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Frequently Asked Questions on Gift Taxes

Below are some of the more common questions and answers about Gift Tax issues. You may also find additional information in Publication 950 or some of the other forms and publications offered on our Forms Page. Included in this area are the instructions to Forms 706 and 709. Within these instructions, you will find the tax rate schedules to the related returns. If the answers to your questions can not be found in these resources, we strongly recommend visiting with a tax practitioner.


Who pays the gift tax?
The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

What is considered a gift?
Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money's worth) is not received in return.

What can be excluded from gifts?
The general rule is that any gift is a taxable gift. However, there are many exceptions to this rule. Generally, the following gifts are not taxable gifts.

  1. Gifts that are not more than the annual exclusion for the calendar year.
  2. Tuition or medical expenses you pay for someone (the educational and medical exclusions).
  3. Gifts to your spouse.
  4. Gifts to a political organization for its use.

In addition to this, gifts to qualifying charities are deductible from the value of the gift(s) made.

May I deduct gifts on my income tax return?
Making a gift or leaving your estate to your heirs does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than gifts that are deductible charitable contributions). If you are not sure whether the gift tax or the estate tax applies to your situation, refer to Publication 950, Introduction to Estate and Gift Taxes.

How many annual exclusions are available?
The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $11,000 in 2002-2005, $12,000 in 2006-2008, $13,000 in 2009-2012 and $14,000 on or after January 1, 2013, the annual exclusion applies to each gift.

What if my spouse and I want to give away property that we own together?
You are each entitled to the annual exclusion amount on the gift. Together, you can give $22,000 to each donee (2002-2005) or $24,000 (2006-2008), $26,000 (2009-2012) and $28,000 on or after January 1, 2013.

What other information do I need to include with the return?
Refer to Form 709 (PDF), 709 Instructions and Publication 950. Among other items listed:

  1. Copies of appraisals.
  2. Copies of relevant documents regarding the transfer.
  3. Documentation of any unusual items shown on the return (partially-gifted assets, other items relevant to the transfer(s)).

What is "Fair Market Value?"
Fair Market Value is defined as: "The fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The fair market value of a particular item of property includible in the decedent's gross estate is not to be determined by a forced sale price. Nor is the fair market value of an item of property to be determined by the sale price of the item in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate." Regulation §20.2031-1.

Who should I hire to represent me and prepare and file the return?
The Internal Revenue Service cannot make recommendations about specific individuals, but there are several factors to consider:

  1. How complex is the transfer?
  2. How large is the transfer?
  3. Do I need an attorney, CPA, Enrolled Agent (EA) or other professional(s)?

For most simple, small transfers (less than the annual exclusion amount) you may not need the services of a professional.

However, if the transfer is large or complicated or both, then these actions should be considered; It is a good idea to discuss the matter with several attorneys and CPAs or EAs. Ask about how much experience they have had and ask for referrals. This process should be similar to locating a good physician. Locate other individuals that have had similar experiences and ask for recommendations. Finally, after the individual(s) are employed and begin to work on transfer matters, make sure the lines of communication remain open so that there are no surprises.

Finally, people who make gifts as a part of their overall estate and financial plan often engage the services of both attorneys and CPAs, EAs and other professionals. The attorney usually handles wills, trusts and transfer documents that are involved and reviews the impact of documents on the gift tax return and overall plan. The CPA or EA often handles the actual return preparation and some representation of the donor in matters with the IRS. However, some attorneys handle all of the work. CPAs or EAs may also handle most of the work, but cannot take care of wills, trusts, deeds and other matters where a law license is required. In addition, other professionals (such as appraisers, surveyors, financial advisors and others) may need to be engaged during this time

Do I have to talk to the IRS during an examination?
You do not have to be present during an examination unless IRS representatives need to ask specific questions. Although you may represent yourself during an examination, most donors prefer that the professional(s) they have employed handle this phase of the examination. You may delegate authority for this by executing Form 2848 "Power of Attorney."

What if I disagree with the examination proposals?
You have many rights and avenues of appeal if you disagree with any proposals made by the IRS.  See Publications 1 and 5 (PDF) for an explanation of these options.

What if I sell property that has been given to me?
The general rule is that your basis in the property is the same as the basis of the donor. For example, if you were given stock that the donor had purchased for $10 per share (and that was his/her basis), and you later sold it for $100 per share, you would pay income tax on a gain of $90 per share. (Note: The rules are different for property acquired from an estate).

Most information for this page came from the Internal Revenue Code: Chapter 12--Gift Tax (generally Internal Revenue Code §2501 and following, related regulations and other sources)

Can a married same sex donor claim the gift tax marital deduction for a transfer to his or her spouse?
For federal tax purposes, the terms “spouse,” “husband,” and “wife” includes individuals of the same sex who were lawfully married under the laws of a state whose laws authorize the marriage of two individuals of the same sex and who remain married.  Also, the Service will recognize a marriage of individuals of the same sex that was validly created under the laws of the state of celebration even if the married couple resides in a state that does not recognize the validity of same-sex marriages.

However, the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals (whether of the opposite sex or the same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term “marriage” does not include such formal relationships.

Gifts to your spouse are eligible for the marital deduction.

For further information, including the timeframes regarding filing claims or amended returns, see Revenue Ruling 2013-17.

Revenue Ruling 2013-17, along with updated Frequently Asked Questions for same-sex couples and updated FAQs for registered domestic partners and individuals in civil unions, are available today on IRS.gov. See also Publication 555, Community Property.


If you have suggestions or comments (or suggested FAQs) for the Estate and Gift Tax web site, please contact us: CONTACT ESTATE AND GIFT TAX.  We will not be able to respond to your email, but will consider it when making improvements or additions to this site.

Page Last Reviewed or Updated: 20-Feb-2014

The 2010 Taxes Online

2010 taxes online Publication 3 - Main Content Table of Contents Gross IncomeForeign Source Income Military Spouses Residency Relief Act (MSRRA) Community Property Form W-2 Codes Adjustments to IncomeArmed Forces Reservists Individual Retirement Arrangements Moving Expenses Combat Zone ExclusionCombat Zone Serving in a Combat Zone Amount of Exclusion Alien StatusResident Aliens Nonresident Aliens Dual-Status Aliens Sale of HomePeriod of suspension. 2010 taxes online Qualified official extended duty. 2010 taxes online ForeclosuresLump Sum Portion of Settlement Payment. 2010 taxes online Interest Payment on Lump Sum Portion of Settlement Payment. 2010 taxes online Lost Equity Portion of Settlement Payment. 2010 taxes online The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. 2010 taxes online Interest Payment on Lost Equity Portion of Settlement Payment. 2010 taxes online Itemized DeductionsEmployee Business Expenses Repayments CreditsFirst-Time Homebuyer Credit Child Tax Credit Earned Income Credit Credit for Excess Social Security Tax Withheld Forgiveness of Decedent's Tax LiabilityCombat Zone Related Forgiveness Terrorist or Military Action Related Forgiveness Claims for Tax Forgiveness Filing ReturnsSame-Sex Marriage Where To File When To File Signing Returns Extension of DeadlinesService That Qualifies for an Extension of Deadline Length of Extension Actions for Which Deadlines Are Extended Deferral of Payment Maximum Rate of Interest How To Get Tax HelpLow Income Taxpayer Clinics Gross Income Members of the Armed Forces receive many different types of pay and allowances. 2010 taxes online Some are included in gross income while others are excluded from gross income. 2010 taxes online Included items (Table 1) are subject to tax and must be reported on your tax return. 2010 taxes online Excluded items (Table 2) are not subject to tax, but may have to be shown on your tax return. 2010 taxes online For information on the exclusion of pay for service in a combat zone and other tax benefits for combat zone participants, see Combat Zone Exclusion and Extension of Deadlines , later. 2010 taxes online Table 1. 2010 taxes online Included Items These items are included in gross income, unless the pay is for service in a combat zone. 2010 taxes online Basic pay • Active duty   Bonus pay • Career status   • Attendance at a designated service school     • Enlistment  • Officer   • Back wages     • Overseas extension   • CONUS COLA       • Reenlistment   • Drills         • Reserve training         • Training duty   Other pay  • Accrued leave          • High deployment per diem Special • Aviation career incentives      • Personal money allowances paid to pay • Career sea     high-ranking officers   • Diving duty      • Student loan repayment from programs   • Foreign duty (outside the 48 contiguous     such as the Department of Defense   states and the District of Columbia)     Educational Loan Repayment Program   • Foreign language proficiency     when year's service (requirement) is not   • Hardship duty     attributable to a combat zone   • Hostile fire or imminent danger         • Medical and dental officers   Incentive pay  • Submarine   • Nuclear-qualified officers      • Flight   • Optometry      • Hazardous duty   • Pharmacy      • High altitude/Low Opening (HALO)   • Special compensation for assistance with activities of daily living (SCAADL)         • Special duty assignment pay         • Veterinarian         • Voluntary Separation Incentive       Basic allowance for housing (BAH). 2010 taxes online   You can still deduct mortgage interest and real estate taxes on your home if you pay these expenses with your BAH. 2010 taxes online Table 2. 2010 taxes online Excluded Items The exclusion for certain items applies whether the item is furnished in kind or is a reimbursement or allowance. 2010 taxes online There is no exclusion for the personal use of a government-provided vehicle. 2010 taxes online Combat  zone pay • Compensation for active service while in a combat zone Note: Limited amount for officers     • Housing and cost-of-living allowances abroad paid by the U. 2010 taxes online S. 2010 taxes online Government or by a foreign government         • OHA (Overseas Housing Allowance)                     Other pay • Defense counseling         • Disability, including payments received for injuries incurred as a direct result of a terrorist or military action         • Group-term life insurance   Moving • Dislocation   • Professional education   allowances • Military base realignment and   • ROTC educational and subsistence     closure benefit    allowances     (the exclusion is limited as   • State bonus pay for service in a     described above)   combat zone     • Move-in housing   • Survivor and retirement protection     • Moving household and   plan premiums     personal items   • Uniform allowances     • Moving trailers or mobile homes   • Uniforms furnished to enlisted     • Storage   personnel     • Temporary lodging and         temporary lodging expenses                 Travel • Annual round trip for dependent Death • Burial services   allowances students allowances • Death gratuity payments to     • Leave between consecutive   eligible survivors     overseas tours   • Travel of dependents to burial site     • Reassignment in a dependent         restricted status Family • Certain educational expenses for     • Transportation for you or your allowances dependents     dependents during ship overhaul   • Emergencies     or inactivation   • Evacuation to a place of safety     • Per diem   • Separation             In-kind military • Dependent-care assistance program Living • BAH (Basic Allowance for Housing)   benefits • Legal assistance allowances • BAS (Basic Allowance for Subsistence)     • Medical/dental care         • Commissary/exchange discounts         • Space-available travel on government aircraft           Death gratuity. 2010 taxes online   Any death gratuity paid to a survivor of a member of the Armed Forces is excluded from gross income. 2010 taxes online Differential wage payments. 2010 taxes online   Differential wage payments are any payments made by an employer to an individual for a period during which the individual is performing service in the uniformed services while on active duty for a period of more than 30 days and that represent all or a portion of the wages the individual would have received from the employer if the individual was performing services for the employer. 2010 taxes online These amounts are taxable and cannot be excluded as combat pay. 2010 taxes online Military base realignment and closure benefit. 2010 taxes online   Payments made under the Homeowners Assistance Program (HAP) generally are excluded from income. 2010 taxes online However, the excludable amount cannot be more than the maximum amount described in subsection (c) of 42 USC 3374 as in effect on November 6, 2009. 2010 taxes online Any part of the payment that is more than this limit is included in gross income. 2010 taxes online For more information about the HAP, see http://hap. 2010 taxes online usace. 2010 taxes online army. 2010 taxes online mil/Overview. 2010 taxes online html. 2010 taxes online Qualified reservist distribution (QRD). 2010 taxes online   A QRD is a distribution to an individual of all or part of the individual's balance in a cafeteria plan or health flexible spending arrangement if: The individual was a reservist who was ordered or called to active duty for more than 179 days or for an indefinite period, and The distribution is made no sooner than the date the reservist was ordered or called to active duty and no later than the last day reimbursements could otherwise be made under the arrangement for the plan year which includes the date of the order or the call to duty. 2010 taxes online A QRD is included in gross income and is subject to employment taxes. 2010 taxes online The employer must include the QRD (reduced by after-tax contributions to the health flexible spending arrangement) as wages on Form W-2, Wage and Tax Statement. 2010 taxes online Thrift Savings Plan (TSP) distributions. 2010 taxes online   If you participate in the Uniformed Services TSP and receive a distribution from your account, the distribution is generally included in your taxable income. 2010 taxes online   If your contributions included tax-exempt combat zone pay, the part of the distribution attributable to those contributions is tax exempt. 2010 taxes online However, the earnings on the tax-exempt portion of the distribution are taxable. 2010 taxes online The TSP will provide a statement showing the taxable and non-taxable portions of the distribution. 2010 taxes online Roth Thrift Savings Plan (TSP) balance. 2010 taxes online   You may be able to contribute to a designated Roth Account through the TSP known as the Roth TSP. 2010 taxes online Roth TSP contributions are after-tax contributions, subject to the same contribution limits as the traditional TSP. 2010 taxes online Qualified distributions from a Roth TSP are not included in your income. 2010 taxes online For more details, see Thrift Savings Accounts in Part II of Publication 721, Tax Guide to U. 2010 taxes online S. 2010 taxes online Civil Service Retirement Benefits. 2010 taxes online State bonus payments. 2010 taxes online   Bonus payments made by a state (or a political subdivision thereof) to a member or former member of the uniformed services of the United States or to a dependent of such member are considered combat pay (and therefore may not be taxable) if the payments are made only because of the member's service in a combat zone. 2010 taxes online See Combat Zone , later, for a list of designated combat zones. 2010 taxes online Foreign Source Income If you are a U. 2010 taxes online S. 2010 taxes online citizen with income from sources outside the United States (foreign income), you must report all of that income (except for amounts that U. 2010 taxes online S. 2010 taxes online law allows you to exclude) on your tax return. 2010 taxes online This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2 or a Form 1099. 2010 taxes online This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties). 2010 taxes online Certain taxpayers can exclude income earned in foreign countries. 2010 taxes online For 2013, this exclusion amount can be as much as $97,600. 2010 taxes online However, the foreign earned income exclusion does not apply to the wages and salaries of military and civilian employees of the U. 2010 taxes online S. 2010 taxes online Government. 2010 taxes online Employees of the U. 2010 taxes online S. 2010 taxes online Government include those who work at United States Armed Forces exchanges, commissioned and noncommissioned officers' messes, Armed Forces motion picture services, and similar personnel. 2010 taxes online Other foreign income earned by military personnel or their spouses may be eligible for the foreign earned income exclusion. 2010 taxes online For more information on the exclusion, see Publication 54. 2010 taxes online Residents of American Samoa may be able to exclude income from American Samoa. 2010 taxes online This possession exclusion does not apply to wages and salaries of military and civilian employees of the U. 2010 taxes online S. 2010 taxes online Government. 2010 taxes online If you need information on the possession exclusion, see Publication 570, Tax Guide for Individuals With Income From U. 2010 taxes online S. 2010 taxes online Possessions. 2010 taxes online Military Spouses Residency Relief Act (MSRRA) If you are the civilian spouse of an active duty U. 2010 taxes online S. 2010 taxes online military servicemember and your domicile is the same as the servicemember's, you can choose to keep your prior residence or domicile for tax purposes when you accompany the servicemember spouse, who is relocating under military orders to a new duty station in one of the 50 states, the District of Columbia, or a U. 2010 taxes online S. 2010 taxes online possession. 2010 taxes online See Publication 570 for more information. 2010 taxes online Domicile. 2010 taxes online   Your domicile is the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. 2010 taxes online It is not always where you presently live. 2010 taxes online Community Property The pay you earn as a member of the Armed Forces may be subject to community property laws depending on your marital status, your domicile, and the nature of the payment. 2010 taxes online The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2010 taxes online Marital status. 2010 taxes online   Community property rules apply to married persons whose domicile during the tax year was in a community property state. 2010 taxes online The rules may affect your tax liability if you file separate returns or are divorced during the year. 2010 taxes online Nevada, Washington, and California domestic partners. 2010 taxes online   A registered domestic partner in Nevada, Washington, or California generally must report half the combined income of the individual and his or her domestic partner. 2010 taxes online See Form 8958 and Publication 555, Community Property. 2010 taxes online Nature of the payment. 2010 taxes online   Active duty military pay is subject to community property laws. 2010 taxes online Armed Forces retired or retainer pay may be subject to community property laws. 2010 taxes online   For more information on community property laws, see Publication 555. 2010 taxes online Form W-2 Codes Form W-2 shows your total pay and other compensation and the income tax, social security tax, and Medicare tax that was withheld during the year. 2010 taxes online Form W-2 also shows other amounts that you may find important in box 12. 2010 taxes online The amounts shown in box 12 are generally preceded by a code. 2010 taxes online A list of codes used in box 12 is shown, next. 2010 taxes online Form W-2 Reference Guide for Box 12 Codes A Uncollected social security or RRTA J Nontaxable sick pay T Adoption benefits   tax on tips             K 20% excise tax on excess golden V Income from exercise of B Uncollected Medicare tax on tips   parachute payments   nonstatutory stock option(s)             C Taxable cost of group-term life L Substantiated employee business W Employer contributions (including   insurance over $50,000   expense reimbursements   employee contributions through a           cafeteria plan) to an employee's D Elective deferrals under a section M Uncollected social security or RRTA   health savings account (HSA)   401(k) cash or deferred arrangement   tax on taxable cost of group-term life       plan (including a SIMPLE 401(k)   insurance over $50,000 (former Y Deferrals under a section 409A   arrangement)   employees only)   nonqualified deferred           compensation plan E Elective deferrals under a section N Uncollected Medicare tax on taxable       403(b) salary reduction agreement   cost of group-term life insurance Z Income under section 409A on a       over $50,000 (former employees only)   nonqualified deferred F Elective deferrals under a section       compensation plan   408(k)(6) salary reduction SEP P Excludable moving expense           reimbursements paid directly to AA Designated Roth contributions G Elective deferrals and employer   employee   under a section 401(k) plan   contributions (including nonelective           deferrals) to a section 457(b) Q Nontaxable combat pay BB Designated Roth contributions   deferred compensation plan       under a section 403(b) plan     R Employer contributions to an Archer     H Elective deferrals to a section   MSA DD Cost of employer-sponsored   501(c)(18)(D) tax-exempt       health coverage   organization plan S Employee salary reduction contributions under a section 408(p) SIMPLE  EE  Designated Roth contributions under a governmental section 457(b) plan  Note. 2010 taxes online For more information on these codes, see your Form(s) W-2. 2010 taxes online Adjustments to Income Adjusted gross income is your total income minus certain adjustments. 2010 taxes online The following adjustments are of particular interest to members of the Armed Forces. 2010 taxes online Armed Forces Reservists If you are a member of a reserve component of the Armed Forces and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct your unreimbursed travel expenses as an adjustment to income on line 24 of Form 1040, U. 2010 taxes online S. 2010 taxes online Individual Income Tax Return, rather than as a miscellaneous itemized deduction. 2010 taxes online Include all unreimbursed expenses from the time you leave home until the time you return home. 2010 taxes online The deduction is limited to the amount the federal government generally reimburses its employees for travel expenses. 2010 taxes online For more information about this limit, see Per Diem and Car Allowances in chapter 6 of Publication 463. 2010 taxes online Member of a reserve component. 2010 taxes online   You are a member of a reserve component of the Armed Forces if you are in the Army, Navy, Marine Corps, Air Force, or Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. 2010 taxes online How to report. 2010 taxes online   If you have reserve-related travel that takes you more than 100 miles from home, you should first complete Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses. 2010 taxes online Then enter on Form 1040, line 24, the part of your expenses, up to the federal rate, included on Form 2106, line 10, or Form 2106-EZ, line 6, that is for reserve-related travel more than 100 miles from your home. 2010 taxes online Subtract this amount from the total on Form 2106, line 10, or Form 2106-EZ, line 6, and deduct the balance as an itemized deduction on Schedule A (Form 1040), line 21. 2010 taxes online Example. 2010 taxes online Captain Harris, a member of the Army Reserve, traveled to a location 220 miles from his home to perform his work in the reserves in April 2013. 2010 taxes online He incurred $1,549 of unreimbursed expenses consisting of $249 for mileage (440 miles × 56. 2010 taxes online 5 cents per mile), $300 for meals, and $1,000 for lodging. 2010 taxes online He also had other deductible mileage expenses of $110 for several trips to a location 20 miles from his home. 2010 taxes online Only 50% of his meal expenses are deductible. 2010 taxes online He shows his total deductible travel expenses of $1,509 ($249 + $150 (50% of $300) + $1,000 + $110) on Form 2106, line 10. 2010 taxes online He enters the $1,399 ($249 + $150 + $1,000) for travel over 100 miles from home on Form 1040, line 24. 2010 taxes online He then subtracts that $1,399 from the amount on Form 2106, $1,509, and enters $110 on Schedule A (Form 1040), line 21. 2010 taxes online Individual Retirement Arrangements Generally, you can deduct the lesser of the contributions to your traditional individual retirement arrangement (IRA) for the year or the general limit (or spousal IRA limit, if applicable). 2010 taxes online However, if you or your spouse was covered by an employer-maintained retirement plan at any time during the year for which contributions were made, you may not be able to deduct all of the contributions. 2010 taxes online The Form W-2 you or your spouse receives from an employer has a box used to indicate whether you were covered for the year. 2010 taxes online The “Retirement plan” box should have a mark in it if you were covered. 2010 taxes online For purposes of a deduction for contributions to a traditional IRA, Armed Forces members (including reservists on active duty for more than 90 days during the year) are considered covered by an employer-maintained retirement plan. 2010 taxes online Individuals serving in the U. 2010 taxes online S. 2010 taxes online Armed Forces or in support of the U. 2010 taxes online S. 2010 taxes online Armed Forces in designated combat zones have additional time to make a qualified retirement contribution to an IRA. 2010 taxes online For more information on this extension of deadline provision, see Extension of Deadlines , later. 2010 taxes online For more information on IRAs, see Publication 590. 2010 taxes online Combat Pay For IRA purposes, your compensation includes nontaxable combat pay. 2010 taxes online This means that even though you do not have to include the combat pay in your gross income, you do include it in your compensation when figuring the limits on contributions and deductions of contributions to IRAs. 2010 taxes online Qualified Reservist Distributions A qualified reservist distribution is defined below. 2010 taxes online It is not subject to the 10% additional tax on early distributions from certain retirement plans. 2010 taxes online Definition. 2010 taxes online   A distribution you receive is a qualified reservist distribution if the following requirements are met. 2010 taxes online You were ordered or called to active duty after September 11, 2001. 2010 taxes online You were ordered or called to active duty for a period of more than 179 days or for an indefinite period because you are a member of a reserve component (see Member of a reserve component , earlier, under Armed Forces Reservists. 2010 taxes online ) The distribution is from an IRA or from amounts attributable to elective deferrals under a section 401(k) or 403(b) plan or a similar arrangement. 2010 taxes online The distribution was made no earlier than the date of the order or call to active duty and no later than the close of the active duty period. 2010 taxes online Qualified Reservist Repayments You may be able to contribute (repay) to an IRA amounts equal to any qualified reservist distributions (defined earlier) you received. 2010 taxes online You can make these repayment contributions even if they would cause your total contributions to the IRA to be more than the general limit on contributions. 2010 taxes online You make these repayment contributions to an IRA, even if you received the qualified reservist distribution from a section 401(k) or 403(b) plan or a similar arrangement. 2010 taxes online Limit. 2010 taxes online   Your qualified reservist repayments cannot be more than your qualified reservist distributions. 2010 taxes online When repayment contributions can be made. 2010 taxes online   You cannot make these repayment contributions after the date that is 2 years after your active duty period ends. 2010 taxes online No deduction. 2010 taxes online   You cannot deduct qualified reservist repayments. 2010 taxes online Figuring your IRA deduction. 2010 taxes online   The repayment of qualified reservist distributions does not affect the amount you can deduct as an IRA contribution. 2010 taxes online Reporting the repayment. 2010 taxes online   If you repay a qualified reservist distribution, include the amount of the repayment with nondeductible contributions on line 1 of Form 8606, Nondeductible IRAs. 2010 taxes online Moving Expenses To deduct moving expenses, you generally must meet certain time and distance tests. 2010 taxes online However, if you are a member of the Armed Forces on active duty and you move because of a permanent change of station, you do not have to meet these tests. 2010 taxes online You can deduct your unreimbursed moving expenses on Form 3903. 2010 taxes online Permanent change of station. 2010 taxes online   A permanent change of station includes: A move from your home to your first post of active duty, A move from one permanent post of duty to another, and A move from your last post of duty to your home or to a nearer point in the United States. 2010 taxes online The move must occur within 1 year of ending your active duty or within the period allowed under the Joint Federal Travel Regulations. 2010 taxes online Spouse and dependents. 2010 taxes online   If you are the spouse or dependent of a member of the Armed Forces who deserts, is imprisoned, or dies, a permanent change of station for you includes a move to: The member's place of enlistment or induction, Your, or the member's, home of record, or A nearer point in the United States. 2010 taxes online   If the military moves you to or from a different location than the member, the moves are treated as a single move to your new main job location. 2010 taxes online Services or reimbursements provided by the government. 2010 taxes online   Do not include in your income the value of moving and storage services provided by the government because of a permanent change of station. 2010 taxes online Similarly, do not include in income amounts received as a dislocation allowance, temporary lodging expense, temporary lodging allowance, or move-in housing allowance. 2010 taxes online   Generally, if the total reimbursements or allowances that you receive from the government because of the move are more than your actual moving expenses, the excess is included in your wages on Form W-2. 2010 taxes online However, if any reimbursements or allowances (other than dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances) exceed the cost of moving and the excess is not included in your wages on Form W-2, the excess still must be included in gross income on Form 1040, line 7. 2010 taxes online   Use Form 3903 to deduct qualified expenses that exceed your reimbursements and allowances (including dislocation, temporary lodging, temporary lodging expense, or move-in housing allowances that are excluded from gross income). 2010 taxes online   If you must relocate and your spouse and dependents move to or from a different location, do not include in income reimbursements, allowances, or the value of moving and storage services provided by the government to move you and your spouse and dependents to and from the separate locations. 2010 taxes online   Do not deduct any expenses for moving services that were provided by the government. 2010 taxes online Also, do not deduct any expenses that were reimbursed by an allowance you did not include in income. 2010 taxes online Deductible Moving Expenses If you move because of a permanent change of station, you can deduct the reasonable unreimbursed expenses of moving you and members of your household. 2010 taxes online You can deduct expenses (if not reimbursed or furnished in kind) for: Moving household goods and personal effects, and Travel. 2010 taxes online Moving household goods and personal effects. 2010 taxes online   You can deduct the expenses of moving your household goods and personal effects, including expenses for hauling a trailer, packing, crating, in-transit storage, and insurance. 2010 taxes online You cannot deduct expenses for moving furniture or other goods you bought on the way from your old home to your new home. 2010 taxes online Storing and insuring household goods and personal effects. 2010 taxes online   You can include only the cost of storing and insuring your household goods and personal effects within any period of 30 consecutive days after the day these goods and effects are moved from your former home and before they are delivered to your new home. 2010 taxes online Travel. 2010 taxes online   You can deduct the expenses of traveling (including lodging but not meals) from your old home to your new home, including car expenses and air fare. 2010 taxes online You can deduct as car expenses either: Your actual out-of-pocket expenses such as gas and oil, or The standard mileage rate of 24 cents a mile. 2010 taxes online   You can add parking fees and tolls to the amount claimed under either method. 2010 taxes online You cannot deduct any expenses for meals. 2010 taxes online You cannot deduct the cost of unnecessary side trips or lavish and extravagant lodging. 2010 taxes online Member of your household. 2010 taxes online   A member of your household is anyone who has both your former home and your new home as his or her main home. 2010 taxes online It does not include a tenant or employee unless you can claim that person as a dependent. 2010 taxes online Foreign Moves A foreign move is a move from the United States or its possessions to a foreign country or from one foreign country to another foreign country. 2010 taxes online A move from a foreign country to the United States or its possessions is not a foreign move. 2010 taxes online For a foreign move, the deductible moving expenses described earlier are expanded to include the reasonable expenses of: Moving your household goods and personal effects to and from storage, and Storing these items for part or all of the time the new job location remains your main job location. 2010 taxes online The new job location must be outside the United States. 2010 taxes online Reporting Moving Expenses Figure moving expense deductions on Form 3903. 2010 taxes online Carry the deduction from Form 3903 to Form 1040, line 26. 2010 taxes online For more information, see Publication 521 and Form 3903. 2010 taxes online Combat Zone Exclusion If you are a member of the U. 2010 taxes online S. 2010 taxes online Armed Forces who serves in a combat zone (defined later), you can exclude certain pay from your income. 2010 taxes online This pay is generally referred to as “combat pay. 2010 taxes online ” You do not actually need to show the exclusion on your tax return because income that qualifies for the combat zone exclusion is not included in the wages reported on your Form W-2. 2010 taxes online (See Form W-2 , later. 2010 taxes online ) The month for which you receive the pay must be a month in which you either served in a combat zone or were hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. 2010 taxes online You do not have to receive the excluded pay while you are in a combat zone, are hospitalized, or in the same year you served in a combat zone. 2010 taxes online If you are an enlisted member, warrant officer, or commissioned warrant officer, you can exclude the following amounts from your income. 2010 taxes online (Other officer personnel are discussed under Amount of Exclusion , later. 2010 taxes online ) Active duty pay earned in any month you served in a combat zone. 2010 taxes online Imminent danger/hostile fire pay. 2010 taxes online A reenlistment bonus if the voluntary extension or reenlistment occurs in a month you served in a combat zone. 2010 taxes online Pay for accrued leave earned in any month you served in a combat zone. 2010 taxes online The Department of Defense must determine that the unused leave was earned during that period. 2010 taxes online Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other nonappropriated fund activities. 2010 taxes online The pay must be earned in a month you served in a combat zone. 2010 taxes online Awards for suggestions, inventions, or scientific achievements you are entitled to because of a submission you made in a month you served in a combat zone. 2010 taxes online Student loan repayments. 2010 taxes online If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. 2010 taxes online If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. 2010 taxes online For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion. 2010 taxes online Retirement pay and pensions do not qualify for the combat zone exclusion. 2010 taxes online Partial (month) service. 2010 taxes online   If you serve in a combat zone for any part of one or more days during a particular month, you are entitled to an exclusion for that entire month. 2010 taxes online Form W-2. 2010 taxes online   The wages shown in box 1 of your 2013 Form W-2 should not include military pay excluded from your income under the combat zone exclusion provisions. 2010 taxes online If it does, you will need to get a corrected Form W-2 from your finance office. 2010 taxes online   You cannot exclude as combat pay any wages shown in box 1 of Form W-2. 2010 taxes online Combat Zone A combat zone is any area the President of the United States designates by Executive Order as an area in which the U. 2010 taxes online S. 2010 taxes online Armed Forces are engaging or have engaged in combat. 2010 taxes online An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order. 2010 taxes online Afghanistan area. 2010 taxes online   By Executive Order No. 2010 taxes online 13239, Afghanistan (and airspace above) was designated as a combat zone beginning September 19, 2001. 2010 taxes online On December 14, 2001, the following countries were certified by the Department of Defense for combat zone tax benefits due to their direct support of military operations in the Afghanistan combat zone. 2010 taxes online Djibouti. 2010 taxes online Jordan. 2010 taxes online Kyrgyzstan. 2010 taxes online Pakistan. 2010 taxes online Somalia. 2010 taxes online Syria. 2010 taxes online Tajikistan. 2010 taxes online Uzbekistan. 2010 taxes online Yemen. 2010 taxes online The Philippines. 2010 taxes online  Note. 2010 taxes online For the Philippines only, the personnel must be deployed in conjunction with Operation Enduring Freedom supporting military operations in the Afghanistan combat zone. 2010 taxes online The Kosovo area. 2010 taxes online   By Executive Order No. 2010 taxes online 13119, the following locations (including airspace above) were designated as a combat zone beginning March 24, 1999. 2010 taxes online Federal Republic of Yugoslavia (Serbia/Montenegro). 2010 taxes online Albania. 2010 taxes online Kosovo. 2010 taxes online The Adriatic Sea. 2010 taxes online The Ionian Sea—north of the 39th parallel. 2010 taxes online Note. 2010 taxes online The combat zone designation for Montenegro and Kosovo (previously a province within Serbia) under Executive Order 13119 remains in force even though Montenegro and Kosovo became independent nations since EO 13119 was signed. 2010 taxes online Arabian peninsula. 2010 taxes online   By Executive Order No. 2010 taxes online 12744, the following locations (and airspace above) were designated as a combat zone beginning January 17, 1991. 2010 taxes online The Persian Gulf. 2010 taxes online The Red Sea. 2010 taxes online The Gulf of Oman. 2010 taxes online The part of the Arabian Sea that is north of 10 degrees north latitude and west of 68 degrees east longitude. 2010 taxes online The Gulf of Aden. 2010 taxes online The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates. 2010 taxes online Jordan which is in direct support of the Arabian Peninsula. 2010 taxes online Serving in a Combat Zone You are considered to be serving in a combat zone if you are either assigned on official temporary duty to a combat zone or you qualify for hostile fire/imminent danger pay while in a combat zone. 2010 taxes online Service in a combat zone includes any periods you are absent from duty because of sickness, wounds, or leave. 2010 taxes online If, as a result of serving in a combat zone, a person becomes a prisoner of war or is missing in action, that person is considered to be serving in the combat zone so long as he or she keeps that status for military pay purposes. 2010 taxes online Hospitalized While Serving in a Combat Zone If you are hospitalized while serving in a combat zone, the wound, disease, or injury causing the hospitalization will be presumed to have been incurred while serving in the combat zone unless there is clear evidence to the contrary. 2010 taxes online Example. 2010 taxes online You are hospitalized for a specific disease in a combat zone where you have been serving for 3 weeks, and the disease for which you are hospitalized has an incubation period of 2 to 4 weeks. 2010 taxes online The disease is presumed to have been incurred while you were serving in the combat zone. 2010 taxes online On the other hand, if the incubation period of the disease is 1 year, the disease would not have been incurred while you were serving in the combat zone. 2010 taxes online Hospitalized After Leaving a Combat Zone In some cases, the wound, disease, or injury may have been incurred while you were serving in the combat zone, even though you were not hospitalized until after you left. 2010 taxes online In that case, you can exclude military pay earned while you are hospitalized as a result of the wound, disease, or injury. 2010 taxes online Example. 2010 taxes online You were hospitalized for a specific disease 3 weeks after you left the combat zone. 2010 taxes online The incubation period of the disease is from 2 to 4 weeks. 2010 taxes online The disease is presumed to have been incurred while serving in the combat zone. 2010 taxes online Nonqualifying Presence in Combat Zone None of the following types of military service qualify as service in a combat zone. 2010 taxes online Presence in a combat zone while on leave from a duty station located outside the combat zone. 2010 taxes online Passage over or through a combat zone during a trip between two points that are outside a combat zone. 2010 taxes online Presence in a combat zone solely for your personal convenience. 2010 taxes online Service Outside Combat Zone Considered Service in Combat Zone Military service outside a combat zone is considered to be performed in a combat zone if: The Department of Defense designates that the service is in direct support of military operations in the combat zone, and The service qualifies you for special military pay for duty subject to hostile fire or imminent danger. 2010 taxes online Military pay received for this service will qualify for the combat zone exclusion if all of the requirements (other than service in a combat zone) are met and the pay is verifiable by reference to military pay records. 2010 taxes online Amount of Exclusion If you are an enlisted member, warrant officer, or commissioned warrant officer and you serve in a combat zone during any part of a month, you can exclude all of your military pay for that month. 2010 taxes online It should not be included in the wages reported on your Form W-2. 2010 taxes online You also can exclude military pay earned while you are hospitalized as a result of wounds, disease, or injury incurred in the combat zone. 2010 taxes online If you are hospitalized, you cannot exclude any military pay received for any month of service that begins more than 2 years after the end of combat activities in the combat zone. 2010 taxes online Your hospitalization does not have to be in the combat zone. 2010 taxes online If you are a commissioned officer (other than a commissioned warrant officer), you can exclude your pay according to the rules just discussed. 2010 taxes online However, the amount of your exclusion is limited to the highest rate of enlisted pay (plus imminent danger/hostile fire pay you received) for each month during any part of which you served in a combat zone or were hospitalized as a result of your service there. 2010 taxes online Alien Status For tax purposes, an alien is an individual who is not a U. 2010 taxes online S. 2010 taxes online citizen. 2010 taxes online An alien is in one of three categories: resident, nonresident, or dual-status. 2010 taxes online Placement in the correct category is crucial in determining what income to report and what forms to file. 2010 taxes online Under peacetime enlistment rules, you generally cannot enlist in the Armed Forces unless you are a citizen or have been legally admitted to the United States for permanent residence. 2010 taxes online If you are an alien enlistee in the Armed Forces, you are probably a resident alien. 2010 taxes online If, under an income tax treaty, you are considered a resident of a foreign country, see your base legal officer. 2010 taxes online Other aliens who are in the United States only because of military assignments and who have a home outside the United States are nonresident aliens. 2010 taxes online Guam and Puerto Rico have special rules. 2010 taxes online Residents of those areas should contact their taxing authority with their questions. 2010 taxes online Most members of the Armed Forces are U. 2010 taxes online S. 2010 taxes online citizens or resident aliens. 2010 taxes online However, if you have questions about your alien status or the alien status of your dependents or spouse, you should read the information in the following paragraphs and see Publication 519. 2010 taxes online Resident Aliens You are considered a resident alien of the United States for tax purposes if you meet either the “green card test” or the “substantial presence test” for the calendar year (January 1–December 31). 2010 taxes online If you meet the substantial presence test for 2014, you did not meet either the green card test or the substantial presence test for 2012 or 2013, and you did not choose to be treated as a resident for part of 2012, you may be able to choose to be treated as a U. 2010 taxes online S. 2010 taxes online resident for part of 2013. 2010 taxes online See First-Year Choice in Publication 519. 2010 taxes online These tests are explained in Publication 519. 2010 taxes online Generally, resident aliens are taxed on their worldwide income and file the same tax forms as U. 2010 taxes online S. 2010 taxes online citizens. 2010 taxes online Treating nonresident alien spouse as resident alien. 2010 taxes online   A nonresident alien spouse can be treated as a resident alien if all the following conditions are met. 2010 taxes online One spouse is a U. 2010 taxes online S. 2010 taxes online citizen or resident alien at the end of the tax year. 2010 taxes online That spouse is married to the nonresident alien at the end of the tax year. 2010 taxes online You both choose to treat the nonresident alien spouse as a resident alien. 2010 taxes online Making the choice. 2010 taxes online   Both you and your spouse must sign a statement and attach it to your joint return for the first tax year for which the choice applies. 2010 taxes online Include in the statement: A declaration that one spouse was a nonresident alien and the other was a U. 2010 taxes online S. 2010 taxes online citizen or resident alien on the last day of the year, A declaration that both spouses choose to be treated as U. 2010 taxes online S. 2010 taxes online residents for the entire tax year, and The name, address, and taxpayer identification number (social security number or individual taxpayer identification number) of each spouse. 2010 taxes online If the nonresident alien spouse is not eligible to get a social security number, he or she should file Form W-7, Application for IRS Individual Taxpayer Identification Number. 2010 taxes online    Once you make this choice, the nonresident alien spouse's worldwide income is subject to U. 2010 taxes online S. 2010 taxes online tax. 2010 taxes online If the nonresident alien spouse has substantial foreign income, there may be no advantage to making this choice. 2010 taxes online Ending the choice. 2010 taxes online   Once you make this choice, it applies to all later years unless one of the following situations occurs. 2010 taxes online You or your spouse revokes the choice. 2010 taxes online You or your spouse dies. 2010 taxes online You and your spouse become legally separated under a decree of divorce or separate maintenance. 2010 taxes online The Internal Revenue Service ends the choice because you or your spouse kept inadequate records. 2010 taxes online For specific details on these situations, see Publication 519. 2010 taxes online   If the choice is ended for any of these reasons, neither spouse can make the choice for any later year. 2010 taxes online Choice not made. 2010 taxes online   If you and your nonresident alien spouse do not make this choice: You cannot file a joint return. 2010 taxes online You can file as married filing separately, or head of household if you qualify. 2010 taxes online You can claim an exemption for your nonresident alien spouse if he or she has no gross income for U. 2010 taxes online S. 2010 taxes online tax purposes and is not another taxpayer's dependent. 2010 taxes online The nonresident alien spouse generally does not have to file a federal income tax return if he or she had no income from sources in the United States. 2010 taxes online If a return has to be filed, see the next discussion. 2010 taxes online The nonresident alien spouse is not eligible for the earned income credit if he or she has to file a return. 2010 taxes online Nonresident Aliens If you are an alien who does not meet the requirements discussed earlier to be a resident alien, you are a nonresident alien. 2010 taxes online If you are required to file a federal tax return, you must file either Form 1040NR, U. 2010 taxes online S. 2010 taxes online Nonresident Alien Income Tax Return, or Form 1040NR-EZ, U. 2010 taxes online S. 2010 taxes online Income Tax Return for Certain Nonresident Aliens With No Dependents. 2010 taxes online See the form instructions for information on who must file and filing status. 2010 taxes online If you are a nonresident alien, you generally must pay tax on income from sources in the United States. 2010 taxes online Your income from conducting a trade or business in the United States is taxed at graduated U. 2010 taxes online S. 2010 taxes online tax rates. 2010 taxes online Other income from U. 2010 taxes online S. 2010 taxes online sources is taxed at a flat 30% (or lower treaty) rate. 2010 taxes online For example, dividends from a U. 2010 taxes online S. 2010 taxes online corporation paid to a nonresident alien generally are subject to a 30% (or lower treaty) rate. 2010 taxes online Dual-Status Aliens You can be both a nonresident and resident alien during the same tax year. 2010 taxes online This usually occurs in the year you arrive in or depart from the United States. 2010 taxes online If you are a dual-status alien, you are taxed on income from all sources for the part of the year you are a resident alien. 2010 taxes online Generally, for the part of the year you are a nonresident alien, you are taxed only on income from sources in the United States. 2010 taxes online Sale of Home You may not have to pay tax on all or part of the gain from the sale of your main home. 2010 taxes online Usually, your main home is the one you live in most of the time. 2010 taxes online It can be a: House, Houseboat, Mobile home, Cooperative apartment, or Condominium. 2010 taxes online You generally can exclude up to $250,000 of gain ($500,000, in most cases, if married filing a joint return) realized on the sale or exchange of a main home in 2013. 2010 taxes online The exclusion is allowed each time you sell or exchange a main home, but generally not more than once every 2 years. 2010 taxes online To be eligible, during the 5-year period ending on the date of the sale, you must have owned the home for at least 2 years (the ownership test), and lived in the home as your main home for at least 2 years (the use test). 2010 taxes online Exception to ownership and use tests. 2010 taxes online   You can exclude gain, but the maximum amount of gain you can exclude will be reduced if you do not meet the ownership and use tests due to a move to a new permanent duty station. 2010 taxes online 5-year test period suspended. 2010 taxes online   You can choose to have the 5-year test period for ownership and use suspended during any period you or your spouse serve on qualified official extended duty as a member of the Armed Forces. 2010 taxes online This means that you may be able to meet the 2-year use test even if, because of your service, you did not actually live in your home for at least the required 2 years during the 5-year period ending on the date of sale. 2010 taxes online Example. 2010 taxes online David bought and moved into a home in 2005. 2010 taxes online He lived in it as his main home for 2½ years. 2010 taxes online For the next 6 years, he did not live in it because he was on qualified official extended duty with the Army. 2010 taxes online He then sold the home at a gain in 2013. 2010 taxes online To meet the use test, David chooses to suspend the 5-year test period for the 6 years he was on qualifying official extended duty. 2010 taxes online This means he can disregard those 6 years. 2010 taxes online Therefore, David's 5-year test period consists of the 5 years before he went on qualifying official extended duty. 2010 taxes online He meets the ownership and use tests because he owned and lived in the home for 2½ years during this test period. 2010 taxes online Period of suspension. 2010 taxes online   The period of suspension cannot last more than 10 years. 2010 taxes online You cannot suspend the 5-year period for more than one property at a time. 2010 taxes online You can revoke your choice to suspend the 5-year period at any time. 2010 taxes online Qualified official extended duty. 2010 taxes online   You are on qualified official extended duty if you serve on extended duty either: At a duty station at least 50 miles from your main home, or While you live in Government quarters under Government orders. 2010 taxes online   You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period. 2010 taxes online Property used for rental or business. 2010 taxes online   You may be able to exclude your gain from the sale of a home that you have used as a rental property or for business. 2010 taxes online However, you must meet the ownership and use tests discussed in Publication 523. 2010 taxes online Nonqualified use. 2010 taxes online   If the sale of your main home results in a gain that is allocated to one or more period(s) of nonqualified use, you cannot exclude that gain from your income. 2010 taxes online   Nonqualified use means any period after 2008 when neither you nor your spouse (or your former spouse) used the property as a main home, with certain exceptions. 2010 taxes online For example, a period of nonqualified use does not include any period (not to exceed a total of 10 years) during which you or your spouse is serving on qualified official extended duty. 2010 taxes online Loss. 2010 taxes online   You cannot deduct a loss from the sale of your main home. 2010 taxes online More information. 2010 taxes online   For more information, see Publication 523. 2010 taxes online Foreclosures There may be tax consequences as a result of compensation payments for foreclosures. 2010 taxes online Payments made for violations of the Service Members Civil Relief Act (SCRA). 2010 taxes online   All service members who received a settlement payment reported on a Form 1099 may need to report the amount on their tax return. 2010 taxes online Generally, you must include settlement payments in income. 2010 taxes online However, the tax treatment of settlement payments will depend on the facts and circumstances. 2010 taxes online Lump Sum Portion of Settlement Payment. 2010 taxes online    Generally, you must include the lump sum payment in gross income. 2010 taxes online In limited circumstances you may be able to exclude part or all of the lump sum payment from gross income. 2010 taxes online For example, you may qualify to exclude part or all of the payment from gross income if you can show that the payment was made to reimburse specific nondeductible expenses (such as living expenses) you incurred because of the SCRA violation. 2010 taxes online Interest Payment on Lump Sum Portion of Settlement Payment. 2010 taxes online    You must include any interest on the lump sum portion of your settlement payment in your income. 2010 taxes online Lost Equity Portion of Settlement Payment. 2010 taxes online    If you lost your main home in foreclosure, you should treat the lost equity payment as an additional amount you received on the foreclosure of the home. 2010 taxes online You will have a gain on the foreclosure only if the sum of the lost equity payment and the value of the main home at foreclosure is more than what you paid for the home. 2010 taxes online In many cases, this gain may be excluded from income. 2010 taxes online For more information on the rules for excluding all or part of any gain from the sale (including a foreclosure) of a main home, see Pub. 2010 taxes online 523, Selling Your Home. 2010 taxes online The rules that apply to a lost equity payment you received for the foreclosure of a property that was not your main home are different. 2010 taxes online    To find rules for reporting gain or loss on the foreclosure of property that was not your main home, see Pub. 2010 taxes online 544, Sales and Other Dispositions of Assets. 2010 taxes online Interest Payment on Lost Equity Portion of Settlement Payment. 2010 taxes online    You must include any interest on the lost equity portion of your settlement payment in your income. 2010 taxes online Itemized Deductions To figure your taxable income, you must subtract either your standard deduction or your itemized deductions from adjusted gross income. 2010 taxes online For information on the standard deduction, see Publication 501. 2010 taxes online Itemized deductions are figured on Schedule A (Form 1040). 2010 taxes online This chapter discusses miscellaneous itemized deductions of particular interest to members of the Armed Forces. 2010 taxes online For information on other itemized deductions, see the publications listed below. 2010 taxes online Publication 502, Medical and Dental Expenses. 2010 taxes online Publication 526, Charitable Contributions. 2010 taxes online Publication 547, Casualties, Disasters, and Thefts. 2010 taxes online Publication 550, Investment Income and Expenses. 2010 taxes online You must reduce the total of most miscellaneous itemized deductions by 2% of your adjusted gross income. 2010 taxes online For information on deductions that are not subject to the 2% limit, see Publication 529. 2010 taxes online Employee Business Expenses Deductible employee business expenses generally are miscellaneous itemized deductions subject to the 2% limit. 2010 taxes online Certain employee business expenses are deductible as adjustments to income. 2010 taxes online For information on many employee business expenses, see Publication 463. 2010 taxes online Generally, you must file Form 2106, Employee Business Expenses, or Form 2106-EZ, Unreimbursed Employee Business Expenses, to claim these expenses. 2010 taxes online You do not have to file Form 2106 or Form 2106-EZ if you are claiming only unreimbursed expenses for uniforms, professional society dues, and work-related educational expenses (all discussed later). 2010 taxes online You can deduct these expenses directly on Schedule A (Form 1040). 2010 taxes online Reimbursement. 2010 taxes online   Generally, to receive advances, reimbursements, or other allowances from the government, you must adequately account for your expenses and return any excess reimbursement. 2010 taxes online Your reimbursed expenses are not deductible. 2010 taxes online   If your expenses are more than your reimbursement, the excess expenses are deductible (subject to the 2% limit) if you can prove them. 2010 taxes online You must file Form 2106 to report these expenses. 2010 taxes online   You can use the shorter Form 2106-EZ if you meet all three of the following conditions. 2010 taxes online You are an employee deducting expenses related to your job. 2010 taxes online You were not reimbursed by your employer for your expenses. 2010 taxes online (Amounts included in box 1 of Form W-2 are not considered reimbursements. 2010 taxes online ) If you claim car expenses, you use the standard mileage rate. 2010 taxes online    For 2013, the standard mileage rate is 56. 2010 taxes online 5 cents a mile for all business miles driven. 2010 taxes online This rate is adjusted periodically. 2010 taxes online Travel Expenses You can deduct unreimbursed travel expenses only if they are incurred while you are traveling away from home. 2010 taxes online If you are a member of the U. 2010 taxes online S. 2010 taxes online Armed Forces on a permanent duty assignment overseas, you are not traveling away from home. 2010 taxes online You cannot deduct your expenses for meals and lodging while at your permanent duty station. 2010 taxes online You cannot deduct these expenses even if you have to maintain a home in the United States for your family members who are not allowed to accompany you overseas. 2010 taxes online A naval officer assigned to permanent duty aboard a ship that has regular eating and living facilities has a home aboard ship for travel expense purposes. 2010 taxes online To be deductible, your travel expenses must be work related. 2010 taxes online You cannot deduct any expenses for personal travel, such as visits to family while on furlough, leave, or liberty. 2010 taxes online Away from home. 2010 taxes online   Home is your permanent duty station (which can be a ship or base), regardless of where you or your family live. 2010 taxes online You are away from home if you are away from your permanent duty station substantially longer than an ordinary day's work and you need to get sleep or rest to meet the demands of your work while away from home. 2010 taxes online   Examples of deductible travel expenses include: Expenses for business-related meals (generally limited to 50% of your unreimbursed cost), lodging, taxicabs, business telephone calls, tips, laundry, and dry cleaning while you are away from home on temporary duty or temporary additional duty, and Expenses of carrying out official business while on “No Cost” orders. 2010 taxes online    You cannot deduct any expenses for travel away from home if the temporary assignment in a single location is realistically expected to last (and does in fact last) for more than 1 year. 2010 taxes online This rule may not apply if you are participating in a federal crime investigation or prosecution. 2010 taxes online For more information, see Publication 463 and the Form 2106 instructions. 2010 taxes online Transportation Expenses These expenses include the ordinary and necessary costs of: Getting from one workplace to another when you are not away from home, Going to a business meeting away from your regular workplace, and Getting from your home to a temporary workplace when you have a regular place of work. 2010 taxes online These expenses include the costs of transportation by air, bus, rail, taxi, and driving and maintaining your car. 2010 taxes online Transportation expenses incurred while traveling away from home are included with your travel expenses, discussed earlier. 2010 taxes online However, if you use your car while traveling away from home overnight, see the rules in chapter 4 of Publication 463 to figure your car expense deduction. 2010 taxes online If you must go from one workplace to another while on duty (for example, as a courier or to attend meetings) without being away from home, your unreimbursed transportation expenses are deductible. 2010 taxes online However, the expenses of getting to and from your regular place of work (commuting) are not deductible. 2010 taxes online Temporary work location. 2010 taxes online   If you have one or more regular places of business away from your home and you commute to a temporary work location in the same trade or business, you can deduct the expenses of the daily round-trip transportation between your home and the temporary location. 2010 taxes online   Generally, if your employment at a work location is realistically expected to last (and does in fact last) for 1 year or less, the employment is temporary. 2010 taxes online   If your employment at a work location is realistically expected to last for more than 1 year or if there is no realistic expectation that the employment will last for 1 year or less, the employment is not temporary, regardless of whether it actually lasts for more than 1 year. 2010 taxes online If employment at a work location initially is realistically expected to last for 1 year or less, but at some later date the employment is realistically expected to last more than 1 year, that employment will be treated as temporary (unless there are facts and circumstances that would indicate otherwise) until your expectation changes. 2010 taxes online    If you do not have a regular place of business, but you ordinarily work in the metropolitan area where you live, you can deduct daily transportation expenses between your home and a temporary work site outside your metropolitan area. 2010 taxes online However, you cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. 2010 taxes online These are nondeductible commuting costs. 2010 taxes online Armed Forces reservists. 2010 taxes online   A meeting of an Armed Forces reserve unit is a second place of business if the meeting is held on a day on which you work at your regular job. 2010 taxes online You can deduct the expense of getting from one workplace to the other. 2010 taxes online You usually cannot deduct the expense if the reserve meeting is held on a day on which you do not work at your regular job. 2010 taxes online In this case, your transportation generally is a nondeductible commuting expense. 2010 taxes online However, you can deduct your transportation expenses if the location of the meeting is temporary and you have one or more regular places of work. 2010 taxes online   If you ordinarily work in a particular metropolitan area but not at any specific location and the reserve meeting is held at a temporary location outside that metropolitan area, you can deduct your transportation expenses. 2010 taxes online If you travel away from home overnight to attend a guard or reserve meeting, you can deduct your travel expenses. 2010 taxes online See Armed Forces Reservists under Adjustments to Income, earlier. 2010 taxes online Uniforms You usually cannot deduct the expenses for uniform cost and upkeep. 2010 taxes online Generally, you must wear uniforms when on duty and you are allowed to wear them when off duty. 2010 taxes online If military regulations prohibit you from wearing certain uniforms when off duty, you can deduct the cost and upkeep of the uniforms, but you must reduce your expenses by any allowance or reimbursement you receive. 2010 taxes online Unreimbursed expenses for the cost and upkeep of the following articles are deductible. 2010 taxes online Military battle dress uniforms and utility uniforms that you cannot wear when off duty. 2010 taxes online Articles not replacing regular clothing, including insignia of rank, corps devices, epaulets, aiguillettes, and swords. 2010 taxes online Reservists' uniforms if you can wear the uniform only while performing duties as a reservist. 2010 taxes online Professional Dues You can deduct unreimbursed dues paid to professional societies directly related to your military position. 2010 taxes online However, you cannot deduct amounts paid to an officers' club or a noncommissioned officers' club. 2010 taxes online Example. 2010 taxes online Lieutenant Margaret Allen, an electrical engineer at Maxwell Air Force Base, can deduct professional dues paid to the American Society of Electrical Engineers. 2010 taxes online Educational Expenses You can deduct the unreimbursed costs of qualifying work-related education. 2010 taxes online This is education that meets at least one of the following two tests. 2010 taxes online The education is required by your employer or the law to keep your present salary, status, or job. 2010 taxes online The required education must serve a bona fide business purpose of your employer. 2010 taxes online The education maintains or improves skills needed in your present work. 2010 taxes online However, even if the education meets one or both of the above tests, it is not qualifying education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. 2010 taxes online You can deduct the expenses for qualifying work-related education even if the education could lead to a degree. 2010 taxes online Example 1. 2010 taxes online Lieutenant Colonel Mason has a degree in financial management and is in charge of base finances at her post of duty. 2010 taxes online She took an advanced finance course. 2010 taxes online She already meets the minimum qualifications for her job. 2010 taxes online By taking the course, she is improving skills in her current position. 2010 taxes online The course does not qualify her for a new trade or business. 2010 taxes online She can deduct educational expenses that are more than the educational allowance she received. 2010 taxes online Example 2. 2010 taxes online Major Williams worked in the military base legal office as a legal intern. 2010 taxes online He was placed in excess leave status by his employer to attend law school. 2010 taxes online He paid all his educational expenses and was not reimbursed. 2010 taxes online After obtaining his law degree, he passed the state bar exam and worked as a judge advocate. 2010 taxes online His educational expenses are not deductible because the law degree qualified him for a new trade or business, even though the education maintained and improved his skills in his work. 2010 taxes online Travel to obtain education. 2010 taxes online   If your work-related education qualifies, you can deduct the costs of travel, including meals (subject to the 50% limit), and lodging, if the main purpose of the trip is to obtain the education. 2010 taxes online   You cannot deduct the cost of travel that is itself a form of education, even if it is directly related to your duties in your work or business. 2010 taxes online Transportation for education. 2010 taxes online   If your work-related education qualifies for a deduction, you can deduct the costs of transportation to obtain that education. 2010 taxes online However, you cannot deduct the cost of services provided in kind, such as base-provided transportation to or from class. 2010 taxes online Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. 2010 taxes online   If you need more information on educational expenses, see Publication 970. 2010 taxes online Repayments If you had to repay to your employer an amount that you included in your income in an earlier year, you may be able to deduct the repaid amount from your income for the year in which you repaid it. 2010 taxes online Repayment of $3,000 or less. 2010 taxes online   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. 2010 taxes online If you reported it as wages, deduct it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. 2010 taxes online Repayment over $3,000. 2010 taxes online   If the amount you repaid was more than $3,000, see Repayments in Publication 525. 2010 taxes online Credits After you have figured your taxable income and tax liability, you can determine if you are entitled to any tax credits. 2010 taxes online This publication discusses the first-time homebuyer credit, child tax credit, earned income credit, and credit for excess social security tax withheld. 2010 taxes online For information on other credits, see your tax form instructions. 2010 taxes online First-Time Homebuyer Credit The first-time homebuyer credit is not available for homes purchased after 2011. 2010 taxes online In 2011, this credit had already expired for most taxpayers, however, certain members of the uniformed services and Foreign Service and certain employees of the intelligence community could claim the credit for homes purchased in 2011. 2010 taxes online If you bought the home (and claimed the credit) after 2008, you generally must repay the credit if you dispose of the home or the home stops being your main home within the 36-month period beginning on the purchase date. 2010 taxes online If the home continues to be your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit. 2010 taxes online If you bought your home in 2008, you generally must repay the credit over a 15-year period in 15 equal installments. 2010 taxes online For more information, see Form 5405, Repayment of the First-Time Homebuyer Credit, and its instructions. 2010 taxes online Child Tax Credit The child tax credit is a credit that may reduce your tax by as much as $1,000 for each of your qualifying children. 2010 taxes online The additional child tax credit is a credit you may be able to take if you are not able to claim the full amount of the child tax credit. 2010 taxes online The child tax credit is not the same as the credit for child and dependent care expenses. 2010 taxes online See Publication 503 for information on the credit for child and dependent care expenses. 2010 taxes online Qualifying Child A qualifying child for purposes of the child tax credit is a child who: Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew), Was under age 17 at the end of 2013, Did not provide over half of his or her own support for 2013, Lived with you for more than half of 2013 (see Exceptions to time lived with you, later), Is claimed as a dependent on your return, Does not file a joint return for the year (or files it only as a claim for refund), and Was a U. 2010 taxes online S. 2010 taxes online citizen, a U. 2010 taxes online S. 2010 taxes online national, or a U. 2010 taxes online S. 2010 taxes online resident alien. 2010 taxes online If the child was adopted, see Adopted child . 2010 taxes online For each qualifying child you must check the box on Form 1040 or Form 1040A, line 6c, column (4). 2010 taxes online Exceptions to time lived with you. 2010 taxes online   A child is considered to have lived with you for all of 2013 if the child was born or died in 2013 and your home was this child's home for the entire time he or she was alive. 2010 taxes online Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service, or detention in a juvenile facility, count as time the child lived with you. 2010 taxes online   There are also exceptions for kidnapped children and children of divorced or separated parents. 2010 taxes online For details, see Publication 501. 2010 taxes online Qualifying child of more than one person. 2010 taxes online   A special rule applies if your qualifying child is the qualifying child of more than one person. 2010 taxes online For details, see Publication 501. 2010 taxes online Adopted child. 2010 taxes online   An adopted child is always treated as your own child. 2010 taxes online An adopted child includes a child lawfully placed with you for legal adoption. 2010 taxes online   If you are a U. 2010 taxes online S. 2010 taxes online citizen or U. 2010 taxes online S. 2010 taxes online national and your adopted child lived with you as a member of your household all year, that child meets condition (7) above to be a qualifying child for the child tax credit. 2010 taxes online Amount of Credit The maximum amount you can claim for the credit is $1,000 for each qualifying child. 2010 taxes online Limits on the credit. 2010 taxes online   You must reduce your child tax credit if either (1) or (2), below, applies. 2010 taxes online The amount on Form 1040, line 46, or Form 1040A, line 28, is less than the credit. 2010 taxes online If the amount is zero, you cannot take this credit because there is no tax to reduce. 2010 taxes online However, you may be able to take the additional child tax credit. 2010 taxes online See Additional Child Tax Credit , later. 2010 taxes online Your modified adjusted gross income (AGI) is more than the amount shown below for your filing status. 2010 taxes online Married filing jointly — $110,000. 2010 taxes online Single, head of household,  or qualifying widow(er) — $75,000. 2010 taxes online Married filing separately — $55,000. 2010 taxes online Modified AGI. 2010 taxes online   For purposes of the child tax credit, your modified AGI is the amount on Form 1040, line 38, or Form 1040A, line 22, plus the following amounts that may apply to you. 2010 taxes online Any amount excluded from income because of the exclusion of income from Puerto Rico. 2010 taxes online Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income. 2010 taxes online Any amount on line 18 of Form 2555-EZ, Foreign Earned Income Exclusion. 2010 taxes online Any amount on line 15 of Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa. 2010 taxes online   If you do not have any of the above, your modified AGI is the same as your AGI. 2010 taxes online Claiming the Credit To claim the child tax credit, you must file Form 1040 or Form 1040A. 2010 taxes online For more information on the child tax credit, see the instructions for Form 1040 or Form 1040A. 2010 taxes online Also attach Schedule 8812, Child Tax Credit, if required. 2010 taxes online Additional Child Tax Credit This credit is for certain individuals who get less than the full amount of the child tax credit. 2010 taxes online The additional child tax credit may give you a refund even if you do not owe any tax. 2010 taxes online For more information, see the instructions for Form 1040 or Form 1040A, and Schedule 8812. 2010 taxes online Earned Income Credit The earned income credit (EIC) is a cr