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1040x 2011 Free File

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1040x 2011 Free File

1040x 2011 free file 3. 1040x 2011 free file   Claiming the Special Depreciation Allowance Table of Contents Introduction What Is Qualified Property?Qualified Reuse and Recycling Property Qualified Cellulosic Biofuel Plant Property Qualified Disaster Assistance Property Certain Qualified Property Acquired After December 31, 2007 Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance How Much Can You Deduct? How Can You Elect Not To Claim an Allowance? When Must You Recapture an Allowance? Introduction You can take a special depreciation allowance to recover part of the cost of qualified property (defined next), placed in service during the tax year. 1040x 2011 free file The allowance applies only for the first year you place the property in service. 1040x 2011 free file For qualified property placed in service in 2013, you can take an additional 50% special allowance. 1040x 2011 free file The allowance is an additional deduction you can take after any section 179 deduction and before you figure regular depreciation under MACRS for the year you place the property in service. 1040x 2011 free file This chapter explains what is qualified property. 1040x 2011 free file It also includes rules regarding how to figure an allowance, how to elect not to claim an allowance, and when you must recapture an allowance. 1040x 2011 free file Corporations can elect to accelerate certain minimum tax credits in lieu of claiming the special depreciation allowance for eligible qualified property. 1040x 2011 free file See Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance , later. 1040x 2011 free file See chapter 6 for information about getting publications and forms. 1040x 2011 free file What Is Qualified Property? Your property is qualified property if it is one of the following. 1040x 2011 free file Qualified reuse and recycling property. 1040x 2011 free file Qualified cellulosic biofuel plant property. 1040x 2011 free file Qualified disaster assistance property. 1040x 2011 free file Certain qualified property acquired after December 31, 2007. 1040x 2011 free file The following discussions provide information about the types of qualified property listed above for which you can take the special depreciation allowance. 1040x 2011 free file Qualified Reuse and Recycling Property You can take a 50% special depreciation allowance for qualified reuse and recycling property. 1040x 2011 free file Qualified reuse and recycling property is any machinery or equipment (not including buildings or real estate), along with any appurtenance, that is used exclusively to collect, distribute, or recycle qualified reuse and recyclable materials (as defined in section 168(m)(3)(B) of the Internal Revenue Code). 1040x 2011 free file Qualified reuse and recycling property also includes software necessary to operate such equipment. 1040x 2011 free file The property must meet the following requirements. 1040x 2011 free file The property must be depreciated under MACRS. 1040x 2011 free file The property must have a useful life of at least 5 years. 1040x 2011 free file The original use of the property must begin with you after August 31, 2008. 1040x 2011 free file You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after August 31, 2008, with no binding written contract for the acquisition in effect before September 1, 2008. 1040x 2011 free file The property must be placed in service for use in your trade or business after August 31, 2008. 1040x 2011 free file Excepted Property Qualified reuse and recycling property does not include any of the following. 1040x 2011 free file Any rolling stock or other equipment used to transport reuse or recyclable materials. 1040x 2011 free file Property required to be depreciated using the Alternative Depreciation System (ADS). 1040x 2011 free file For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . 1040x 2011 free file Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. 1040x 2011 free file Property for which you elected not to claim any special depreciation allowance (discussed later). 1040x 2011 free file Property placed in service and disposed of in the same tax year. 1040x 2011 free file Property converted from business use to personal use in the same tax year acquired. 1040x 2011 free file Property converted from personal use to business use in the same or later tax year may be qualified reuse and recycling property. 1040x 2011 free file Qualified Cellulosic Biofuel Plant Property You can take a 50% special depreciation allowance for qualified cellulosic biofuel plant property. 1040x 2011 free file Cellulosic biofuel is any liquid fuel which is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. 1040x 2011 free file Examples include bagasse (from sugar cane), corn stalks, and switchgrass. 1040x 2011 free file The property must meet the following requirements. 1040x 2011 free file The property is used in the United States solely to produce cellulosic biofuel. 1040x 2011 free file The original use of the property must begin with you after December 20, 2006. 1040x 2011 free file You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) after December 20, 2006, with no binding written contract for acquisition in effect before December 21, 2006. 1040x 2011 free file The property must be placed in service for use in your trade or business or for the production of income after October 3, 2008, and before January 3, 2013. 1040x 2011 free file Note. 1040x 2011 free file For property placed in service after January 2, 2013, and before January 1, 2014, you can take a 50% special depreciation allowance for qualified second generation biofuel plant property that is used solely in the United States to produce second generation biofuel (as defined in section 40(b)(6)(E)). 1040x 2011 free file The other requirements for qualified second generation biofuel plant property to be eligible for the special depreciation allowance are identical to the requirements discussed for Qualified Cellulosic Biofuel Plant Property above. 1040x 2011 free file Special Rules Sale-leaseback. 1040x 2011 free file   If you sold qualified cellulosic biofuel plant property you placed in service after October 3, 2008, and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. 1040x 2011 free file   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before December 21, 2006. 1040x 2011 free file Syndicated leasing transactions. 1040x 2011 free file   If qualified cellulosic biofuel plant property is originally placed in service by a lessor after October 3, 2008, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. 1040x 2011 free file   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. 1040x 2011 free file Excepted Property Qualified cellulosic biofuel plant property does not include any of the following. 1040x 2011 free file Property placed in service and disposed of in the same tax year. 1040x 2011 free file Property converted from business use to personal use in the same tax year it is acquired. 1040x 2011 free file Property converted from personal use to business use in the same or later tax year may be qualified cellulosic biomass ethanol plant property. 1040x 2011 free file Property required to be depreciated using the Alternative Depreciation System (ADS). 1040x 2011 free file For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . 1040x 2011 free file Property any portion of which is financed with the proceeds of any obligation the interest on which is exempt from tax under section 103 of the Internal Revenue Code. 1040x 2011 free file Property for which you elected not to claim any special depreciation allowance (discussed later). 1040x 2011 free file Property for which a deduction was taken under section 179C for certain qualified refinery property. 1040x 2011 free file Other bonus depreciation property to which section 168(k) of the Internal Revenue Code applies. 1040x 2011 free file Qualified Disaster Assistance Property You can take a 50% special depreciation allowance for qualified disaster assistance property placed in service in federally declared disaster areas in which the disaster occurred in 2009. 1040x 2011 free file A list of the federally declared disaster areas is available at the FEMA website at www. 1040x 2011 free file fema. 1040x 2011 free file gov. 1040x 2011 free file Your property is qualified disaster assistance property if it meets the following requirements. 1040x 2011 free file The property is nonresidential real property or residential real property placed in service before January 1, 2014, in a federally declared disaster area in which the disaster occurred in 2009. 1040x 2011 free file You must have acquired the property by purchase (as discussed under Property Acquired by Purchase in chapter 2 ) on or after the applicable disaster date, with no binding written contract for the acquisition in effect before the applicable disaster date. 1040x 2011 free file The property must rehabilitate property damaged, or replace property destroyed or condemned, as a result of the applicable federally declared disaster. 1040x 2011 free file The property must be similar in nature to, and located in the same county as, the rehabilitated or replaced property. 1040x 2011 free file The original use of the property within the applicable disaster area must have begun with you on or after the applicable disaster date. 1040x 2011 free file The property is placed in service by you on or before the date which is the last day of the fourth calendar year. 1040x 2011 free file Substantially all (80% or more) of the use of the property must be in the active conduct of your trade or business in a federally declared disaster area, occurring in 2009. 1040x 2011 free file It is not excepted property (explained later in Excepted Property ). 1040x 2011 free file Special Rules Sale-leaseback. 1040x 2011 free file   If you sold qualified disaster assistance property you placed in service after the applicable disaster date and leased it back within 3 months after you originally placed it in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. 1040x 2011 free file   The property will not qualify for the special allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before the applicable disaster date. 1040x 2011 free file Syndicated leasing transactions. 1040x 2011 free file   If qualified disaster assistance property is originally placed in service by a lessor after the applicable disaster date, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. 1040x 2011 free file   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of sale if the property is sold within 3 months after the final unit is placed in service and the period between the times the first and last units are placed in service does not exceed 12 months. 1040x 2011 free file Excepted Property Qualified disaster assistance property does not include any of the following. 1040x 2011 free file Property required to be depreciated using the Alternative Depreciation System (ADS). 1040x 2011 free file For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . 1040x 2011 free file Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103 of the Internal Revenue Code. 1040x 2011 free file Any qualified revitalization building (defined later) placed in service before January 1, 2010, for which you have elected to claim a commercial revitalization deduction for qualified revitalization expenditures. 1040x 2011 free file Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. 1040x 2011 free file Any property for which the special allowance under section 168(k) or section 1400N(d) of the Internal Revenue Code applies. 1040x 2011 free file Property for which you elected not to claim any special depreciation allowance (discussed later). 1040x 2011 free file Property placed in service and disposed of in the same tax year. 1040x 2011 free file Property converted from business use to personal use in the same tax year acquired. 1040x 2011 free file Property converted from personal use to business use in the same or later tax year may be qualified disaster assistance property. 1040x 2011 free file Any gambling or animal racing property (defined later). 1040x 2011 free file Qualified revitalization building. 1040x 2011 free file   This is a commercial building and its structural components that you placed in service in a renewal community before January 1, 2010. 1040x 2011 free file If the building is new, the original use of the building must begin with you. 1040x 2011 free file If the building is not new, you must substantially rehabilitate the building and then place it in service. 1040x 2011 free file For more information, including definitions of substantially rehabilitated building and qualified revitalization expenditure, see section 1400I(b) of the Internal Revenue Code. 1040x 2011 free file Gambling or animal racing property. 1040x 2011 free file   Gambling or animal racing property includes the following personal and real property. 1040x 2011 free file Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing. 1040x 2011 free file Any real property determined by square footage (other than any portion that is less than 100 square feet) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing. 1040x 2011 free file Certain Qualified Property Acquired After December 31, 2007 You can take a 50% special depreciation deduction allowance for certain qualified property acquired after December 31, 2007. 1040x 2011 free file Your property is qualified property if it meets the following requirements. 1040x 2011 free file It is one of the following types of property. 1040x 2011 free file Tangible property depreciated under MACRS with a recovery period of 20 years or less. 1040x 2011 free file Water utility property. 1040x 2011 free file Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. 1040x 2011 free file (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. 1040x 2011 free file ) Qualified leasehold improvement property (defined under Qualified leasehold improvement property later). 1040x 2011 free file You must have acquired the property after December 31, 2007, with no binding written contract for the acquisition in effect before January 1, 2008. 1040x 2011 free file The property must be placed in service for use in your trade or business or for the production of income before January 1, 2014 (before January 1, 2015, for certain property with a long production period and certain aircraft (defined next)). 1040x 2011 free file The original use of the property must begin with you after December 31, 2007. 1040x 2011 free file It is not excepted property (explained later in Excepted property). 1040x 2011 free file Qualified leasehold improvement property. 1040x 2011 free file    Generally, this is any improvement to an interior part of a building that is nonresidential real property, if all the following requirements are met. 1040x 2011 free file The improvement is made under or according to a lease by the lessee (or any sublessee) or the lessor of that part of the building. 1040x 2011 free file That part of the building is to be occupied exclusively by the lessee (or any sublessee) of that part. 1040x 2011 free file The improvement is placed in service more than 3 years after the date the building was first placed in service by any person. 1040x 2011 free file The improvement is section 1250 property. 1040x 2011 free file See chapter 3 in Publication 544, Sales and Other Dispositions of Assets, for the definition of section 1250 property. 1040x 2011 free file   However, a qualified leasehold improvement does not include any improvement for which the expenditure is attributable to any of the following. 1040x 2011 free file The enlargement of the building. 1040x 2011 free file Any elevator or escalator. 1040x 2011 free file Any structural component benefiting a common area. 1040x 2011 free file The internal structural framework of the building. 1040x 2011 free file   Generally, a binding commitment to enter into a lease is treated as a lease and the parties to the commitment are treated as the lessor and lessee. 1040x 2011 free file However, a lease between related persons is not treated as a lease. 1040x 2011 free file Related persons. 1040x 2011 free file   For this purpose, the following are related persons. 1040x 2011 free file Members of an affiliated group. 1040x 2011 free file An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. 1040x 2011 free file A corporation and an individual who directly or indirectly owns 80% or more of the value of the outstanding stock of that corporation. 1040x 2011 free file Two corporations that are members of the same controlled group. 1040x 2011 free file A trust fiduciary and a corporation if 80% or more of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. 1040x 2011 free file The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 1040x 2011 free file The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. 1040x 2011 free file A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. 1040x 2011 free file Two S corporations, and an S corporation and a regular corporation, if the same persons own 80% or more of the value of the outstanding stock of each corporation. 1040x 2011 free file A corporation and a partnership if the same persons own both of the following. 1040x 2011 free file 80% or more of the value of the outstanding stock of the corporation. 1040x 2011 free file 80% or more of the capital or profits interest in the partnership. 1040x 2011 free file The executor and beneficiary of any estate. 1040x 2011 free file Long Production Period Property To be qualified property, long production period property must meet the following requirements. 1040x 2011 free file It must meet the requirements in (2)-(5), above. 1040x 2011 free file The property has a recovery period of at least 10 years or is transportation property. 1040x 2011 free file Transportation property is tangible personal property used in the trade or business of transporting persons or property. 1040x 2011 free file The property is subject to section 263A of the Internal Revenue Code. 1040x 2011 free file The property has an estimated production period exceeding 1 year and an estimated production cost exceeding $1,000,000. 1040x 2011 free file Noncommercial Aircraft To be qualified property, noncommercial aircraft must meet the following requirements. 1040x 2011 free file It must meet the requirements in (2)-(5), above. 1040x 2011 free file The aircraft must not be tangible personal property used in the trade or business of transporting persons or property (except for agricultural or firefighting purposes). 1040x 2011 free file The aircraft must be purchased (as discussed under Property Acquired by Purchase in chapter 2 ) by a purchaser who at the time of the contract for purchase, makes a nonrefundable deposit of the lesser of 10% of the cost or $100,000. 1040x 2011 free file The aircraft must have an estimated production period exceeding four months and a cost exceeding $200,000. 1040x 2011 free file Special Rules Sale-leaseback. 1040x 2011 free file   If you sold qualified property you placed in service after December 31, 2007, and leased it back within 3 months after you originally placed in service, the property is treated as originally placed in service no earlier than the date it is used by you under the leaseback. 1040x 2011 free file   The property will not qualify for the special depreciation allowance if the lessee or a related person to the lessee or lessor had a written binding contract in effect for the acquisition of the property before January 1, 2008. 1040x 2011 free file Syndicated leasing transactions. 1040x 2011 free file   If qualified property is originally placed in service by a lessor after December 31, 2007, the property is sold within 3 months of the date it was placed in service, and the user of the property does not change, then the property is treated as originally placed in service by the taxpayer no earlier than the date of the last sale. 1040x 2011 free file   Multiple units of property subject to the same lease will be treated as originally placed in service no earlier than the date of the last sale if the property is sold within 3 months after the final unit is placed in service and the period between the time the first and last units are placed in service does not exceed 12 months. 1040x 2011 free file Excepted Property Qualified property does not include any of the following. 1040x 2011 free file Property placed in service and disposed of in the same tax year. 1040x 2011 free file Property converted from business use to personal use in the same tax year acquired. 1040x 2011 free file Property converted from personal use to business use in the same or later tax year may be qualified property. 1040x 2011 free file Property required to be depreciated under the Alternative Depreciation System (ADS). 1040x 2011 free file This includes listed property used 50% or less in a qualified business use. 1040x 2011 free file For other property required to be depreciated using ADS, see Required use of ADS under Which Depreciation System (GDS or ADS) Applies , in chapter 4 . 1040x 2011 free file Qualified restaurant property (as defined in section 168(e)(7) of the Internal Revenue Code). 1040x 2011 free file Qualified retail improvement property (as defined in section 168(e)(8) of the Internal Revenue Code). 1040x 2011 free file Property for which you elected not to claim any special depreciation allowance (discussed later). 1040x 2011 free file Property for which you elected to accelerate certain credits in lieu of the special depreciation allowance (discussed next). 1040x 2011 free file Election to Accelerate Certain Credits in Lieu of the Special Depreciation Allowance An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 2 extension property (as defined in section 168(k)(4)(I)(iv)), unless the corporation made an election not to apply the section 168(k)(4) election to round 2 extension property for its first tax year ending after December 31, 2010. 1040x 2011 free file For 2013, round 2 extension property generally is long production period and noncommercial aircraft if acquired after March 31, 2008, and placed in service after December 31, 2012, but before January 1, 2014. 1040x 2011 free file An election made by a corporation to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, continues to apply to round 3 extension property (as defined in section 168(k)(4)(J)(iv)), unless the corporation makes an election not to apply the section 168(k)(4) election to round 3 extension property. 1040x 2011 free file If a corporation did not make a section 168(k)(4) election for either its first tax year ending after March 31, 2008, its first tax year ending after December 31, 2008, or its first tax year ending after December 31, 2010, the corporation may elect for its first tax year ending after December 31, 2012, to claim pre-2006 unused minimum tax credits in lieu of claiming the special depreciation allowance for only round 3 extension property. 1040x 2011 free file If you make an election to accelerate these credits in lieu of claiming the special depreciation allowance for eligible property, you must not take the 50% special depreciation allowance for the property and must depreciate the basis in the property under MACRS using the straight line method. 1040x 2011 free file See Which Depreciation Method Applies in chapter 4 . 1040x 2011 free file Once made, the election cannot be revoked without IRS consent. 1040x 2011 free file Additional guidance. 1040x 2011 free file   For additional guidance on the election to accelerate the research or minimum tax credit in lieu of claiming the special depreciation allowance, see Rev. 1040x 2011 free file Proc. 1040x 2011 free file 2008-65 on page 1082 of Internal Revenue Bulletin 2008-44, available at www. 1040x 2011 free file irs. 1040x 2011 free file gov/pub/irs-irbs/irb08-44. 1040x 2011 free file pdf, Rev. 1040x 2011 free file Proc. 1040x 2011 free file 2009-16 on page 449 of Internal Revenue Bulletin 2009-06, available at www. 1040x 2011 free file irs. 1040x 2011 free file gov/pub/irs-irbs/irb09-06. 1040x 2011 free file pdf, and Rev. 1040x 2011 free file Proc. 1040x 2011 free file 2009-33 on page 150 of Internal Revenue Bulletin 2009-29, available at www. 1040x 2011 free file irs. 1040x 2011 free file gov/pub/irs-irbs/irb09-29. 1040x 2011 free file pdf. 1040x 2011 free file Also, see Form 3800, General Business Credit; Form 8827, Credit for Prior Year Minimum Tax — Corporations; and related instructions. 1040x 2011 free file   Additional guidance regarding the election to accelerate the minimum tax credit in lieu of claiming the special depreciation allowance for round 2 extension property and round 3 extension property may also be available in later Internal Revenue Bulletins available at www. 1040x 2011 free file irs. 1040x 2011 free file gov/irb. 1040x 2011 free file How Much Can You Deduct? Figure the special depreciation allowance by multiplying the depreciable basis of qualified reuse and recycling property, qualified cellulosic biofuel plant property, qualified disaster assistance property, and certain qualified property acquired after December 31, 2007, by 50%. 1040x 2011 free file For qualified property other than listed property, enter the special allowance on line 14 in Part II of Form 4562. 1040x 2011 free file For qualified property that is listed property, enter the special allowance on line 25 in Part V of Form 4562. 1040x 2011 free file If you place qualified property in service in a short tax year, you can take the full amount of a special depreciation allowance. 1040x 2011 free file Depreciable basis. 1040x 2011 free file   This is the property's cost or other basis multiplied by the percentage of business/investment use, reduced by the total amount of any credits and deductions allocable to the property. 1040x 2011 free file   The following are examples of some credits and deductions that reduce depreciable basis. 1040x 2011 free file Any section 179 deduction. 1040x 2011 free file Any deduction for removal of barriers to the disabled and the elderly. 1040x 2011 free file Any disabled access credit, enhanced oil recovery credit, and credit for employer-provided childcare facilities and services. 1040x 2011 free file Basis adjustment to investment credit property under section 50(c) of the Internal Revenue Code. 1040x 2011 free file   For additional credits and deductions that affect basis, see section 1016 of the Internal Revenue Code. 1040x 2011 free file   For information about how to determine the cost or other basis of property, see What Is the Basis of Your Depreciable Property in chapter 1 . 1040x 2011 free file For a discussion of business/investment use, see Partial business or investment use under Property Used in Your Business or Income-Producing Activity in chapter 1 . 1040x 2011 free file Depreciating the remaining cost. 1040x 2011 free file   After you figure your special depreciation allowance for your qualified property, you can use the remaining cost to figure your regular MACRS depreciation deduction (discussed in chapter 4 . 1040x 2011 free file Therefore, you must reduce the depreciable basis of the property by the special depreciation allowance before figuring your regular MACRS depreciation deduction. 1040x 2011 free file Example. 1040x 2011 free file On November 1, 2013, Tom Brown bought and placed in service in his business qualified property that cost $450,000. 1040x 2011 free file He did not elect to claim a section 179 deduction. 1040x 2011 free file He deducts 50% of the cost ($225,000) as a special depreciation allowance for 2013. 1040x 2011 free file He uses the remaining $225,000 of cost to figure his regular MACRS depreciation deduction for 2013 and later years. 1040x 2011 free file Like-kind exchanges and involuntary conversions. 1040x 2011 free file   If you acquire qualified property in a like-kind exchange or involuntary conversion, the carryover basis of the acquired property is eligible for a special depreciation allowance. 1040x 2011 free file After you figure your special allowance, you can use the remaining carryover basis to figure your regular MACRS depreciation deduction. 1040x 2011 free file In the year you claim the allowance (the year you place in service the property received in the exchange or dispose of involuntarily converted property), you must reduce the carryover basis of the property by the allowance before figuring your regular MACRS depreciation deduction. 1040x 2011 free file See Figuring the Deduction for Property Acquired in a Nontaxable Exchange , in chapter 4 under How Is the Depreciation Deduction Figured . 1040x 2011 free file The excess basis (the part of the acquired property's basis that exceeds its carryover basis) is also eligible for a special depreciation allowance. 1040x 2011 free file How Can You Elect Not To Claim an Allowance? You can elect, for any class of property, not to deduct any special allowances for all property in such class placed in service during the tax year. 1040x 2011 free file To make an election, attach a statement to your return indicating what election you are making and the class of property for which you are making the election. 1040x 2011 free file When to make election. 1040x 2011 free file   Generally, you must make the election on a timely filed tax return (including extensions) for the year in which you place the property in service. 1040x 2011 free file   However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the original return (not including extensions). 1040x 2011 free file Attach the election statement to the amended return. 1040x 2011 free file On the amended return, write “Filed pursuant to section 301. 1040x 2011 free file 9100-2. 1040x 2011 free file ” Revoking an election. 1040x 2011 free file   Once you elect not to deduct a special depreciation allowance for a class of property, you cannot revoke the election without IRS consent. 1040x 2011 free file A request to revoke the election is a request for a letter ruling. 1040x 2011 free file If you elect not to have any special allowance apply, the property may be subject to an alternative minimum tax adjustment for depreciation. 1040x 2011 free file When Must You Recapture an Allowance? When you dispose of property for which you claimed a special depreciation allowance, any gain on the disposition is generally recaptured (included in income) as ordinary income up to the amount of the special depreciation allowance previously allowed or allowable. 1040x 2011 free file See When Do You Recapture MACRS Depreciation in chapter 4 or more information. 1040x 2011 free file Recapture of allowance deducted for qualified GO Zone property. 1040x 2011 free file   If, in any year after the year you claim the special depreciation allowance for qualified GO Zone property (including specified GO Zone extension property), the property ceases to be used in the GO Zone, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. 1040x 2011 free file For additional guidance, see Notice 2008-25 on page 484 of Internal Revenue Bulletin 2008-9. 1040x 2011 free file Qualified cellulosic biomass ethanol plant property and qualified cellulosic biofuel plant property. 1040x 2011 free file   If, in any year after the year you claim the special depreciation allowance for any qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, the property ceases to be qualified cellulosic biomass ethanol plant property or qualified biofuel plant property, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. 1040x 2011 free file Recapture of allowance for qualified Recovery Assistance property. 1040x 2011 free file   If, in any year after the year you claim the special depreciation allowance for qualified Recovery Assistance property, the property ceases to be used in the Kansas disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. 1040x 2011 free file For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. 1040x 2011 free file Recapture of allowance for qualified disaster assistance property. 1040x 2011 free file   If, in any year after the year you claim the special depreciation allowance for qualified disaster assistance property, the property ceases to be used in the applicable disaster area, you may have to recapture as ordinary income the excess benefit you received from claiming the special depreciation allowance. 1040x 2011 free file   For additional guidance, see Notice 2008-67 on page 307 of Internal Revenue Bulletin 2008-32. 1040x 2011 free file Prev  Up  Next   Home   More Online Publications
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Tax Relief for Victims of Freedom and Noble Wildfires in Oklahoma

OK-2012-09, Aug. 23, 2012

Updated 9/27/2012 to include Noble Wildfire and include Cleveland County.

OKLAHOMA CITY — Victims of the Freedom and Noble Wildfires that began on Aug. 3, 2012, in parts of Oklahoma may qualify for tax relief from the Internal Revenue Service.

The President has declared Creek and Cleveland counties a federal disaster area. Individuals who reside or have a business in these counties may qualify for tax relief.

The declaration permits the IRS to postpone certain deadlines for taxpayers who reside or have a business in the disaster area. For instance, certain deadlines falling on or after Aug. 3, and on or before Oct. 2, have been postponed to Oct. 2, 2012. This includes the quarterly estimated tax payment due on Sept. 17, 2012.

In addition, the IRS is waiving the failure-to-deposit penalties for employment and excise tax deposits due on or after Aug. 3, and on or before Aug. 20, as long as the deposits are made by Aug. 20, 2012.

If an affected taxpayer receives a penalty notice from the IRS, the taxpayer should call the telephone number on the notice to have the IRS abate any interest and any late filing or late payment penalties that would otherwise apply. Penalties or interest will be abated only for taxpayers who have an original or extended filing, payment or deposit due date, including an extended filing or payment due date, that falls within the postponement period.

The IRS automatically identifies taxpayers located in the covered disaster area and applies automatic filing and payment relief. But affected taxpayers who reside or have a business located outside the covered disaster area must call the IRS disaster hotline at 1-866-562-5227 to request this tax relief.

Covered Disaster Area

The counties listed above constitute a covered disaster area for purposes of Treas. Reg. § 301.7508A-1(d)(2) and is entitled to the relief detailed below.

Affected Taxpayers

Taxpayers considered to be affected taxpayers eligible for the postponement of time to file returns, pay taxes and perform other time-sensitive acts are those taxpayers listed in Treas. Reg. § 301.7508A-1(d)(1), and include individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Taxpayers not in the covered disaster area, but whose records necessary to meet a deadline listed in Treas. Reg. § 301.7508A-1(c) are in the covered disaster area, are also entitled to relief. In addition, all relief workers affiliated with a recognized government or philanthropic organization assisting in the relief activities in the covered disaster area and any individual visiting the covered disaster area who was killed or injured as a result of the disaster are entitled to relief.

Grant of Relief

Under section 7508A, the IRS gives affected taxpayers until Oct. 2 to file most tax returns (including individual, corporate, and estate and trust income tax returns; partnership returns, S corporation returns, and trust returns; estate, gift, and generation-skipping transfer tax returns; and employment and certain excise tax returns), or to make tax payments, including estimated tax payments, that have either an original or extended due date occurring on or after Aug. 3 and on or before Oct. 2.

The IRS also gives affected taxpayers until Oct. 2 to perform other time-sensitive actions described in Treas. Reg. § 301.7508A-1(c)(1) and Rev. Proc. 2007-56, 2007-34 I.R.B. 388 (Aug. 20, 2007), that are due to be performed on or after Aug. 3 and on or before Oct. 2.

This relief also includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56. The relief described in section 17 of Rev. Proc. 2007-56, pertaining to like-kind exchanges of property, also applies to certain taxpayers who are not otherwise affected taxpayers and may include acts required to be performed before or after the period above.

The postponement of time to file and pay does not apply to information returns in the W-2, 1098, 1099 series, or to Forms 1042-S or 8027. Penalties for failure to timely file information returns can be waived under existing procedures for reasonable cause. Likewise, the postponement does not apply to employment and excise tax deposits. The IRS, however, will abate penalties for failure to make timely employment and excise tax deposits due on or after Aug. 3 and on or before Aug. 20 provided the taxpayer makes these deposits by Aug. 20.

Casualty Losses

Affected taxpayers in a federally declared disaster area have the option of claiming disaster-related casualty losses on their federal income tax return for either this year or last year. Claiming the loss on an original or amended return for last year will get the taxpayer an earlier refund, but waiting to claim the loss on this year’s return could result in a greater tax saving, depending on other income factors.

Individuals may deduct personal property losses that are not covered by insurance or other reimbursements. For details, see Form 4684 and its instructions.

Affected taxpayers claiming the disaster loss on last year’s return should put the Disaster Designation “OKLAHOMA/FREEDOM WILDFIRE” or "OKLAHOMA/NOBLE WILDFIRE" at the top of the form so that the IRS can expedite the processing of the refund.

Other Relief

The IRS will waive the usual fees and expedite requests for copies of previously filed tax returns for affected taxpayers. Taxpayers should put the assigned Disaster Designation in red ink at the top of Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, as appropriate, and submit it to the IRS.

Affected taxpayers who are contacted by the IRS on a collection or examination matter should explain how the disaster impacts them so that the IRS can provide appropriate consideration to their case.

Taxpayers may download forms and publications from the official IRS website, IRS.gov, or order them by calling 1-800-TAX-FORM (1-800-829-3676). The IRS toll-free number for general tax questions is 1-800-829-1040.

Page Last Reviewed or Updated: 14-Aug-2013

The 1040x 2011 Free File

1040x 2011 free file 36. 1040x 2011 free file   Earned Income Credit (EIC) Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Do You Qualify for the Credit?If Improper Claim Made in Prior Year Part A. 1040x 2011 free file Rules for EveryoneRule 1. 1040x 2011 free file Your AGI Must Be Less Than: Rule 2. 1040x 2011 free file You Must Have a Valid Social Security Number (SSN) Rule 3. 1040x 2011 free file Your Filing Status Cannot Be Married Filing Separately Rule 4. 1040x 2011 free file You Must Be a U. 1040x 2011 free file S. 1040x 2011 free file Citizen or Resident Alien All Year Rule 5. 1040x 2011 free file You Cannot File Form 2555 or Form 2555-EZ Rule 6. 1040x 2011 free file Your Investment Income Must Be $3,300 or Less Rule 7. 1040x 2011 free file You Must Have Earned Income Part B. 1040x 2011 free file Rules If You Have a Qualifying ChildRule 8. 1040x 2011 free file Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9. 1040x 2011 free file Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Rule 10. 1040x 2011 free file You Cannot Be a Qualifying Child of Another Taxpayer Part C. 1040x 2011 free file Rules If You Do Not Have a Qualifying ChildRule 11. 1040x 2011 free file You Must Be at Least Age 25 but Under Age 65 Rule 12. 1040x 2011 free file You Cannot Be the Dependent of Another Person Rule 13. 1040x 2011 free file You Cannot Be a Qualifying Child of Another Taxpayer Rule 14. 1040x 2011 free file You Must Have Lived in the United States More Than Half of the Year Part D. 1040x 2011 free file Figuring and Claiming the EICRule 15. 1040x 2011 free file Your Earned Income Must Be Less Than: IRS Will Figure the EIC for You How To Figure the EIC Yourself ExamplesExample 1. 1040x 2011 free file John and Janet Smith (Form 1040A) Example 2. 1040x 2011 free file Kelly Green (Form 1040EZ) What's New Earned income amount is more. 1040x 2011 free file  The maximum amount of income you can earn and still get the credit has increased. 1040x 2011 free file You may be able to take the credit if: You have three or more qualifying children and you earned less than $46,227 ($51,567 if married filing jointly), You have two qualifying children and you earned less than $43,038 ($48,378 if married filing jointly), You have one qualifying child and you earned less than $37,870 ($43,210 if married filing jointly), or You do not have a qualifying child and you earned less than $14,340 ($19,680 if married filing jointly). 1040x 2011 free file Your adjusted gross income also must be less than the amount in the above list that applies to you. 1040x 2011 free file For details, see Rules 1 and 15. 1040x 2011 free file Investment income amount is more. 1040x 2011 free file  The maximum amount of investment income you can have and still get the credit has increased to $3,300. 1040x 2011 free file See Rule 6. 1040x 2011 free file Reminders Increased EIC on certain joint returns. 1040x 2011 free file  A married person filing a joint return may get more EIC than someone with the same income but a different filing status. 1040x 2011 free file As a result, the EIC table has different columns for married persons filing jointly than for everyone else. 1040x 2011 free file When you look up your EIC in the EIC Table, be sure to use the correct column for your filing status and the number of children you have. 1040x 2011 free file Online help. 1040x 2011 free file  You can use the EITC Assistant at www. 1040x 2011 free file irs. 1040x 2011 free file gov/eitc to find out if you are eligible for the credit. 1040x 2011 free file The EITC Assistant is available in English and Spanish. 1040x 2011 free file EIC questioned by IRS. 1040x 2011 free file  The IRS may ask you to provide documents to prove you are entitled to claim the EIC. 1040x 2011 free file We will tell you what documents to send us. 1040x 2011 free file These may include: birth certificates, school records, medical records, etc. 1040x 2011 free file The process of establishing your eligibility will delay your refund. 1040x 2011 free file Introduction The earned income credit (EIC) is a tax credit for certain people who work and have less than $51,567 of earned income. 1040x 2011 free file A tax credit usually means more money in your pocket. 1040x 2011 free file It reduces the amount of tax you owe. 1040x 2011 free file The EIC may also give you a refund. 1040x 2011 free file How do you get the earned income credit?   To claim the EIC, you must: Qualify by meeting certain rules, and File a tax return, even if you: Do not owe any tax, Did not earn enough money to file a return, or Did not have income taxes withheld from your pay. 1040x 2011 free file When you complete your return, you can figure your EIC by using a worksheet in the instructions for Form 1040, Form 1040A, or Form 1040EZ. 1040x 2011 free file Or, if you prefer, you can let the IRS figure the credit for you. 1040x 2011 free file How will this chapter help you?   This chapter will explain the following. 1040x 2011 free file The rules you must meet to qualify for the EIC. 1040x 2011 free file How to figure the EIC. 1040x 2011 free file Useful Items - You may want to see: Publication 596 Earned Income Credit (EIC) Form (and Instructions) Schedule EIC Earned Income Credit (Qualifying Child Information) 8862 Information To Claim Earned Income Credit After Disallowance Do You Qualify for the Credit? To qualify to claim the EIC, you must first meet all of the rules explained in Part A, Rules for Everyone . 1040x 2011 free file Then you must meet the rules in Part B, Rules If You Have a Qualifying Child , or Part C, Rules If You Do Not Have a Qualifying Child . 1040x 2011 free file There is one final rule you must meet in Part D, Figuring and Claiming the EIC . 1040x 2011 free file You qualify for the credit if you meet all the rules in each part that applies to you. 1040x 2011 free file If you have a qualifying child, the rules in Parts A, B, and D apply to you. 1040x 2011 free file If you do not have a qualifying child, the rules in Parts A, C, and D apply to you. 1040x 2011 free file Table 36-1, Earned Income Credit in a Nutshell. 1040x 2011 free file   Use Table 36–1 as a guide to Parts A, B, C, and D. 1040x 2011 free file The table is a summary of all the rules in each part. 1040x 2011 free file Do you have a qualifying child?   You have a qualifying child only if you have a child who meets the four tests described in Rule 8 and illustrated in Figure 36–1. 1040x 2011 free file If Improper Claim Made in Prior Year If your EIC for any year after 1996 was denied or reduced for any reason other than a math or clerical error, you must attach a completed Form 8862 to your next tax return to claim the EIC. 1040x 2011 free file You must also qualify to claim the EIC by meeting all the rules described in this chapter. 1040x 2011 free file However, if your EIC was denied or reduced as a result of a math or clerical error, do not attach Form 8862 to your next tax return. 1040x 2011 free file For example, if your arithmetic is incorrect, the IRS can correct it. 1040x 2011 free file If you do not provide a correct social security number, the IRS can deny the EIC. 1040x 2011 free file These kinds of errors are called math or clerical errors. 1040x 2011 free file If your EIC for any year after 1996 was denied and it was determined that your error was due to reckless or intentional disregard of the EIC rules, then you cannot claim the EIC for the next 2 years. 1040x 2011 free file If your error was due to fraud, then you cannot claim the EIC for the next 10 years. 1040x 2011 free file More information. 1040x 2011 free file   See chapter 5 in Publication 596 for more detailed information about the disallowance period and Form 8862. 1040x 2011 free file Part A. 1040x 2011 free file Rules for Everyone This part of the chapter discusses Rules 1 through 7. 1040x 2011 free file You must meet all seven rules to qualify for the earned income credit. 1040x 2011 free file If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the chapter. 1040x 2011 free file If you meet all seven rules in this part, then read either Part B or Part C (whichever applies) for more rules you must meet. 1040x 2011 free file Rule 1. 1040x 2011 free file Your AGI Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040x 2011 free file Adjusted gross income (AGI). 1040x 2011 free file   AGI is the amount on line 38 (Form 1040), line 22 (Form 1040A), or line 4 (Form 1040EZ). 1040x 2011 free file If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. 1040x 2011 free file Example. 1040x 2011 free file Your AGI is $38,550, you are single, and you have one qualifying child. 1040x 2011 free file You cannot claim the EIC because your AGI is not less than $37,870. 1040x 2011 free file However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. 1040x 2011 free file Community property. 1040x 2011 free file   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. 1040x 2011 free file This is different from the community property rules that apply under Rule 7 . 1040x 2011 free file Rule 2. 1040x 2011 free file You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). 1040x 2011 free file Any qualifying child listed on Schedule EIC also must have a valid SSN. 1040x 2011 free file (See Rule 8 if you have a qualifying child. 1040x 2011 free file ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. 1040x 2011 free file An example of a federally funded benefit is Medicaid. 1040x 2011 free file If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. 1040x 2011 free file S. 1040x 2011 free file citizen or permanent resident, ask the SSA for a new social security card without the legend. 1040x 2011 free file U. 1040x 2011 free file S. 1040x 2011 free file citizen. 1040x 2011 free file   If you were a U. 1040x 2011 free file S. 1040x 2011 free file citizen when you received your SSN, you have a valid SSN. 1040x 2011 free file Valid for work only with INS or DHS authorization. 1040x 2011 free file   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. 1040x 2011 free file SSN missing or incorrect. 1040x 2011 free file   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. 1040x 2011 free file Other taxpayer identification number. 1040x 2011 free file   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). 1040x 2011 free file ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. 1040x 2011 free file No SSN. 1040x 2011 free file   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040x 2011 free file You cannot claim the EIC. 1040x 2011 free file Getting an SSN. 1040x 2011 free file   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5, Application for a Social Security Card, with the SSA. 1040x 2011 free file You can get Form SS-5 online at www. 1040x 2011 free file socialsecurity. 1040x 2011 free file gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. 1040x 2011 free file Filing deadline approaching and still no SSN. 1040x 2011 free file   If the filing deadline is approaching and you still do not have an SSN, you have two choices. 1040x 2011 free file Request an automatic 6-month extension of time to file your return. 1040x 2011 free file You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. 1040x 2011 free file S. 1040x 2011 free file Individual Income Tax Return. 1040x 2011 free file For more information, see chapter 1 . 1040x 2011 free file File the return on time without claiming the EIC. 1040x 2011 free file After receiving the SSN, file an amended return (Form 1040X, Amended U. 1040x 2011 free file S. 1040x 2011 free file Individual Income Tax Return) claiming the EIC. 1040x 2011 free file Attach a filled-in Schedule EIC if you have a qualifying child. 1040x 2011 free file Table 36-1. 1040x 2011 free file Earned Income Credit in a Nutshell First, you must meet all the rules in this column. 1040x 2011 free file Second, you must meet all the rules in one of these columns, whichever applies. 1040x 2011 free file Third, you must meet the rule in this column. 1040x 2011 free file Part A. 1040x 2011 free file  Rules for Everyone Part B. 1040x 2011 free file  Rules If You Have a Qualifying Child Part C. 1040x 2011 free file  Rules If You Do Not Have a Qualifying Child Part D. 1040x 2011 free file  Figuring and Claiming the EIC 1. 1040x 2011 free file Your adjusted gross income (AGI) must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040x 2011 free file 2. 1040x 2011 free file You must have a valid social security number. 1040x 2011 free file  3. 1040x 2011 free file Your filing status cannot be “Married filing separately. 1040x 2011 free file ” 4. 1040x 2011 free file You must be a U. 1040x 2011 free file S. 1040x 2011 free file citizen or resident alien all year. 1040x 2011 free file  5. 1040x 2011 free file You cannot file Form 2555 or Form 2555-EZ (relating to foreign earned income). 1040x 2011 free file  6. 1040x 2011 free file Your investment income must be $3,300 or less. 1040x 2011 free file  7. 1040x 2011 free file You must have earned income. 1040x 2011 free file 8. 1040x 2011 free file Your child must meet the relationship, age, residency, and joint return tests. 1040x 2011 free file  9. 1040x 2011 free file Your qualifying child cannot be used by more than one person to claim the EIC. 1040x 2011 free file  10. 1040x 2011 free file You cannot be a qualifying child of another person. 1040x 2011 free file 11. 1040x 2011 free file You must be at least age 25 but under age 65. 1040x 2011 free file  12. 1040x 2011 free file You cannot be the dependent of another person. 1040x 2011 free file  13. 1040x 2011 free file You cannot be a qualifying child of another person. 1040x 2011 free file  14. 1040x 2011 free file You must have lived in the United States more than half of the year. 1040x 2011 free file 15. 1040x 2011 free file Your earned income must be less than: • $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children,  • $43,038 ($48,378 for married filing jointly) if you have two qualifying children,  • $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or   • $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040x 2011 free file Rule 3. 1040x 2011 free file Your Filing Status Cannot Be Married Filing Separately If you are married, you usually must file a joint return to claim the EIC. 1040x 2011 free file Your filing status cannot be “Married filing separately. 1040x 2011 free file ” Spouse did not live with you. 1040x 2011 free file   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. 1040x 2011 free file In that case, you may be able to claim the EIC. 1040x 2011 free file For detailed information about filing as head of household, see chapter 2 . 1040x 2011 free file Rule 4. 1040x 2011 free file You Must Be a U. 1040x 2011 free file S. 1040x 2011 free file Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. 1040x 2011 free file You can use that filing status only if one spouse is a U. 1040x 2011 free file S. 1040x 2011 free file citizen or resident alien and you choose to treat the nonresident spouse as a U. 1040x 2011 free file S. 1040x 2011 free file resident. 1040x 2011 free file If you make this choice, you and your spouse are taxed on your worldwide income. 1040x 2011 free file If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). 1040x 2011 free file If you need more information on making this choice, get Publication 519, U. 1040x 2011 free file S. 1040x 2011 free file Tax Guide for Aliens. 1040x 2011 free file Rule 5. 1040x 2011 free file You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. 1040x 2011 free file You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. 1040x 2011 free file U. 1040x 2011 free file S. 1040x 2011 free file possessions are not foreign countries. 1040x 2011 free file See Publication 54, Tax Guide for U. 1040x 2011 free file S. 1040x 2011 free file Citizens and Resident Aliens Abroad, for more detailed information. 1040x 2011 free file Rule 6. 1040x 2011 free file Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. 1040x 2011 free file If your investment income is more than $3,300, you cannot claim the credit. 1040x 2011 free file For most people, investment income is the total of the following amounts. 1040x 2011 free file Taxable interest (line 8a of Form 1040 or 1040A). 1040x 2011 free file Tax-exempt interest (line 8b of Form 1040 or 1040A). 1040x 2011 free file Dividend income (line 9a of Form 1040 or 1040A). 1040x 2011 free file Capital gain net income (line 13 of Form 1040, if more than zero, or line 10 of Form 1040A). 1040x 2011 free file If you file Form 1040EZ, your investment income is the total of the amount of line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. 1040x 2011 free file However, see Rule 6 in chapter 1 of Publication 596 if: You are filing Schedule E (Form 1040), Form 4797, or Form 8814, or You are reporting income from the rental of personal property on Form 1040, line 21. 1040x 2011 free file Rule 7. 1040x 2011 free file You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. 1040x 2011 free file If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. 1040x 2011 free file If you are an employee, earned income includes all the taxable income you get from your employer. 1040x 2011 free file If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the instructions for Form 1040. 1040x 2011 free file Earned Income Earned income includes all of the following types of income. 1040x 2011 free file Wages, salaries, tips, and other taxable employee pay. 1040x 2011 free file Employee pay is earned income only if it is taxable. 1040x 2011 free file Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 1040x 2011 free file But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained below. 1040x 2011 free file Net earnings from self-employment. 1040x 2011 free file Gross income received as a statutory employee. 1040x 2011 free file Wages, salaries, and tips. 1040x 2011 free file   Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. 1040x 2011 free file You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). 1040x 2011 free file Nontaxable combat pay election. 1040x 2011 free file   You can elect to include your nontaxable combat pay in earned income for the earned income credit. 1040x 2011 free file Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. 1040x 2011 free file Figure the credit with and without your nontaxable combat pay before making the election. 1040x 2011 free file   If you make the election, you must include in earned income all nontaxable combat pay you received. 1040x 2011 free file If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. 1040x 2011 free file In other words, if one of you makes the election, the other one can also make it but does not have to. 1040x 2011 free file   The amount of your nontaxable combat pay should be shown in box 12 of your Form W-2 with code “Q. 1040x 2011 free file ” Self-employed persons and statutory employees. 1040x 2011 free file   If you are self-employed or received income as a statutory employee, you must use the Form 1040 instructions to see if you qualify to get the EIC. 1040x 2011 free file Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. 1040x 2011 free file Each approved form exempts certain income from social security taxes. 1040x 2011 free file Each form is discussed here in terms of what is or is not earned income for the EIC. 1040x 2011 free file Form 4361. 1040x 2011 free file   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. 1040x 2011 free file This includes wages, salaries, tips, and other taxable employee compensation. 1040x 2011 free file A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. 1040x 2011 free file Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. 1040x 2011 free file Examples include fees for performing marriages and honoraria for delivering speeches. 1040x 2011 free file Form 4029. 1040x 2011 free file   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. 1040x 2011 free file However, amounts you received as a self-employed individual do not count as earned income. 1040x 2011 free file Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. 1040x 2011 free file Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. 1040x 2011 free file Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. 1040x 2011 free file You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. 1040x 2011 free file Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. 1040x 2011 free file Report taxable pension payments on Form 1040, lines 16a and 16b (or Form 1040A, lines 12a and 12b). 1040x 2011 free file Disability insurance payments. 1040x 2011 free file   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. 1040x 2011 free file It does not matter whether you have reached minimum retirement age. 1040x 2011 free file If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. 1040x 2011 free file ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. 1040x 2011 free file Do not include any of these items in your earned income. 1040x 2011 free file Earnings while an inmate. 1040x 2011 free file   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. 1040x 2011 free file This includes amounts for work performed while in a work release program or while in a halfway house. 1040x 2011 free file Workfare payments. 1040x 2011 free file   Nontaxable workfare payments are not earned income for the EIC. 1040x 2011 free file These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if private sector employment is not available, or (2) community service program activities. 1040x 2011 free file Community property. 1040x 2011 free file   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3 ), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. 1040x 2011 free file That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. 1040x 2011 free file Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. 1040x 2011 free file Nevada, Washington, and California domestic partners. 1040x 2011 free file   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. 1040x 2011 free file Your earned income for the EIC does not include any amount earned by your partner. 1040x 2011 free file Your earned income includes the entire amount you earned. 1040x 2011 free file For details, see Publication 555. 1040x 2011 free file Conservation Reserve Program (CRP) payments. 1040x 2011 free file   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. 1040x 2011 free file Nontaxable military pay. 1040x 2011 free file   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. 1040x 2011 free file Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). 1040x 2011 free file See Publication 3, Armed Forces' Tax Guide, for more information. 1040x 2011 free file    Combat pay. 1040x 2011 free file You can elect to include your nontaxable combat pay in earned income for the EIC. 1040x 2011 free file See Nontaxable combat pay election, earlier. 1040x 2011 free file Part B. 1040x 2011 free file Rules If You Have a Qualifying Child If you have met all of the rules in Part A , read Part B to see if you have a qualifying child. 1040x 2011 free file Part B discusses Rules 8 through 10. 1040x 2011 free file You must meet all three of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit with a qualifying child. 1040x 2011 free file You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. 1040x 2011 free file (You cannot file Form 1040EZ. 1040x 2011 free file ) You also must complete Schedule EIC and attach it to your return. 1040x 2011 free file If you meet all the rules in Part A and this part, read Part D to find out what to do next. 1040x 2011 free file If you do not meet Rule 8, you do not have a qualifying child. 1040x 2011 free file Read Part C to find out if you can get the earned income credit without a qualifying child. 1040x 2011 free file Rule 8. 1040x 2011 free file Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. 1040x 2011 free file The four tests are: Relationship, Age, Residency, and Joint return. 1040x 2011 free file The four tests are illustrated in Figure 36–1. 1040x 2011 free file The paragraphs that follow contain more information about each test. 1040x 2011 free file Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). 1040x 2011 free file The following definitions clarify the relationship test. 1040x 2011 free file Adopted child. 1040x 2011 free file   An adopted child is always treated as your own child. 1040x 2011 free file The term “adopted child” includes a child who was lawfully placed with you for legal adoption. 1040x 2011 free file Foster child. 1040x 2011 free file   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgement, decree, or other order of any court of competent jurisdiction. 1040x 2011 free file An authorized placement agency includes a state or local government agency. 1040x 2011 free file It also includes a tax-exempt organization licensed by a state. 1040x 2011 free file In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. 1040x 2011 free file Example. 1040x 2011 free file Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. 1040x 2011 free file Debbie is your foster child. 1040x 2011 free file Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly), or Permanently and totally disabled at any time during 2013, regardless of age. 1040x 2011 free file    The following examples and definitions clarify the age test. 1040x 2011 free file Example 1—child not under age 19. 1040x 2011 free file Your son turned 19 on December 10. 1040x 2011 free file Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. 1040x 2011 free file Example 2—child not younger than you or your spouse. 1040x 2011 free file Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. 1040x 2011 free file He is not disabled. 1040x 2011 free file Both you and your spouse are 21 years old and you file a joint return. 1040x 2011 free file Your brother is not your qualifying child because he is not younger than you or your spouse. 1040x 2011 free file Example 3—child younger than your spouse but not younger than you. 1040x 2011 free file The facts are the same as in Example 2 except that your spouse is 25 years old. 1040x 2011 free file Because your brother is younger than your spouse, he is your qualifying child even though he is not younger than you. 1040x 2011 free file Student defined. 1040x 2011 free file   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. 1040x 2011 free file The 5 calendar months need not be consecutive. 1040x 2011 free file   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. 1040x 2011 free file School defined. 1040x 2011 free file   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. 1040x 2011 free file However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. 1040x 2011 free file Vocational high school students. 1040x 2011 free file   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. 1040x 2011 free file Permanently and totally disabled. 1040x 2011 free file   Your child is permanently and totally disabled if both of the following apply. 1040x 2011 free file He or she cannot engage in any substantial gainful activity because of a physical or mental condition. 1040x 2011 free file A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. 1040x 2011 free file Residency Test Your child must have lived with you in the United States for more than half of 2013. 1040x 2011 free file The following definitions clarify the residency test. 1040x 2011 free file United States. 1040x 2011 free file   This means the 50 states and the District of Columbia. 1040x 2011 free file It does not include Puerto Rico or U. 1040x 2011 free file S. 1040x 2011 free file possessions such as Guam. 1040x 2011 free file Homeless shelter. 1040x 2011 free file   Your home can be any location where you regularly live. 1040x 2011 free file You do not need a traditional home. 1040x 2011 free file For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. 1040x 2011 free file Military personnel stationed outside the United States. 1040x 2011 free file    U. 1040x 2011 free file S. 1040x 2011 free file military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. 1040x 2011 free file Figure 36-1. 1040x 2011 free file Tests for Qualifying Child Please click here for the text description of the image. 1040x 2011 free file Qualifying child Extended active duty. 1040x 2011 free file   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. 1040x 2011 free file Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. 1040x 2011 free file Birth or death of a child. 1040x 2011 free file   A child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. 1040x 2011 free file Temporary absences. 1040x 2011 free file   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. 1040x 2011 free file Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. 1040x 2011 free file Kidnapped child. 1040x 2011 free file    A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. 1040x 2011 free file The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or your child's family. 1040x 2011 free file This treatment applies for all years until the child is returned. 1040x 2011 free file However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. 1040x 2011 free file   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. 1040x 2011 free file Joint Return Test To meet this test, the child cannot file a joint return for the year. 1040x 2011 free file Exception. 1040x 2011 free file   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. 1040x 2011 free file Example 1—child files joint return. 1040x 2011 free file You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. 1040x 2011 free file He earned $25,000 for the year. 1040x 2011 free file The couple files a joint return. 1040x 2011 free file Because your daughter and her husband filed a joint return, she is not your qualifying child. 1040x 2011 free file Example 2—child files joint return only to claim a refund of withheld tax. 1040x 2011 free file Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. 1040x 2011 free file They do not have a child. 1040x 2011 free file Neither is required to file a tax return. 1040x 2011 free file Taxes were taken out of their pay, so they filed a joint return only to get a refund of the withheld taxes. 1040x 2011 free file The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. 1040x 2011 free file Example 3—child files joint return to claim American opportunity credit. 1040x 2011 free file The facts are the same as in Example 2 except no taxes were taken out of your son's pay. 1040x 2011 free file He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. 1040x 2011 free file Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to get a refund of income tax withheld or estimated tax paid. 1040x 2011 free file The exception to the joint return test does not apply, so your son is not your qualifying child. 1040x 2011 free file Married child. 1040x 2011 free file   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) , described later. 1040x 2011 free file Social security number. 1040x 2011 free file   The qualifying child must have a valid social security number (SSN) unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. 1040x 2011 free file You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), which is issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. 1040x 2011 free file   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. 1040x 2011 free file For more information about SSNs, see Rule 2 . 1040x 2011 free file Rule 9. 1040x 2011 free file Your Qualifying Child Cannot Be Used By More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. 1040x 2011 free file However, only one of these persons can actually treat the child as a qualifying child. 1040x 2011 free file Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). 1040x 2011 free file The exemption for the child. 1040x 2011 free file The child tax credit. 1040x 2011 free file Head of household filing status. 1040x 2011 free file The credit for child and dependent care expenses. 1040x 2011 free file The exclusion for dependent care benefits. 1040x 2011 free file The EIC. 1040x 2011 free file The other person cannot take any of these benefits based on this qualifying child. 1040x 2011 free file In other words, you and the other person cannot agree to divide these tax benefits between you. 1040x 2011 free file The other person cannot take any of these tax benefits unless he or she has a different qualifying child. 1040x 2011 free file The tiebreaker rules explained next explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. 1040x 2011 free file However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. 1040x 2011 free file Tiebreaker rules. 1040x 2011 free file   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. 1040x 2011 free file If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. 1040x 2011 free file If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. 1040x 2011 free file If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. 1040x 2011 free file If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. 1040x 2011 free file If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. 1040x 2011 free file If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. 1040x 2011 free file If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. 1040x 2011 free file See Example 8 . 1040x 2011 free file   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. 1040x 2011 free file See Examples 1 through 13 . 1040x 2011 free file   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in Part C for people who do not have a qualifying child. 1040x 2011 free file If the other person cannot claim the EIC. 1040x 2011 free file   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. 1040x 2011 free file See Examples 6 and 7 . 1040x 2011 free file But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier. 1040x 2011 free file Examples. 1040x 2011 free file The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. 1040x 2011 free file Example 1. 1040x 2011 free file You and your 2-year-old son Jimmy lived with your mother all year. 1040x 2011 free file You are 25 years old, unmarried, and your AGI is $9,000. 1040x 2011 free file Your only income was $9,000 from a part-time job. 1040x 2011 free file Your mother's only income was $20,000 from her job, and her AGI is $20,000. 1040x 2011 free file Jimmy's father did not live with you or Jimmy. 1040x 2011 free file The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. 1040x 2011 free file Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. 1040x 2011 free file However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier for which that person qualifies). 1040x 2011 free file He is not a qualifying child of anyone else, including his father. 1040x 2011 free file If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). 1040x 2011 free file Example 2. 1040x 2011 free file The facts are the same as in Example 1 except your AGI is $25,000. 1040x 2011 free file Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. 1040x 2011 free file Only you can claim him. 1040x 2011 free file Example 3. 1040x 2011 free file The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. 1040x 2011 free file In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. 1040x 2011 free file The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. 1040x 2011 free file Example 4. 1040x 2011 free file The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. 1040x 2011 free file Only one of you can claim each child. 1040x 2011 free file However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. 1040x 2011 free file For example, if you claim one child, your mother can claim the other two. 1040x 2011 free file Example 5. 1040x 2011 free file The facts are the same as in Example 1 except that you are only 18 years old. 1040x 2011 free file This means you are a qualifying child of your mother. 1040x 2011 free file Because of Rule 10 , discussed next, you cannot claim the EIC and cannot claim Jimmy as a qualifying child. 1040x 2011 free file Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. 1040x 2011 free file If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. 1040x 2011 free file Example 6. 1040x 2011 free file The facts are the same as in Example 1 except that your mother earned $50,000 from her job. 1040x 2011 free file Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. 1040x 2011 free file Example 7. 1040x 2011 free file The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. 1040x 2011 free file Your earned income is too high for you to claim the EIC. 1040x 2011 free file But your mother cannot claim the EIC either, because her AGI is not higher than yours. 1040x 2011 free file Example 8. 1040x 2011 free file The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have an AGI of $30,000 on a joint return. 1040x 2011 free file If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. 1040x 2011 free file Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. 1040x 2011 free file In other words, each parent's AGI can be treated as $15,000. 1040x 2011 free file Example 9. 1040x 2011 free file You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. 1040x 2011 free file In August and September, Joey lived with you. 1040x 2011 free file For the rest of the year, Joey lived with your husband, who is Joey's father. 1040x 2011 free file Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. 1040x 2011 free file At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. 1040x 2011 free file You and your husband will file separate returns. 1040x 2011 free file Your husband agrees to let you treat Joey as a qualifying child. 1040x 2011 free file This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. 1040x 2011 free file However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. 1040x 2011 free file See Rule 3 . 1040x 2011 free file Example 10. 1040x 2011 free file The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. 1040x 2011 free file In this case, only your husband will be allowed to treat Joey as a qualifying child. 1040x 2011 free file This is because, during 2013, the boy lived with him longer than with you. 1040x 2011 free file You cannot claim the EIC (either with or without a qualifying child). 1040x 2011 free file However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. 1040x 2011 free file See Rule 3 . 1040x 2011 free file Example 11. 1040x 2011 free file You, your 5-year-old son and your son's father lived together all year. 1040x 2011 free file You and your son's father are not married. 1040x 2011 free file Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. 1040x 2011 free file Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. 1040x 2011 free file Neither of you had any other income. 1040x 2011 free file Your son's father agrees to let you treat the child as a qualifying child. 1040x 2011 free file This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. 1040x 2011 free file Example 12. 1040x 2011 free file The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. 1040x 2011 free file In this case, only your son's father will be allowed to treat your son as a qualifying child. 1040x 2011 free file This is because his AGI, $14,000, is more than your AGI, $12,000. 1040x 2011 free file You cannot claim the EIC (either with or without a qualifying child). 1040x 2011 free file Example 13. 1040x 2011 free file You and your 7-year-old niece, your sister's child, lived with your mother all year. 1040x 2011 free file You are 25 years old, and your AGI is $9,300. 1040x 2011 free file Your only income was from a part-time job. 1040x 2011 free file Your mother's AGI is $15,000. 1040x 2011 free file Her only income was from her job. 1040x 2011 free file Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. 1040x 2011 free file Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. 1040x 2011 free file However, only your mother can treat her as a qualifying child. 1040x 2011 free file This is because your mother's AGI, $15,000, is more than your AGI, $9,300. 1040x 2011 free file Special rule for divorced or separated parents (or parents who live apart). 1040x 2011 free file   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. 1040x 2011 free file The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of 2013, whether or not they are or were married. 1040x 2011 free file The child received over half of his or her support for the year from the parents. 1040x 2011 free file The child is in the custody of one or both parents for more than half of 2013. 1040x 2011 free file Either of the following statements is true. 1040x 2011 free file The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. 1040x 2011 free file If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. 1040x 2011 free file A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. 1040x 2011 free file  For details, see chapter 3. 1040x 2011 free file Also see Applying Rule 9 to divorced or separated parents (or parents who live apart) , next. 1040x 2011 free file Applying Rule 9 to divorced or separated parents (or parents who live apart). 1040x 2011 free file   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. 1040x 2011 free file However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. 1040x 2011 free file If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. 1040x 2011 free file Example 1. 1040x 2011 free file You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. 1040x 2011 free file Your AGI is $10,000. 1040x 2011 free file Your mother’s AGI is $25,000. 1040x 2011 free file Your son's father did not live with you or your son. 1040x 2011 free file Under the special rule for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. 1040x 2011 free file However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. 1040x 2011 free file You and your mother did not have any child care expenses or dependent care benefits. 1040x 2011 free file If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. 1040x 2011 free file Example 2. 1040x 2011 free file The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. 1040x 2011 free file Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. 1040x 2011 free file Example 3. 1040x 2011 free file The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. 1040x 2011 free file Your mother also claims him as a qualifying child for head of household filing status. 1040x 2011 free file You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. 1040x 2011 free file The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. 1040x 2011 free file Rule 10. 1040x 2011 free file You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 1040x 2011 free file ) if all of the following statements are true. 1040x 2011 free file You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 1040x 2011 free file Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). 1040x 2011 free file You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 1040x 2011 free file You lived with that person in the United States for more than half of the year. 1040x 2011 free file You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 1040x 2011 free file For more details about the tests to be a qualifying child, see Rule 8 . 1040x 2011 free file If you are a qualifying child of another taxpayer, you cannot claim the EIC. 1040x 2011 free file This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 1040x 2011 free file Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). 1040x 2011 free file Example. 1040x 2011 free file You and your daughter lived with your mother all year. 1040x 2011 free file You are 22 years old, unmarried, and attended a trade school full time. 1040x 2011 free file You had a part-time job and earned $5,700. 1040x 2011 free file You had no other income. 1040x 2011 free file Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. 1040x 2011 free file She can claim the EIC if she meets all the other requirements. 1040x 2011 free file Because you are your mother's qualifying child, you cannot claim the EIC. 1040x 2011 free file This is so even if your mother cannot or does not claim the EIC. 1040x 2011 free file Child of person not required to file a return. 1040x 2011 free file   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 1040x 2011 free file Example. 1040x 2011 free file The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 1040x 2011 free file As a result, you are not your mother's qualifying child. 1040x 2011 free file You can claim the EIC if you meet all the other requirements to do so. 1040x 2011 free file   See Rule 10 in Publication 596 for additional examples. 1040x 2011 free file Part C. 1040x 2011 free file Rules If You Do Not Have a Qualifying Child Read this part if you: Do not have a qualifying child, and Have met all the rules in Part A . 1040x 2011 free file  Part C discusses Rules 11 through 14. 1040x 2011 free file You must meet all four of these rules, in addition to the rules in Parts A and D , to qualify for the earned income credit without a qualifying child. 1040x 2011 free file If you have a qualifying child, the rules in this part do not apply to you. 1040x 2011 free file You can claim the credit only if you meet all the rules in Parts A, B, and D. 1040x 2011 free file See Rule 8 to find out if you have a qualifying child. 1040x 2011 free file Rule 11. 1040x 2011 free file You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. 1040x 2011 free file If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. 1040x 2011 free file It does not matter which spouse meets the age test, as long as one of the spouses does. 1040x 2011 free file You meet the age test if you were born after December 31, 1948, and before January 2, 1989. 1040x 2011 free file If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. 1040x 2011 free file If neither you nor your spouse meets the age test, you cannot claim the EIC. 1040x 2011 free file Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040x 2011 free file Death of spouse. 1040x 2011 free file   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. 1040x 2011 free file Example 1. 1040x 2011 free file You are age 28 and unmarried. 1040x 2011 free file You meet the age test. 1040x 2011 free file Example 2—spouse meets age test. 1040x 2011 free file You are married and filing a joint return. 1040x 2011 free file You are age 23 and your spouse is age 27. 1040x 2011 free file You meet the age test because your spouse is at least age 25 but under age 65. 1040x 2011 free file Example 3—spouse dies in 2013. 1040x 2011 free file You are married and filing a joint return with your spouse who died in August 2013. 1040x 2011 free file You are age 67. 1040x 2011 free file Your spouse would have become age 65 in November 2013. 1040x 2011 free file Because your spouse was under age 65 when she died, you meet the age test. 1040x 2011 free file Rule 12. 1040x 2011 free file You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. 1040x 2011 free file If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. 1040x 2011 free file If you are not sure whether someone else can claim you (or your spouse, if filing a joint return) as a dependent, read the rules for claiming a dependent in chapter 3. 1040x 2011 free file If someone else can claim you (or your spouse, if filing a joint return) as a dependent on his or her return, but does not, you still cannot claim the credit. 1040x 2011 free file Example 1. 1040x 2011 free file In 2013, you were age 25, single, and living at home with your parents. 1040x 2011 free file You worked and were not a student. 1040x 2011 free file You earned $7,500. 1040x 2011 free file Your parents cannot claim you as a dependent. 1040x 2011 free file When you file your return, you claim an exemption for yourself by not checking the “You” box on line 5 of your Form 1040EZ and by entering $10,000 on that line. 1040x 2011 free file You meet this rule. 1040x 2011 free file You can claim the EIC if you meet all the other requirements. 1040x 2011 free file Example 2. 1040x 2011 free file The facts are the same as in Example 1 , except that you earned $2,000. 1040x 2011 free file Your parents can claim you as a dependent but decide not to. 1040x 2011 free file You do not meet this rule. 1040x 2011 free file You cannot claim the credit because your parents could have claimed you as a dependent. 1040x 2011 free file Joint returns. 1040x 2011 free file   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. 1040x 2011 free file   However, another person may be able to claim you as a dependent if you and your spouse file a joint return only to get a refund of income tax withheld or estimated tax paid. 1040x 2011 free file But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. 1040x 2011 free file Example 1. 1040x 2011 free file You are 26 years old. 1040x 2011 free file You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. 1040x 2011 free file Neither you nor your wife is required to file a tax return. 1040x 2011 free file You do not have a child. 1040x 2011 free file Taxes were taken out of your pay, so you file a joint return only to get a refund of the withheld taxes. 1040x 2011 free file Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. 1040x 2011 free file They can claim exemptions for you and your wife if all the other tests to do so are met. 1040x 2011 free file Example 2. 1040x 2011 free file The facts are the same as in Example 1 except no taxes were taken out of your pay. 1040x 2011 free file Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. 1040x 2011 free file Because claiming the EIC is your reason for filing the return, you are not filing it only to get a refund of income tax withheld or estimated tax paid. 1040x 2011 free file Your parents cannot claim an exemption for either you or your wife. 1040x 2011 free file Rule 13. 1040x 2011 free file You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. 1040x 2011 free file ) if all of the following statements are true. 1040x 2011 free file You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. 1040x 2011 free file Or, you are that person's brother, sister, half brother, half sister, stepbrother, or stepsister (or a descendant of any of them). 1040x 2011 free file You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student (as defined in Rule 8 ), and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. 1040x 2011 free file You lived with that person in the United States for more than half of the year. 1040x 2011 free file You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). 1040x 2011 free file For more details about the tests to be a qualifying child, see Rule 8 . 1040x 2011 free file If you are a qualifying child of another taxpayer, you cannot claim the EIC. 1040x 2011 free file This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. 1040x 2011 free file Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040x 2011 free file Example. 1040x 2011 free file You lived with your mother all year. 1040x 2011 free file You are age 26, unmarried, and permanently and totally disabled. 1040x 2011 free file Your only income was from a community center where you went three days a week to answer telephones. 1040x 2011 free file You earned $5,000 for the year and provided more than half of your own support. 1040x 2011 free file Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. 1040x 2011 free file She can claim the EIC if she meets all the other requirements. 1040x 2011 free file Because you are a qualifying child of your mother, you cannot claim the EIC. 1040x 2011 free file This is so even if your mother cannot or does not claim the EIC. 1040x 2011 free file Joint returns. 1040x 2011 free file   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. 1040x 2011 free file   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return for the year only to get a refund of income tax withheld or estimated tax paid. 1040x 2011 free file But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. 1040x 2011 free file Child of person not required to file a return. 1040x 2011 free file   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. 1040x 2011 free file Example. 1040x 2011 free file You lived all year with your father. 1040x 2011 free file You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. 1040x 2011 free file You have no other income, no children, and provided more than half of your own support. 1040x 2011 free file Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. 1040x 2011 free file As a result, you are not your father's qualifying child. 1040x 2011 free file You can claim the EIC if you meet all the other requirements to do so. 1040x 2011 free file   See Rule 13 in Publication 596 for additional examples. 1040x 2011 free file Rule 14. 1040x 2011 free file You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. 1040x 2011 free file If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). 1040x 2011 free file United States. 1040x 2011 free file   This means the 50 states and the District of Columbia. 1040x 2011 free file It does not include Puerto Rico or U. 1040x 2011 free file S. 1040x 2011 free file possessions such as Guam. 1040x 2011 free file Homeless shelter. 1040x 2011 free file   Your home can be any location where you regularly live. 1040x 2011 free file You do not need a traditional home. 1040x 2011 free file If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. 1040x 2011 free file Military personnel stationed outside the United States. 1040x 2011 free file   U. 1040x 2011 free file S. 1040x 2011 free file military personnel stationed outside the United States on extended active duty (defined in Rule 8 ) are considered to live in the United States during that duty period for purposes of the EIC. 1040x 2011 free file Part D. 1040x 2011 free file Figuring and Claiming the EIC Read this part if you have met all the rules in Parts A and B, or all the rules in Parts A and C. 1040x 2011 free file Part D discusses Rule 15 . 1040x 2011 free file You must meet this rule, in addition to the rules in Parts A and B , or Parts A and C , to qualify for the earned income credit. 1040x 2011 free file This part of the chapter also explains how to figure the amount of your credit. 1040x 2011 free file You have two choices. 1040x 2011 free file Have the IRS figure the EIC for you. 1040x 2011 free file If you want to do this, see IRS Will Figure the EIC for You . 1040x 2011 free file Figure the EIC yourself. 1040x 2011 free file If you want to do this, see How To Figure the EIC Yourself . 1040x 2011 free file Rule 15. 1040x 2011 free file Your Earned Income Must Be Less Than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. 1040x 2011 free file Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. 1040x 2011 free file Employee pay is earned income only if it is taxable. 1040x 2011 free file Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. 1040x 2011 free file But there is an exception for nontaxable combat pay, which you can choose to include in earned income. 1040x 2011 free file Earned income is explained in detail in Rule 7 . 1040x 2011 free file Figuring earned income. 1040x 2011 free file   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. 1040x 2011 free file   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. 1040x 2011 free file   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). 1040x 2011 free file You will then reduce that amount by any amount included on that line and described in the following list: Scholarship or fellowship grants not reported on a Form W-2, Inmate's income, and Pension or annuity from deferred compensation plans. 1040x 2011 free file Scholarship or fellowship grants not reported on a Form W-2. 1040x 2011 free file   A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. 1040x 2011 free file Inmate's income. 1040x 2011 free file   Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. 1040x 2011 free file This includes amounts received for work performed while in a work release program or while in a halfway house. 1040x 2011 free file If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 1040x 2011 free file Pension or annuity from deferred compensation plans. 1040x 2011 free file   A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. 1040x 2011 free file If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). 1040x 2011 free file This amount may be reported in box 11 of your Form W-2. 1040x 2011 free file If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or annuity. 1040x 2011 free file Clergy. 1040x 2011 free file   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also reported on line 7 (Form 1040), subtract that amount from the amount on line 7 (Form 1040) and enter the result in the first space of the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b. 1040x 2011 free file Put “Clergy” on the dotted line next to line 64a (Form 1040). 1040x 2011 free file Church employees. 1040x 2011 free file    A church employee means an employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes. 1040x 2011 free file If you received wages as a