it is treated as zero. 1040 s This limit does not apply to a loan if the avoidance of federal tax is one of the main purposes of the interest arrangement. 1040 s Effective dates. 1040 s    These rules apply to term loans made after June 6, 1984, and to demand loans outstanding after that date. 1040 s U. 1040 s S. 1040 s Savings Bonds This section provides tax information on U. 1040 s S. 1040 s savings bonds. 1040 s It explains how to report the interest income on these bonds and how to treat transfers of these bonds. 1040 s U. 1040 s S. 1040 s savings bonds currently offered to individuals include Series EE bonds and Series I bonds. 1040 s For other information on U. 1040 s S. 1040 s savings bonds, write to:  For Series HH/H: Bureau of the Fiscal Service Division of Customer Assistance P. 1040 s O. 1040 s Box 2186 Parkersburg, WV 26106-2186  For Series EE and I paper savings bonds: Bureau of the Fiscal Service Division of Customer Assistance P. 1040 s O. 1040 s Box 7012 Parkersburg, WV 26106-7012  For Series EE and I electronic bonds: Bureau of the Fiscal Service  Division of Customer Assistance P. 1040 s O. 1040 s Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. 1040 s treasurydirect. 1040 s gov/indiv/indiv. 1040 s htm. 1040 s Accrual method taxpayers. 1040 s   If you use an accrual method of accounting, you must report interest on U. 1040 s S. 1040 s savings bonds each year as it accrues. 1040 s You cannot postpone reporting interest until you receive it or until the bonds mature. 1040 s Cash method taxpayers. 1040 s   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. 1040 s S. 1040 s savings bonds when you receive it. 1040 s But see Reporting options for cash method taxpayers , later. 1040 s Series HH bonds. 1040 s   These bonds were issued at face value. 1040 s Interest is paid twice a year by direct deposit to your bank account. 1040 s If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. 1040 s   Series HH bonds were first offered in 1980 and last offered in August 2004. 1040 s Before 1980, series H bonds were issued. 1040 s Series H bonds are treated the same as series HH bonds. 1040 s If you are a cash method taxpayer, you must report the interest when you receive it. 1040 s   Series H bonds have a maturity period of 30 years. 1040 s Series HH bonds mature in 20 years. 1040 s The last series H bonds matured in 2009. 1040 s The last series HH bonds will mature in 2024. 1040 s Series EE and series I bonds. 1040 s   Interest on these bonds is payable when you redeem the bonds. 1040 s The difference between the purchase price and the redemption value is taxable interest. 1040 s Series EE bonds. 1040 s   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. 1040 s Before July 1980, series E bonds were issued. 1040 s 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. 1040 s Paper series EE and series E bonds are issued at a discount. 1040 s The face value is payable to you at maturity. 1040 s Electronic series EE bonds are issued at their face value. 1040 s The face value plus accrued interest is payable to you at maturity. 1040 s As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. 1040 s    Owners of paper series EE bonds can convert them to electronic bonds. 1040 s These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). 1040 s Series I bonds. 1040 s   Series I bonds were first offered in 1998. 1040 s These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. 1040 s The face value plus all accrued interest is payable to you at maturity. 1040 s Reporting options for cash method taxpayers. 1040 s   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. 1040 s Method 1. 1040 s Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. 1040 s (However, see Savings bonds traded , later. 1040 s )  Note. 1040 s Series EE bonds issued in 1983 matured in 2013. 1040 s If you have used method 1, you generally must report the interest on these bonds on your 2013 return. 1040 s The last series E bonds were issued in 1980 and matured in 2010. 1040 s If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. 1040 s Method 2. 1040 s Choose to report the increase in redemption value as interest each year. 1040 s  You must use the same method for all series EE, series E, and series I bonds you own. 1040 s If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. 1040 s If you plan to cash your bonds in the same year you will pay for higher educational expenses, you may want to use method 1 because you may be able to exclude the interest from your income. 1040 s To learn how, see Education Savings Bond Program, later. 1040 s Change from method 1. 1040 s   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. 1040 s In the year of change, you must report all interest accrued to date and not previously reported for all your bonds. 1040 s   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. 1040 s Change from method 2. 1040 s   To change from method 2 to method 1, you must request permission from the IRS. 1040 s Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. 1040 s You have typed or printed the following number at the top: “131. 1040 s ” It includes your name and social security number under “131. 1040 s ” It includes the year of change (both the beginning and ending dates). 1040 s It identifies the savings bonds for which you are requesting this change. 1040 s 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. 1040 s   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). 1040 s   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. 1040 s On the statement, type or print “Filed pursuant to section 301. 1040 s 9100-2. 1040 s ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). 1040 s    By the date you file the original statement with your return, you must also send a signed copy to the address below. 1040 s    Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. 1040 s O. 1040 s Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. 1040 s 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. 1040 s In that case, follow the form instructions for an automatic change. 1040 s No user fee is required. 1040 s Co-owners. 1040 s   If a U. 1040 s S. 1040 s 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. 1040 s One co-owner's funds used. 1040 s   If you used your funds to buy the bond, you must pay the tax on the interest. 1040 s This is true even if you let the other co-owner redeem the bond and keep all the proceeds. 1040 s 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. 1040 s The co-owner who redeemed the bond is a “nominee. 1040 s ” See Nominee distributions under How To Report Interest Income, later, for more information about how a person who is a nominee reports interest income belonging to another person. 1040 s Both co-owners' funds used. 1040 s   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. 1040 s Community property. 1040 s   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. 1040 s If you file separate returns, each of you generally must report one-half of the bond interest. 1040 s For more information about community property, see Publication 555. 1040 s Table 1-2. 1040 s   These rules are also shown in Table 1-2. 1040 s Child as only owner. 1040 s   Interest on U. 1040 s S. 1040 s savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. 1040 s If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year. 1040 s Choice to report interest each year. 1040 s   The choice to report the accrued interest each year can be made either by your child or by you for your child. 1040 s This choice is made by filing an income tax return that shows all the interest earned to date, and by stating on the return that your child chooses to report the interest each year. 1040 s Either you or your child should keep a copy of this return. 1040 s   Unless your child is otherwise required to file a tax return for any year after making this choice, your child does not have to file a return only to report the annual accrual of U. 1040 s S. 1040 s savings bond interest under this choice. 1040 s However, see Tax on unearned income of certain children , earlier, under General Information. 1040 s Neither you nor your child can change the way you report the interest unless you request permission from the IRS, as discussed earlier under Change from method 2 . 1040 s Ownership transferred. 1040 s   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. 1040 s But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. 1040 s   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. 1040 s Example. 1040 s You bought series EE bonds entirely with your own funds. 1040 s You did not choose to report the accrued interest each year. 1040 s Later, you transfer the bonds to your former spouse under a divorce agreement. 1040 s You must include the deferred accrued interest, from the date of the original issue of the bonds to the date of transfer, in your income in the year of transfer. 1040 s Your former spouse includes in income the interest on the bonds from the date of transfer to the date of redemption. 1040 s Table 1-2. 1040 s Who Pays the Tax on U. 1040 s S. 1040 s Savings Bond Interest IF . 1040 s . 1040 s . 1040 s THEN the interest must be reported by . 1040 s . 1040 s . 1040 s you buy a bond in your name and the name of another person as co-owners, using only your own funds you. 1040 s 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. 1040 s 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. 1040 s you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. 1040 s If you file separate returns, both you and your spouse generally report one-half of the interest. 1040 s Purchased jointly. 1040 s   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. 1040 s 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. 1040 s This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. 1040 s   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. 1040 s But the new co-owner will report only his or her share of the interest earned after the transfer. 1040 s   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. 1040 s Example 1. 1040 s You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. 1040 s The bond was issued to you and your spouse as co-owners. 1040 s You both postpone reporting interest on the bond. 1040 s You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. 1040 s At that time neither you nor your spouse has to report the interest earned to the date of reissue. 1040 s Example 2. 1040 s You bought a $1,000 series EE savings bond entirely with your own funds. 1040 s The bond was issued to you and your spouse as co-owners. 1040 s You both postponed reporting interest on the bond. 1040 s You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. 1040 s You must report half the interest earned to the date of reissue. 1040 s Transfer to a trust. 1040 s   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. 1040 s 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. 1040 s 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. 1040 s   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. 1040 s See Savings bonds traded , later. 1040 s Decedents. 1040 s   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. 1040 s Decedent who reported interest each year. 1040 s   If the bonds transferred because of death were owned by a person who used an accrual method, or who used the cash method and had chosen to report the interest each year, the interest earned in the year of death up to the date of death must be reported on that person's final return. 1040 s The person who acquires the bonds includes in income only interest earned after the date of death. 1040 s Decedent who postponed reporting interest. 1040 s   If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways. 1040 s The surviving spouse or personal representative (executor, administrator, etc. 1040 s ) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. 1040 s The person who acquires the bonds then includes in income only interest earned after the date of death. 1040 s If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. 1040 s All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. 1040 s If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. 1040 s In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate. 1040 s For more information on income in respect of a decedent, see Publication 559, Survivors, Executors, and Administrators. 1040 s Example 1. 1040 s Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. 1040 s He had bought the bond for $500 and had not chosen to report the interest each year. 1040 s At the date of death, interest of $200 had accrued on the bond, and its value of $700 was included in your uncle's estate. 1040 s Your uncle's executor chose not to include the $200 accrued interest in your uncle's final income tax return. 1040 s The $200 is income in respect of the decedent. 1040 s You are a cash method taxpayer and do not choose to report the interest each year as it is earned. 1040 s If you cash the bond when it reaches maturity value of $1,000, you report $500 interest income—the difference between maturity value of $1,000 and the original cost of $500. 1040 s For that year, you can deduct (as a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit) any federal estate tax paid because the $200 interest was included in your uncle's estate. 1040 s Example 2. 1040 s If, in Example 1 , the executor had chosen to include the $200 accrued interest in your uncle's final return, you would report only $300 as interest when you cashed the bond at maturity. 1040 s $300 is the interest earned after your uncle's death. 1040 s Example 3. 1040 s If, in Example 1 , you make or have made the choice to report the increase in redemption value as interest each year, you include in gross income for the year you acquire the bond all of the unreported increase in value of all series E, series EE, and series I bonds you hold, including the $200 on the bond you inherited from your uncle. 1040 s Example 4. 1040 s When your aunt died, she owned series HH bonds that she had acquired in a trade for series EE bonds. 1040 s You were the beneficiary of these bonds. 1040 s Your aunt used the cash method and did not choose to report the interest on the series EE bonds each year as it accrued. 1040 s Your aunt's executor chose not to include any interest earned before your aunt's death on her final return. 1040 s The income in respect of the decedent is the sum of the unreported interest on the series EE bonds and the interest, if any, payable on the series HH bonds but not received as of the date of your aunt's death. 1040 s You must report any interest received during the year as income on your return. 1040 s The part of the interest payable but not received before your aunt's death is income in respect of the decedent and may qualify for the estate tax deduction. 1040 s For information on when to report the interest on the series EE bonds traded, see Savings bonds traded , later. 1040 s Savings bonds distributed from a retirement or profit-sharing plan. 1040 s   If you acquire a U. 1040 s S. 1040 s savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond's redemption value (its cost plus the interest accrued before the distribution). 1040 s When you redeem the bond (whether in the year of distribution or later), your interest income includes only the interest accrued after the bond was distributed. 1040 s To figure the interest reported as a taxable distribution and your interest income when you redeem the bond, see Worksheet for savings bonds distributed from a retirement or profit-sharing plan under How To Report Interest Income, later. 1040 s Savings bonds traded. 1040 s   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. 1040 s (You cannot trade series I bonds for series HH bonds. 1040 s After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. 1040 s ) Any cash you received is income up to the amount of the interest earned on the bonds traded. 1040 s 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. 1040 s 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. 1040 s Example. 1040 s You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. 1040 s You reported the $223 as taxable income on your tax return. 1040 s At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. 1040 s You hold the series HH bonds until maturity, when you receive $2,500. 1040 s You must report $300 as interest income in the year of maturity. 1040 s This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). 1040 s (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. 1040 s ) Choice to report interest in year of trade. 1040 s   You could have chosen to treat all of the previously unreported accrued interest on series EE or series E bonds traded for series HH bonds as income in the year of the trade. 1040 s If you made this choice, it is treated as a change from method 1. 1040 s See Change from method 1 under Series EE and series I bonds, earlier. 1040 s Form 1099-INT for U. 1040 s S. 1040 s savings bond interest. 1040 s   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. 1040 s 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. 1040 s However, your Form 1099-INT may show more interest than you have to include on your income tax return. 1040 s For example, this may happen if any of the following are true. 1040 s You chose to report the increase in the redemption value of the bond each year. 1040 s The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. 1040 s You received the bond from a decedent. 1040 s 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. 1040 s Ownership of the bond was transferred. 1040 s The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. 1040 s You were named as a co-owner, and the other co-owner contributed funds to buy the bond. 1040 s The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. 1040 s (See Co-owners , earlier in this section, for more information about the reporting requirements. 1040 s ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. 1040 s 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. 1040 s (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 1040 s , for the year of distribution. 1040 s )   For more information on including the correct amount of interest on your return, see U. 1040 s S. 1040 s savings bond interest previously reported or Nominee distributions under How To Report Interest Income, later. 1040 s    Interest on U. 1040 s S. 1040 s savings bonds is exempt from state and local taxes. 1040 s The Form 1099-INT you receive will indicate the amount that is for U. 1040 s S. 1040 s savings bonds interest in box 3. 1040 s Do not include this income on your state or local income tax return. 1040 s 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. 1040 s S. 1040 s savings bonds during the year if you pay qualified higher educational expenses during the same year. 1040 s This exclusion is known as the Education Savings Bond Program. 1040 s You do not qualify for this exclusion if your filing status is married filing separately. 1040 s Form 8815. 1040 s   Use Form 8815 to figure your exclusion. 1040 s Attach the form to your Form 1040 or Form 1040A. 1040 s Qualified U. 1040 s S. 1040 s savings bonds. 1040 s   A qualified U. 1040 s S. 1040 s savings bond is a series EE bond issued after 1989 or a series I bond. 1040 s The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). 1040 s You must be at least 24 years old before the bond's issue date. 1040 s 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. 1040 s    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. 1040 s Beneficiary. 1040 s   You can designate any individual (including a child) as a beneficiary of the bond. 1040 s Verification by IRS. 1040 s   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of Treasury. 1040 s Qualified expenses. 1040 s   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. 1040 s   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. 1040 s For information about these programs, see Publication 970, Tax Benefits for Education. 1040 s   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. 1040 s Eligible educational institutions. 1040 s   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 Department of Education. 1040 s Reduction for certain benefits. 1040 s   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. 1040 s Tax-free part of scholarships and fellowships. 1040 s Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. 1040 s Expenses used to figure the tax-free portion of distributions from a qualified tuition program. 1040 s Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. 1040 s Any expense used in figuring the American Opportunity and lifetime learning credits. 1040 s For information about these benefits, see Publication 970. 1040 s Amount excludable. 1040 s   If the total proceeds (interest and principal) from the qualified U. 1040 s S. 1040 s 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. 1040 s If the proceeds are more than the expenses, you may be able to exclude only part of the interest. 1040 s   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. 1040 s The numer