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2012 Tax Forms 1040

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2012 Tax Forms 1040

2012 tax forms 1040 Publication 561 - Main Contents Table of Contents What Is Fair Market Value (FMV)?Factors. 2012 tax forms 1040 Stock. 2012 tax forms 1040 Options. 2012 tax forms 1040 Determining Fair Market Value Problems in Determining Fair Market Value Valuation of Various Kinds of PropertyHousehold Goods Used Clothing Jewelry and Gems Paintings, Antiques, and Other Objects of Art Collections Cars, Boats, and Aircraft Inventory Patents Stocks and Bonds Real Estate Interest in a Business Annuities, Interests for Life or Terms of Years, Remainders, and Reversions Certain Life Insurance and Annuity Contracts Partial Interest in Property Not in Trust AppraisalsDeductions of More Than $5,000 Deductions of More Than $500,000 Qualified Appraisal Form 8283 Internal Revenue Service Review of Appraisals Penalty How To Get Tax HelpLow income tax clinics (LITCs). 2012 tax forms 1040 What Is Fair Market Value (FMV)? To figure how much you may deduct for property that you contribute, you must first determine its fair market value on the date of the contribution. 2012 tax forms 1040 Fair market value. 2012 tax forms 1040   Fair market value (FMV) is the price that property would sell for on the open market. 2012 tax forms 1040 It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. 2012 tax forms 1040 If you put a restriction on the use of property you donate, the FMV must reflect that restriction. 2012 tax forms 1040 Example 1. 2012 tax forms 1040 If you give used clothing to the Salvation Army, the FMV would be the price that typical buyers actually pay for clothing of this age, condition, style, and use. 2012 tax forms 1040 Usually, such items are worth far less than what you paid for them. 2012 tax forms 1040 Example 2. 2012 tax forms 1040 If you donate land and restrict its use to agricultural purposes, you must value the land at its value for agricultural purposes, even though it would have a higher FMV if it were not restricted. 2012 tax forms 1040 Factors. 2012 tax forms 1040   In making and supporting the valuation of property, all factors affecting value are relevant and must be considered. 2012 tax forms 1040 These include: The cost or selling price of the item, Sales of comparable properties, Replacement cost, and Opinions of experts. 2012 tax forms 1040   These factors are discussed later. 2012 tax forms 1040 Also, see Table 1 for a summary of questions to ask as you consider each factor. 2012 tax forms 1040 Date of contribution. 2012 tax forms 1040   Ordinarily, the date of a contribution is the date that the transfer of the property takes place. 2012 tax forms 1040 Stock. 2012 tax forms 1040   If you deliver, without any conditions, a properly endorsed stock certificate to a qualified organization or to an agent of the organization, the date of the contribution is the date of delivery. 2012 tax forms 1040 If the certificate is mailed and received through the regular mail, it is the date of mailing. 2012 tax forms 1040 If you deliver the certificate to a bank or broker acting as your agent or to the issuing corporation or its agent, for transfer into the name of the organization, the date of the contribution is the date the stock is transferred on the books of the corporation. 2012 tax forms 1040 Options. 2012 tax forms 1040   If you grant an option to a qualified organization to buy real property, you have not made a charitable contribution until the organization exercises the option. 2012 tax forms 1040 The amount of the contribution is the FMV of the property on the date the option is exercised minus the exercise price. 2012 tax forms 1040 Example. 2012 tax forms 1040 You grant an option to a local university, which is a qualified organization, to buy real property. 2012 tax forms 1040 Under the option, the university could buy the property at any time during a 2-year period for $40,000. 2012 tax forms 1040 The FMV of the property on the date the option is granted is $50,000. 2012 tax forms 1040 In the following tax year, the university exercises the option. 2012 tax forms 1040 The FMV of the property on the date the option is exercised is $55,000. 2012 tax forms 1040 Therefore, you have made a charitable contribution of $15,000 ($55,000, the FMV, minus $40,000, the exercise price) in the tax year the option is exercised. 2012 tax forms 1040 Determining Fair Market Value Determining the value of donated property would be a simple matter if you could rely only on fixed formulas, rules, or methods. 2012 tax forms 1040 Usually it is not that simple. 2012 tax forms 1040 Using such formulas, etc. 2012 tax forms 1040 , seldom results in an acceptable determination of FMV. 2012 tax forms 1040 There is no single formula that always applies when determining the value of property. 2012 tax forms 1040 This is not to say that a valuation is only guesswork. 2012 tax forms 1040 You must consider all the facts and circumstances connected with the property, such as its desirability, use, and scarcity. 2012 tax forms 1040 For example, donated furniture should not be evaluated at some fixed rate such as 15% of the cost of new replacement furniture. 2012 tax forms 1040 When the furniture is contributed, it may be out of style or in poor condition, therefore having little or no market value. 2012 tax forms 1040 On the other hand, it may be an antique, the value of which could not be determined by using any formula. 2012 tax forms 1040 Cost or Selling Price of the Donated Property The cost of the property to you or the actual selling price received by the qualified organization may be the best indication of its FMV. 2012 tax forms 1040 However, because conditions in the market change, the cost or selling price of property may have less weight if the property was not bought or sold reasonably close to the date of contribution. 2012 tax forms 1040 The cost or selling price is a good indication of the property's value if: The purchase or sale took place close to the valuation date in an open market, The purchase or sale was at “arm's-length,” The buyer and seller knew all relevant facts, The buyer and seller did not have to act, and The market did not change between the date of purchase or sale and the valuation date. 2012 tax forms 1040 Example. 2012 tax forms 1040 Tom Morgan, who is not a dealer in gems, bought an assortment of gems for $5,000 from a promoter. 2012 tax forms 1040 The promoter claimed that the price was “wholesale” even though he and other dealers made similar sales at similar prices to other persons who were not dealers. 2012 tax forms 1040 The promoter said that if Tom kept the gems for more than 1 year and then gave them to charity, Tom could claim a charitable deduction of $15,000, which, according to the promoter, would be the value of the gems at the time of contribution. 2012 tax forms 1040 Tom gave the gems to a qualified charity 13 months after buying them. 2012 tax forms 1040 The selling price for these gems had not changed from the date of purchase to the date he donated them to charity. 2012 tax forms 1040 The best evidence of FMV depends on actual transactions and not on some artificial estimate. 2012 tax forms 1040 The $5,000 charged Tom and others is, therefore, the best evidence of the maximum FMV of the gems. 2012 tax forms 1040 Terms of the purchase or sale. 2012 tax forms 1040   The terms of the purchase or sale should be considered in determining FMV if they influenced the price. 2012 tax forms 1040 These terms include any restrictions, understandings, or covenants limiting the use or disposition of the property. 2012 tax forms 1040 Rate of increase or decrease in value. 2012 tax forms 1040   Unless you can show that there were unusual circumstances, it is assumed that the increase or decrease in the value of your donated property from your cost has been at a reasonable rate. 2012 tax forms 1040 For time adjustments, an appraiser may consider published price indexes for information on general price trends, building costs, commodity costs, securities, and works of art sold at auction in arm's-length sales. 2012 tax forms 1040 Example. 2012 tax forms 1040 Bill Brown bought a painting for $10,000. 2012 tax forms 1040 Thirteen months later he gave it to an art museum, claiming a charitable deduction of $15,000 on his tax return. 2012 tax forms 1040 The appraisal of the painting should include information showing that there were unusual circumstances that justify a 50% increase in value for the 13 months Bill held the property. 2012 tax forms 1040 Arm's-length offer. 2012 tax forms 1040   An arm's-length offer to buy the property close to the valuation date may help to prove its value if the person making the offer was willing and able to complete the transaction. 2012 tax forms 1040 To rely on an offer, you should be able to show proof of the offer and the specific amount to be paid. 2012 tax forms 1040 Offers to buy property other than the donated item will help to determine value if the other property is reasonably similar to the donated property. 2012 tax forms 1040 Sales of Comparable Properties The sales prices of properties similar to the donated property are often important in determining the FMV. 2012 tax forms 1040 The weight to be given to each sale depends on the following. 2012 tax forms 1040 The degree of similarity between the property sold and the donated property. 2012 tax forms 1040 The time of the sale—whether it was close to the valuation date. 2012 tax forms 1040 The circumstances of the sale—whether it was at arm's-length with a knowledgeable buyer and seller, with neither having to act. 2012 tax forms 1040 The conditions of the market in which the sale was made—whether unusually inflated or deflated. 2012 tax forms 1040 The comparable sales method of valuing real estate is explained later under Valuation of Various Kinds of Property. 2012 tax forms 1040 Example 1. 2012 tax forms 1040 Mary Black, who is not a book dealer, paid a promoter $10,000 for 500 copies of a single edition of a modern translation of the Bible. 2012 tax forms 1040 The promoter had claimed that the price was considerably less than the “retail” price, and gave her a statement that the books had a total retail value of $30,000. 2012 tax forms 1040 The promoter advised her that if she kept the Bibles for more than 1 year and then gave them to a qualified organization, she could claim a charitable deduction for the “retail” price of $30,000. 2012 tax forms 1040 Thirteen months later she gave all the Bibles to a church that she selected from a list provided by the promoter. 2012 tax forms 1040 At the time of her donation, wholesale dealers were selling similar quantities of Bibles to the general public for $10,000. 2012 tax forms 1040 The FMV of the Bibles is $10,000, the price at which similar quantities of Bibles were being sold to others at the time of the contribution. 2012 tax forms 1040 Example 2. 2012 tax forms 1040 The facts are the same as in Example 1, except that the promoter gave Mary Black a second option. 2012 tax forms 1040 The promoter said that if Mary wanted a charitable deduction within 1 year of the purchase, she could buy the 500 Bibles at the “retail” price of $30,000, paying only $10,000 in cash and giving a promissory note for the remaining $20,000. 2012 tax forms 1040 The principal and interest on the note would not be due for 12 years. 2012 tax forms 1040 According to the promoter, Mary could then, within 1 year of the purchase, give the Bibles to a qualified organization and claim the full $30,000 retail price as a charitable contribution. 2012 tax forms 1040 She purchased the Bibles under the second option and, 3 months later, gave them to a church, which will use the books for church purposes. 2012 tax forms 1040 At the time of the gift, the promoter was selling similar lots of Bibles for either $10,000 or $30,000. 2012 tax forms 1040 The difference between the two prices was solely at the discretion of the buyer. 2012 tax forms 1040 The promoter was a willing seller for $10,000. 2012 tax forms 1040 Therefore, the value of Mary's contribution of the Bibles is $10,000, the amount at which similar lots of Bibles could be purchased from the promoter by members of the general public. 2012 tax forms 1040 Replacement Cost The cost of buying, building, or manufacturing property similar to the donated item should be considered in determining FMV. 2012 tax forms 1040 However, there must be a reasonable relationship between the replacement cost and the FMV. 2012 tax forms 1040 The replacement cost is the amount it would cost to replace the donated item on the valuation date. 2012 tax forms 1040 Often there is no relationship between the replacement cost and the FMV. 2012 tax forms 1040 If the supply of the donated property is more or less than the demand for it, the replacement cost becomes less important. 2012 tax forms 1040 To determine the replacement cost of the donated property, find the “estimated replacement cost new. 2012 tax forms 1040 ” Then subtract from this figure an amount for depreciation due to the physical condition and obsolescence of the donated property. 2012 tax forms 1040 You should be able to show the relationship between the depreciated replacement cost and the FMV, as well as how you arrived at the “estimated replacement cost new. 2012 tax forms 1040 ” Opinions of Experts Generally, the weight given to an expert's opinion on matters such as the authenticity of a coin or a work of art, or the most profitable and best use of a piece of real estate, depends on the knowledge and competence of the expert and the thoroughness with which the opinion is supported by experience and facts. 2012 tax forms 1040 For an expert's opinion to deserve much weight, the facts must support the opinion. 2012 tax forms 1040 For additional information, see Appraisals, later. 2012 tax forms 1040 Table 1. 2012 tax forms 1040 Factors That Affect FMV IF the factor you are considering is. 2012 tax forms 1040 . 2012 tax forms 1040 . 2012 tax forms 1040 THEN you should ask these questions. 2012 tax forms 1040 . 2012 tax forms 1040 . 2012 tax forms 1040     cost or selling price Was the purchase or sale of the property reasonably close to the date of contribution? Was any increase or decrease in value, as compared to your cost, at a reasonable rate? Do the terms of purchase or sale limit what can be done with the property? Was there an arm's-length offer to buy the property close to the valuation date?     sales of comparable properties How similar is the property sold to the property donated? How close is the date of sale to the valuation date? Was the sale at arm's-length? What was the condition of the market at the time of sale?     replacement cost What would it cost to replace the donated property? Is there a reasonable relationship between replacement cost and FMV? Is the supply of the donated property more or less than the demand for it?     opinions of experts Is the expert knowledgeable and competent? Is the opinion thorough and supported by facts and experience? Problems in Determining Fair Market Value There are a number of problems in determining the FMV of donated property. 2012 tax forms 1040 Unusual Market Conditions The sale price of the property itself in an arm's-length transaction in an open market is often the best evidence of its value. 2012 tax forms 1040 When you rely on sales of comparable property, the sales must have been made in an open market. 2012 tax forms 1040 If those sales were made in a market that was artificially supported or stimulated so as not to be truly representative, the prices at which the sales were made will not indicate the FMV. 2012 tax forms 1040 For example, liquidation sale prices usually do not indicate the FMV. 2012 tax forms 1040 Also, sales of stock under unusual circumstances, such as sales of small lots, forced sales, and sales in a restricted market, may not represent the FMV. 2012 tax forms 1040 Selection of Comparable Sales Using sales of comparable property is an important method for determining the FMV of donated property. 2012 tax forms 1040 However, the amount of weight given to a sale depends on the degree of similarity between the comparable and the donated properties. 2012 tax forms 1040 The degree of similarity must be close enough so that this selling price would have been given consideration by reasonably well-informed buyers or sellers of the property. 2012 tax forms 1040 Example. 2012 tax forms 1040 You give a rare, old book to your former college. 2012 tax forms 1040 The book is a third edition and is in poor condition because of a missing back cover. 2012 tax forms 1040 You discover that there was a sale for $300, near the valuation date, of a first edition of the book that was in good condition. 2012 tax forms 1040 Although the contents are the same, the books are not at all similar because of the different editions and their physical condition. 2012 tax forms 1040 Little consideration would be given to the selling price of the $300 property by knowledgeable buyers or sellers. 2012 tax forms 1040 Future Events You may not consider unexpected events happening after your donation of property in making the valuation. 2012 tax forms 1040 You may consider only the facts known at the time of the gift, and those that could be reasonably expected at the time of the gift. 2012 tax forms 1040 Example. 2012 tax forms 1040 You give farmland to a qualified charity. 2012 tax forms 1040 The transfer provides that your mother will have the right to all income and full use of the property for her life. 2012 tax forms 1040 Even though your mother dies 1 week after the transfer, the value of the property on the date it is given is its present value, subject to the life interest as estimated from actuarial tables. 2012 tax forms 1040 You may not take a higher deduction because the charity received full use and possession of the land only 1 week after the transfer. 2012 tax forms 1040 Using Past Events to Predict the Future A common error is to rely too much on past events that do not fairly reflect the probable future earnings and FMV. 2012 tax forms 1040 Example. 2012 tax forms 1040 You give all your rights in a successful patent to your favorite charity. 2012 tax forms 1040 Your records show that before the valuation date there were three stages in the patent's history of earnings. 2012 tax forms 1040 First, there was rapid growth in earnings when the invention was introduced. 2012 tax forms 1040 Then, there was a period of high earnings when the invention was being exploited. 2012 tax forms 1040 Finally, there was a decline in earnings when competing inventions were introduced. 2012 tax forms 1040 The entire history of earnings may be relevant in estimating the future earnings. 2012 tax forms 1040 However, the appraiser must not rely too much on the stage of rapid growth in earnings, or of high earnings. 2012 tax forms 1040 The market conditions at those times do not represent the condition of the market at the valuation date. 2012 tax forms 1040 What is most significant is the trend of decline in earnings up to the valuation date. 2012 tax forms 1040 For more information about donations of patents, see Patents, later. 2012 tax forms 1040 Valuation of Various Kinds of Property This section contains information on determining the FMV of ordinary kinds of donated property. 2012 tax forms 1040 For information on appraisals, see Appraisals, later. 2012 tax forms 1040 Household Goods The FMV of used household goods, such as furniture, appliances, and linens, is usually much lower than the price paid when new. 2012 tax forms 1040 Such used property may have little or no market value because of its worn condition. 2012 tax forms 1040 It may be out of style or no longer useful. 2012 tax forms 1040 You cannot take a deduction for household goods donated after August 17, 2006, unless they are in good used condition or better. 2012 tax forms 1040 A household good that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. 2012 tax forms 1040 See Deduction over $500 for certain clothing or household items, later. 2012 tax forms 1040 If the property is valuable because it is old or unique, see the discussion under Paintings, Antiques, and Other Objects of Art. 2012 tax forms 1040 Used Clothing Used clothing and other personal items are usually worth far less than the price you paid for them. 2012 tax forms 1040 Valuation of items of clothing does not lend itself to fixed formulas or methods. 2012 tax forms 1040 The price that buyers of used items actually pay in used clothing stores, such as consignment or thrift shops, is an indication of the value. 2012 tax forms 1040 You cannot take a deduction for clothing donated after August 17, 2006, unless it is in good used condition or better. 2012 tax forms 1040 An item of clothing that is not in good used condition or better for which you take a deduction of more than $500 requires a qualified appraisal. 2012 tax forms 1040 See Deduction over $500 for certain clothing or household items, later. 2012 tax forms 1040 For valuable furs or very expensive gowns, a Form 8283 may have to be sent with your tax return. 2012 tax forms 1040 Jewelry and Gems Jewelry and gems are of such a specialized nature that it is almost always necessary to get an appraisal by a specialized jewelry appraiser. 2012 tax forms 1040 The appraisal should describe, among other things, the style of the jewelry, the cut and setting of the gem, and whether it is now in fashion. 2012 tax forms 1040 If not in fashion, the possibility of having the property redesigned, recut, or reset should be reported in the appraisal. 2012 tax forms 1040 The stone's coloring, weight, cut, brilliance, and flaws should be reported and analyzed. 2012 tax forms 1040 Sentimental personal value has no effect on FMV. 2012 tax forms 1040 But if the jewelry was owned by a famous person, its value might increase. 2012 tax forms 1040 Paintings, Antiques, and Other Objects of Art Your deduction for contributions of paintings, antiques, and other objects of art, should be supported by a written appraisal from a qualified and reputable source, unless the deduction is $5,000 or less. 2012 tax forms 1040 Examples of information that should be included in appraisals of art objects—paintings in particular—are found later under Qualified Appraisal. 2012 tax forms 1040 Art valued at $20,000 or more. 2012 tax forms 1040   If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the signed appraisal to your return. 2012 tax forms 1040 For individual objects valued at $20,000 or more, a photograph of a size and quality fully showing the object, preferably an 8 x 10 inch color photograph or a color transparency no smaller than 4 x 5 inches, must be provided upon request. 2012 tax forms 1040 Art valued at $50,000 or more. 2012 tax forms 1040   If you donate an item of art that has been appraised at $50,000 or more, you can request a Statement of Value for that item from the IRS. 2012 tax forms 1040 You must request the statement before filing the tax return that reports the donation. 2012 tax forms 1040 Your request must include the following. 2012 tax forms 1040 A copy of a qualified appraisal of the item. 2012 tax forms 1040 See Qualified Appraisal, later. 2012 tax forms 1040 A $2,500 check or money order payable to the Internal Revenue Service for the user fee that applies to your request regarding one, two, or three items of art. 2012 tax forms 1040 Add $250 for each item in excess of three. 2012 tax forms 1040 A completed Form 8283, Section B. 2012 tax forms 1040 The location of the IRS territory that has examination responsibility for your return. 2012 tax forms 1040 If your request lacks essential information, you will be notified and given 30 days to provide the missing information. 2012 tax forms 1040   Send your request to: Internal Revenue Service Attention: Art Appraisal (C:AP:ART) P. 2012 tax forms 1040 O. 2012 tax forms 1040 Box 27720 McPherson Station Washington, DC 20038 Refunds. 2012 tax forms 1040   You can withdraw your request for a Statement of Value at any time before it is issued. 2012 tax forms 1040 However, the IRS will not refund the user fee if you do. 2012 tax forms 1040   If the IRS declines to issue a Statement of Value in the interest of efficient tax administration, the IRS will refund the user fee. 2012 tax forms 1040 Authenticity. 2012 tax forms 1040   The authenticity of the donated art must be determined by the appraiser. 2012 tax forms 1040 Physical condition. 2012 tax forms 1040   Important items in the valuation of antiques and art are physical condition and extent of restoration. 2012 tax forms 1040 These have a significant effect on the value and must be fully reported in an appraisal. 2012 tax forms 1040 An antique in damaged condition, or lacking the “original brasses,” may be worth much less than a similar piece in excellent condition. 2012 tax forms 1040 Art appraisers. 2012 tax forms 1040   More weight will usually be given to an appraisal prepared by an individual specializing in the kind and price range of the art being appraised. 2012 tax forms 1040 Certain art dealers or appraisers specialize, for example, in old masters, modern art, bronze sculpture, etc. 2012 tax forms 1040 Their opinions on the authenticity and desirability of such art would usually be given more weight than the opinions of more generalized art dealers or appraisers. 2012 tax forms 1040 They can report more recent comparable sales to support their opinion. 2012 tax forms 1040   To identify and locate experts on unique, specialized items or collections, you may wish to use the current Official Museum Directory of the American Association of Museums. 2012 tax forms 1040 It lists museums both by state and by category. 2012 tax forms 1040   To help you locate a qualified appraiser for your donation, you may wish to ask an art historian at a nearby college or the director or curator of a local museum. 2012 tax forms 1040 The Yellow Pages often list specialized art and antique dealers, auctioneers, and art appraisers. 2012 tax forms 1040 You may be able to find a qualified appraiser on the Internet. 2012 tax forms 1040 You may also contact associations of dealers for guidance. 2012 tax forms 1040 Collections Since many kinds of hobby collections may be the subject of a charitable donation, it is not possible to discuss all of the possible collectibles in this publication. 2012 tax forms 1040 Most common are rare books, autographs, sports memorabilia, dolls, manuscripts, stamps, coins, guns, phonograph records, and natural history items. 2012 tax forms 1040 Many of the elements of valuation that apply to paintings and other objects of art, discussed earlier, also apply to miscellaneous collections. 2012 tax forms 1040 Reference material. 2012 tax forms 1040   Publications available to help you determine the value of many kinds of collections include catalogs, dealers' price lists, and specialized hobby periodicals. 2012 tax forms 1040 When using one of these price guides, you must use the current edition at the date of contribution. 2012 tax forms 1040 However, these sources are not always reliable indicators of FMV and should be supported by other evidence. 2012 tax forms 1040   For example, a dealer may sell an item for much less than is shown on a price list, particularly after the item has remained unsold for a long time. 2012 tax forms 1040 The price an item sold for in an auction may have been the result of a rigged sale or a mere bidding duel. 2012 tax forms 1040 The appraiser must analyze the reference material, and recognize and make adjustments for misleading entries. 2012 tax forms 1040 If you are donating a valuable collection, you should get an appraisal. 2012 tax forms 1040 If your donation appears to be of little value, you may be able to make a satisfactory valuation using reference materials available at a state, city, college, or museum library. 2012 tax forms 1040 Stamp collections. 2012 tax forms 1040   Most libraries have catalogs or other books that report the publisher's estimate of values. 2012 tax forms 1040 Generally, two price levels are shown for each stamp: the price postmarked and the price not postmarked. 2012 tax forms 1040 Stamp dealers generally know the value of their merchandise and are able to prepare satisfactory appraisals of valuable collections. 2012 tax forms 1040 Coin collections. 2012 tax forms 1040   Many catalogs and other reference materials show the writer's or publisher's opinion of the value of coins on or near the date of the publication. 2012 tax forms 1040 Like many other collectors' items, the value of a coin depends on the demand for it, its age, and its rarity. 2012 tax forms 1040 Another important factor is the coin's condition. 2012 tax forms 1040 For example, there is a great difference in the value of a coin that is in mint condition and a similar coin that is only in good condition. 2012 tax forms 1040   Catalogs usually establish a category for coins, based on their physical condition—mint or uncirculated, extremely fine, very fine, fine, very good, good, fair, or poor—with a different valuation for each category. 2012 tax forms 1040 Books. 2012 tax forms 1040   The value of books is usually determined by selecting comparable sales and adjusting the prices according to the differences between the comparable sales and the item being evaluated. 2012 tax forms 1040 This is difficult to do and, except for a collection of little value, should be done by a specialized appraiser. 2012 tax forms 1040 Within the general category of literary property, there are dealers who specialize in certain areas, such as Americana, foreign imports, Bibles, and scientific books. 2012 tax forms 1040 Modest value of collection. 2012 tax forms 1040   If the collection you are donating is of modest value, not requiring a written appraisal, the following information may help you in determining the FMV. 2012 tax forms 1040   A book that is very old, or very rare, is not necessarily valuable. 2012 tax forms 1040 There are many books that are very old or rare, but that have little or no market value. 2012 tax forms 1040 Condition of book. 2012 tax forms 1040   The condition of a book may have a great influence on its value. 2012 tax forms 1040 Collectors are interested in items that are in fine, or at least good, condition. 2012 tax forms 1040 When a book has a missing page, a loose binding, tears, stains, or is otherwise in poor condition, its value is greatly lowered. 2012 tax forms 1040 Other factors. 2012 tax forms 1040   Some other factors in the valuation of a book are the kind of binding (leather, cloth, paper), page edges, and illustrations (drawings and photographs). 2012 tax forms 1040 Collectors usually want first editions of books. 2012 tax forms 1040 However, because of changes or additions, other editions are sometimes worth as much as, or more than, the first edition. 2012 tax forms 1040 Manuscripts, autographs, diaries, and similar items. 2012 tax forms 1040   When these items are handwritten, or at least signed by famous people, they are often in demand and are valuable. 2012 tax forms 1040 The writings of unknowns also may be of value if they are of unusual historical or literary importance. 2012 tax forms 1040 Determining the value of such material is difficult. 2012 tax forms 1040 For example, there may be a great difference in value between two diaries that were kept by a famous person—one kept during childhood and the other during a later period in his or her life. 2012 tax forms 1040 The appraiser determines a value in these cases by applying knowledge and judgment to such factors as comparable sales and conditions. 2012 tax forms 1040 Signatures. 2012 tax forms 1040   Signatures, or sets of signatures, that were cut from letters or other papers usually have little or no value. 2012 tax forms 1040 But complete sets of the signatures of U. 2012 tax forms 1040 S. 2012 tax forms 1040 presidents are in demand. 2012 tax forms 1040 Cars, Boats, and Aircraft If you donate a car, a boat, or an aircraft to a charitable organization, its FMV must be determined. 2012 tax forms 1040 Certain commercial firms and trade organizations publish monthly or seasonal guides for different regions of the country, containing complete dealer sale prices or dealer average prices for recent model years. 2012 tax forms 1040 Prices are reported for each make, model, and year. 2012 tax forms 1040 These guides also provide estimates for adjusting for unusual equipment, unusual mileage, and physical condition. 2012 tax forms 1040 The prices are not “official,” and these publications are not considered an appraisal of any specific donated property. 2012 tax forms 1040 But they do provide clues for making an appraisal and suggest relative prices for comparison with current sales and offerings in your area. 2012 tax forms 1040 These publications are sometimes available from public libraries or at a bank, credit union, or finance company. 2012 tax forms 1040 You can also find pricing information about used cars on the Internet. 2012 tax forms 1040 An acceptable measure of the FMV of a donated car, boat, or airplane is an amount not in excess of the price listed in a used vehicle pricing guide for a private party sale, not the dealer retail value, of a similar vehicle. 2012 tax forms 1040 However, the FMV may be less than that amount if the vehicle has engine trouble, body damage, high mileage, or any type of excessive wear. 2012 tax forms 1040 The FMV of a donated vehicle is the same as the price listed in a used vehicle pricing guide for a private party sale only if the guide lists a sales price for a vehicle that is the same make, model, and year, sold in the same area, in the same condition, with the same or similar options or accessories, and with the same or similar warranties as the donated vehicle. 2012 tax forms 1040 Example. 2012 tax forms 1040 You donate a used car in poor condition to a local high school for use by students studying car repair. 2012 tax forms 1040 A used car guide shows the dealer retail value for this type of car in poor condition is $1,600. 2012 tax forms 1040 However, the guide shows the price for a private party sale of the car is only $750. 2012 tax forms 1040 The FMV of the car is considered to be no more than $750. 2012 tax forms 1040 Boats. 2012 tax forms 1040   Except for inexpensive small boats, the valuation of boats should be based on an appraisal by a marine surveyor because the physical condition is so critical to the value. 2012 tax forms 1040 More information. 2012 tax forms 1040   Your deduction for a donated car, boat, or airplane generally is limited to the gross proceeds from its sale by the qualified organization. 2012 tax forms 1040 This rule applies if the claimed value of the donated vehicle is more than $500. 2012 tax forms 1040 In certain cases, you can deduct the vehicle's FMV. 2012 tax forms 1040 For details, see Publication 526. 2012 tax forms 1040 Inventory If you donate any inventory item to a charitable organization, the amount of your deductible contribution generally is the FMV of the item, minus any gain you would have realized if you had sold the item at its FMV on the date of the gift. 2012 tax forms 1040 For more information, see Publication 526. 2012 tax forms 1040 Patents To determine the FMV of a patent, you must take into account, among other factors: Whether the patented technology has been made obsolete by other technology; Any restrictions on the donee's use of, or ability to transfer, the patented technology; and The length of time remaining before the patent expires. 2012 tax forms 1040 However, your deduction for a donation of a patent or other intellectual property is its FMV, minus any gain you would have realized if you had sold the property at its FMV on the date of the gift. 2012 tax forms 1040 Generally, this means your deduction is the lesser of the property's FMV or its basis. 2012 tax forms 1040 For details, see Publication 526. 2012 tax forms 1040 Stocks and Bonds The value of stocks and bonds is the FMV of a share or bond on the valuation date. 2012 tax forms 1040 See Date of contribution, earlier, under What Is Fair Market Value (FMV). 2012 tax forms 1040 Selling prices on valuation date. 2012 tax forms 1040   If there is an active market for the contributed stocks or bonds on a stock exchange, in an over-the-counter market, or elsewhere, the FMV of each share or bond is the average price between the highest and lowest quoted selling prices on the valuation date. 2012 tax forms 1040 For example, if the highest selling price for a share was $11, and the lowest $9, the average price is $10. 2012 tax forms 1040 You get the average price by adding $11 and $9 and dividing the sum by 2. 2012 tax forms 1040 No sales on valuation date. 2012 tax forms 1040   If there were no sales on the valuation date, but there were sales within a reasonable period before and after the valuation date, you determine FMV by taking the average price between the highest and lowest sales prices on the nearest date before and on the nearest date after the valuation date. 2012 tax forms 1040 Then you weight these averages in inverse order by the respective number of trading days between the selling dates and the valuation date. 2012 tax forms 1040 Example. 2012 tax forms 1040   On the day you gave stock to a qualified organization, there were no sales of the stock. 2012 tax forms 1040 Sales of the stock nearest the valuation date took place two trading days before the valuation date at an average selling price of $10 and three trading days after the valuation date at an average selling price of $15. 2012 tax forms 1040 The FMV on the valuation date was $12, figured as follows: [(3 x $10) + (2 x $15)] ÷ 5 = $12 Listings on more than one stock exchange. 2012 tax forms 1040   Stocks or bonds listed on more than one stock exchange are valued based on the prices of the exchange on which they are principally dealt. 2012 tax forms 1040 This applies if these prices are published in a generally available listing or publication of general circulation. 2012 tax forms 1040 If this is not applicable, and the stocks or bonds are reported on a composite listing of combined exchanges in a publication of general circulation, use the composite list. 2012 tax forms 1040 See also Unavailable prices or closely held corporation, later. 2012 tax forms 1040 Bid and asked prices on valuation date. 2012 tax forms 1040   If there were no sales within a reasonable period before and after the valuation date, the FMV is the average price between the bona fide bid and asked prices on the valuation date. 2012 tax forms 1040 Example. 2012 tax forms 1040 Although there were no sales of Blue Corporation stock on the valuation date, bona fide bid and asked prices were available on that date of $14 and $16, respectively. 2012 tax forms 1040 The FMV is $15, the average price between the bid and asked prices. 2012 tax forms 1040 No prices on valuation date. 2012 tax forms 1040   If there were no prices available on the valuation date, you determine FMV by taking the average prices between the bona fide bid and asked prices on the closest trading date before and after the valuation date. 2012 tax forms 1040 Both dates must be within a reasonable period. 2012 tax forms 1040 Then you weight these averages in inverse order by the respective number of trading days between the bid and asked dates and the valuation date. 2012 tax forms 1040 Example. 2012 tax forms 1040 On the day you gave stock to a qualified organization, no prices were available. 2012 tax forms 1040 Bona fide bid and asked prices 3 days before the valuation date were $10 and 2 days after the valuation date were $15. 2012 tax forms 1040 The FMV on the valuation date is $13, figured as follows: [(2 x $10) + (3 x $15)] ÷ 5 = $13 Prices only before or after valuation date, but not both. 2012 tax forms 1040   If no selling prices or bona fide bid and asked prices are available on a date within a reasonable period before the valuation date, but are available on a date within a reasonable period after the valuation date, or vice versa, then the average price between the highest and lowest of such available prices may be treated as the value. 2012 tax forms 1040 Large blocks of stock. 2012 tax forms 1040   When a large block of stock is put on the market, it may lower the selling price of the stock if the supply is greater than the demand. 2012 tax forms 1040 On the other hand, market forces may exist that will afford higher prices for large blocks of stock. 2012 tax forms 1040 Because of the many factors to be considered, determining the value of large blocks of stock usually requires the help of experts specializing in underwriting large quantities of securities, or in trading in the securities of the industry of which the particular company is a part. 2012 tax forms 1040 Unavailable prices or closely held corporation. 2012 tax forms 1040   If selling prices or bid and asked prices are not available, or if securities of a closely held corporation are involved, determine the FMV by considering the following factors. 2012 tax forms 1040 For bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors. 2012 tax forms 1040 For shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. 2012 tax forms 1040 Other factors. 2012 tax forms 1040   Other relevant factors include: The nature and history of the business, especially its recent history, The goodwill of the business, The economic outlook in the particular industry, The company's position in the industry, its competitors, and its management, and The value of securities of corporations engaged in the same or similar business. 2012 tax forms 1040 For preferred stock, the most important factors are its yield, dividend coverage, and protection of its liquidation preference. 2012 tax forms 1040   You should keep complete financial and other information on which the valuation is based. 2012 tax forms 1040 This includes copies of reports of examinations of the company made by accountants, engineers, or any technical experts on or close to the valuation date. 2012 tax forms 1040 Restricted securities. 2012 tax forms 1040   Some classes of stock cannot be traded publicly because of restrictions imposed by the Securities and Exchange Commission, or by the corporate charter or a trust agreement. 2012 tax forms 1040 These restricted securities usually trade at a discount in relation to freely traded securities. 2012 tax forms 1040   To arrive at the FMV of restricted securities, factors that you must consider include the resale provisions found in the restriction agreements, the relative negotiating strengths of the buyer and seller, and the market experience of freely traded securities of the same class as the restricted securities. 2012 tax forms 1040 Real Estate Because each piece of real estate is unique and its valuation is complicated, a detailed appraisal by a professional appraiser is necessary. 2012 tax forms 1040 The appraiser must be thoroughly trained in the application of appraisal principles and theory. 2012 tax forms 1040 In some instances the opinions of equally qualified appraisers may carry unequal weight, such as when one appraiser has a better knowledge of local conditions. 2012 tax forms 1040 The appraisal report must contain a complete description of the property, such as street address, legal description, and lot and block number, as well as physical features, condition, and dimensions. 2012 tax forms 1040 The use to which the property is put, zoning and permitted uses, and its potential use for other higher and better uses are also relevant. 2012 tax forms 1040 In general, there are three main approaches to the valuation of real estate. 2012 tax forms 1040 An appraisal may require the combined use of two or three methods rather than one method only. 2012 tax forms 1040 1. 2012 tax forms 1040 Comparable Sales The comparable sales method compares the donated property with several similar properties that have been sold. 2012 tax forms 1040 The selling prices, after adjustments for differences in date of sale, size, condition, and location, would then indicate the estimated FMV of the donated property. 2012 tax forms 1040 If the comparable sales method is used to determine the value of unimproved real property (land without significant buildings, structures, or any other improvements that add to its value), the appraiser should consider the following factors when comparing the potential comparable property and the donated property: Location, size, and zoning or use restrictions, Accessibility and road frontage, and available utilities and water rights, Riparian rights (right of access to and use of the water by owners of land on the bank of a river) and existing easements, rights-of-way, leases, etc. 2012 tax forms 1040 , Soil characteristics, vegetative cover, and status of mineral rights, and Other factors affecting value. 2012 tax forms 1040 For each comparable sale, the appraisal must include the names of the buyer and seller, the deed book and page number, the date of sale and selling price, a property description, the amount and terms of mortgages, property surveys, the assessed value, the tax rate, and the assessor's appraised FMV. 2012 tax forms 1040 The comparable selling prices must be adjusted to account for differences between the sale property and the donated property. 2012 tax forms 1040 Because differences of opinion may arise between appraisers as to the degree of comparability and the amount of the adjustment considered necessary for comparison purposes, an appraiser should document each item of adjustment. 2012 tax forms 1040 Only comparable sales having the least adjustments in terms of items and/or total dollar adjustments should be considered as comparable to the donated property. 2012 tax forms 1040 2. 2012 tax forms 1040 Capitalization of Income This method capitalizes the net income from the property at a rate that represents a fair return on the particular investment at the particular time, considering the risks involved. 2012 tax forms 1040 The key elements are the determination of the income to be capitalized and the rate of capitalization. 2012 tax forms 1040 3. 2012 tax forms 1040 Replacement Cost New or Reproduction Cost Minus Observed Depreciation This method, used alone, usually does not result in a determination of FMV. 2012 tax forms 1040 Instead, it generally tends to set the upper limit of value, particularly in periods of rising costs, because it is reasonable to assume that an informed buyer will not pay more for the real estate than it would cost to reproduce a similar property. 2012 tax forms 1040 Of course, this reasoning does not apply if a similar property cannot be created because of location, unusual construction, or some other reason. 2012 tax forms 1040 Generally, this method serves to support the value determined from other methods. 2012 tax forms 1040 When the replacement cost method is applied to improved realty, the land and improvements are valued separately. 2012 tax forms 1040 The replacement cost of a building is figured by considering the materials, the quality of workmanship, and the number of square feet or cubic feet in the building. 2012 tax forms 1040 This cost represents the total cost of labor and material, overhead, and profit. 2012 tax forms 1040 After the replacement cost has been figured, consideration must be given to the following factors: Physical deterioration—the wear and tear on the building itself, Functional obsolescence—usually in older buildings with, for example, inadequate lighting, plumbing, or heating, small rooms, or a poor floor plan, and Economic obsolescence—outside forces causing the whole area to become less desirable. 2012 tax forms 1040 Interest in a Business The FMV of any interest in a business, whether a sole proprietorship or a partnership, is the amount that a willing buyer would pay for the interest to a willing seller after consideration of all relevant factors. 2012 tax forms 1040 The relevant factors to be considered in valuing the business are: The FMV of the assets of the business, The demonstrated earnings capacity of the business, based on a review of past and current earnings, and The other factors used in evaluating corporate stock, if they apply. 2012 tax forms 1040 The value of the goodwill of the business should also be taken into consideration. 2012 tax forms 1040 You should keep complete financial and other information on which you base the valuation. 2012 tax forms 1040 This includes copies of reports of examinations of the business made by accountants, engineers, or any technical experts on or close to the valuation date. 2012 tax forms 1040 Annuities, Interests for Life or Terms of Years, Remainders, and Reversions The value of these kinds of property is their present value, except in the case of annuities under contracts issued by companies regularly engaged in their sale. 2012 tax forms 1040 The valuation of these commercial annuity contracts and of insurance policies is discussed later under Certain Life Insurance and Annuity Contracts. 2012 tax forms 1040 To determine present value, you must know the applicable interest rate and use actuarial tables. 2012 tax forms 1040 Interest rate. 2012 tax forms 1040   The applicable interest rate varies. 2012 tax forms 1040 It is announced monthly in a news release and published in the Internal Revenue Bulletin as a Revenue Ruling. 2012 tax forms 1040 The interest rate to use is under the heading “Rate Under Section 7520” for a given month and year. 2012 tax forms 1040 You can call the IRS office at 1-800-829-1040 to obtain this rate. 2012 tax forms 1040 Actuarial tables. 2012 tax forms 1040   You need to refer to actuarial tables to determine a qualified interest in the form of an annuity, any interest for life or a term of years, or any remainder interest to a charitable organization. 2012 tax forms 1040   Use the valuation tables set forth in IRS Publications 1457, Actuarial Values (Book Aleph), and 1458, Actuarial Values (Book Beth). 2012 tax forms 1040 Both of these publications provide tables containing actuarial factors to be used in determining the present value of an annuity, an interest for life or for a term of years, or a remainder or reversionary interest. 2012 tax forms 1040 For qualified charitable transfers, you can use the factor for the month in which you made the contribution or for either of the 2 months preceding that month. 2012 tax forms 1040   Publication 1457 also contains actuarial factors for computing the value of a remainder interest in a charitable remainder annuity trust and a pooled income fund. 2012 tax forms 1040 Publication 1458 contains the factors for valuing the remainder interest in a charitable remainder unitrust. 2012 tax forms 1040 You can download Publications 1457 and 1458 from www. 2012 tax forms 1040 irs. 2012 tax forms 1040 gov. 2012 tax forms 1040 In addition, they are available for purchase via the website of the U. 2012 tax forms 1040 S. 2012 tax forms 1040 Government Printing Office, by phone at (202) 512-1800, or by mail from the: Superintendent of Documents P. 2012 tax forms 1040 O. 2012 tax forms 1040 Box 371954 Pittsburgh, PA 15250-7954 Tables containing actuarial factors for transfers to pooled income funds may also be found in Income Tax Regulation 1. 2012 tax forms 1040 642(c)-6(e)(6), transfers to charitable remainder unitrusts in Regulation 1. 2012 tax forms 1040 664-4(e), and other transfers in Regulation 20. 2012 tax forms 1040 2031-7(d)(6). 2012 tax forms 1040 Special factors. 2012 tax forms 1040   If you need a special factor for an actual transaction, you can request a letter ruling. 2012 tax forms 1040 Be sure to include the date of birth of each person the duration of whose life may affect the value of the interest. 2012 tax forms 1040 Also include copies of the relevant instruments. 2012 tax forms 1040 IRS charges a user fee for providing special factors. 2012 tax forms 1040   For more information about requesting a ruling, see Revenue Procedure 2006-1 (or annual update), 2006-1 I. 2012 tax forms 1040 R. 2012 tax forms 1040 B. 2012 tax forms 1040 1. 2012 tax forms 1040 Revenue Procedure 2006-1 is available at www. 2012 tax forms 1040 irs. 2012 tax forms 1040 gov/irb/2006-01_IRB/ar06. 2012 tax forms 1040 html. 2012 tax forms 1040   For information on the circumstances under which a charitable deduction may be allowed for the donation of a partial interest in property not in trust, see Partial Interest in Property Not in Trust, later. 2012 tax forms 1040 Certain Life Insurance and Annuity Contracts The value of an annuity contract or a life insurance policy issued by a company regularly engaged in the sale of such contracts or policies is the amount that company would charge for a comparable contract. 2012 tax forms 1040 But if the donee of a life insurance policy may reasonably be expected to cash the policy rather than hold it as an investment, then the FMV is the cash surrender value rather than the replacement cost. 2012 tax forms 1040 If an annuity is payable under a combination annuity contract and life insurance policy (for example, a retirement income policy with a death benefit) and there was no insurance element when it was transferred to the charity, the policy is treated as an annuity contract. 2012 tax forms 1040 Partial Interest in Property Not in Trust Generally, no deduction is allowed for a charitable contribution, not made in trust, of less than your entire interest in property. 2012 tax forms 1040 However, this does not apply to a transfer of less than your entire interest if it is a transfer of: A remainder interest in your personal residence or farm, An undivided part of your entire interest in property, or A qualified conservation contribution. 2012 tax forms 1040 Remainder Interest in Real Property The amount of the deduction for a donation of a remainder interest in real property is the FMV of the remainder interest at the time of the contribution. 2012 tax forms 1040 To determine this value, you must know the FMV of the property on the date of the contribution. 2012 tax forms 1040 Multiply this value by the appropriate factor. 2012 tax forms 1040 Publications 1457 and 1458 contain these factors. 2012 tax forms 1040 You must make an adjustment for depreciation or depletion using the factors shown in Publication 1459, Actuarial Values (Book Gimel). 2012 tax forms 1040 You can use the factors for the month in which you made the contribution or for either of the two months preceding that month. 2012 tax forms 1040 See the earlier discussion on Annuities, Interests for Life or Terms of Years, Remainders, and Reversions. 2012 tax forms 1040 You can download Publication 1459 from www. 2012 tax forms 1040 irs. 2012 tax forms 1040 gov. 2012 tax forms 1040 For this purpose, the term “depreciable property” means any property subject to wear and tear or obsolescence, even if not used in a trade or business or for the production of income. 2012 tax forms 1040 If the remainder interest includes both depreciable and nondepreciable property, for example a house and land, the FMV must be allocated between each kind of property at the time of the contribution. 2012 tax forms 1040 This rule also applies to a gift of a remainder interest that includes property that is part depletable and part not depletable. 2012 tax forms 1040 Take into account depreciation or depletion only for the property that is subject to depreciation or depletion. 2012 tax forms 1040 For more information, see section 1. 2012 tax forms 1040 170A-12 of the Income Tax Regulations. 2012 tax forms 1040 Undivided Part of Your Entire Interest A contribution of an undivided part of your entire interest in property must consist of a part of each and every substantial interest or right you own in the property. 2012 tax forms 1040 It must extend over the entire term of your interest in the property. 2012 tax forms 1040 For example, you are entitled to the income from certain property for your life (life estate) and you contribute 20% of that life estate to a qualified organization. 2012 tax forms 1040 You can claim a deduction for the contribution if you do not have any other interest in the property. 2012 tax forms 1040 To figure the value of a contribution involving a partial interest, see Publication 1457. 2012 tax forms 1040 If the only interest you own in real property is a remainder interest and you transfer part of that interest to a qualified organization, see the previous discussion on valuation of a remainder interest in real property. 2012 tax forms 1040 Qualified Conservation Contribution A qualified conservation contribution is a contribution of a qualified real property interest to a qualified organization to be used only for conservation purposes. 2012 tax forms 1040 Qualified organization. 2012 tax forms 1040   For purposes of a qualified conservation contribution, a qualified organization is: A governmental unit, A publicly supported charitable, religious, scientific, literary, educational, etc. 2012 tax forms 1040 , organization, or An organization that is controlled by, and operated for the exclusive benefit of, a governmental unit or a publicly supported charity. 2012 tax forms 1040 The organization also must have a commitment to protect the conservation purposes of the donation and must have the resources to enforce the restrictions. 2012 tax forms 1040 Conservation purposes. 2012 tax forms 1040   Your contribution must be made only for one of the following conservation purposes. 2012 tax forms 1040 Preserving land areas for outdoor recreation by, or for the education of, the general public. 2012 tax forms 1040 Protecting a relatively natural habitat of fish, wildlife, or plants, or a similar ecosystem. 2012 tax forms 1040 Preserving open space, including farmland and forest land, if it yields a significant public benefit. 2012 tax forms 1040 It must be either for the scenic enjoyment of the general public or under a clearly defined federal, state, or local governmental conservation policy. 2012 tax forms 1040 Preserving a historically important land area or a certified historic structure. 2012 tax forms 1040 There must be some visual public access to the property. 2012 tax forms 1040 Factors used in determining the type and amount of public access required include the historical significance of the property, the remoteness or accessibility of the site, and the extent to which intrusions on the privacy of individuals living on the property would be unreasonable. 2012 tax forms 1040 Building in registered historic district. 2012 tax forms 1040   A contribution after July 25, 2006, of a qualified real property interest that is an easement or other restriction on the exterior of a building in a registered historic district is deductible only if it meets all of the following three conditions. 2012 tax forms 1040 The restriction must preserve the entire exterior of the building and must prohibit any change to the exterior of the building that is inconsistent with its historical character. 2012 tax forms 1040 You and the organization receiving the contribution must enter into a written agreement certifying, that the organization is a qualified organization and that it has the resources and commitment to maintain the property as donated. 2012 tax forms 1040 If you make the contribution in a tax year beginning after August 17, 2006, you must include with your return: A qualified appraisal, Photographs of the building's entire exterior, and A description of all restrictions on development of the building, such as zoning laws and restrictive covenants. 2012 tax forms 1040   If you make this type of contribution after February 12, 2007, and claim a deduction of more than $10,000, your deduction will not be allowed unless you pay a $500 filing fee. 2012 tax forms 1040 See Form 8283-V, Payment Voucher for Filing Fee Under Section 170(f)(13), and its instructions. 2012 tax forms 1040 Qualified real property interest. 2012 tax forms 1040   This is any of the following interests in real property. 2012 tax forms 1040 Your entire interest in real estate other than a mineral interest (subsurface oil, gas, or other minerals, and the right of access to these minerals). 2012 tax forms 1040 A remainder interest. 2012 tax forms 1040 A restriction (granted in perpetuity) on the use that may be made of the real property. 2012 tax forms 1040 Valuation. 2012 tax forms 1040   A qualified real property interest described in (1) should be valued in a manner that is consistent with the type of interest transferred. 2012 tax forms 1040 If you transferred all the interest in the property, the FMV of the property is the amount of the contribution. 2012 tax forms 1040 If you do not transfer the mineral interest, the FMV of the surface rights in the property is the amount of the contribution. 2012 tax forms 1040   If you owned only a remainder interest or an income interest (life estate), see Undivided Part of Your Entire Interest, earlier. 2012 tax forms 1040 If you owned the entire property but transferred only a remainder interest (item (2)), see Remainder Interest in Real Property, earlier. 2012 tax forms 1040   In determining the value of restrictions, you should take into account the selling price in arm's-length transactions of other properties that have comparable restrictions. 2012 tax forms 1040 If there are no comparable sales, the restrictions are valued indirectly as the difference between the FMVs of the property involved before and after the grant of the restriction. 2012 tax forms 1040   The FMV of the property before contribution of the restriction should take into account not only current use but the likelihood that the property, without the restriction, would be developed. 2012 tax forms 1040 You should also consider any zoning, conservation, or historical preservation laws that would restrict development. 2012 tax forms 1040 Granting an easement may increase, rather than reduce, the value of property, and in such a situation no deduction would be allowed. 2012 tax forms 1040 Example. 2012 tax forms 1040   You own 10 acres of farmland. 2012 tax forms 1040 Similar land in the area has an FMV of $2,000 an acre. 2012 tax forms 1040 However, land in the general area that is restricted solely to farm use has an FMV of $1,500 an acre. 2012 tax forms 1040 Your county wants to preserve open space and prevent further development in your area. 2012 tax forms 1040   You grant to the county an enforceable open space easement in perpetuity on 8 of the 10 acres, restricting its use to farmland. 2012 tax forms 1040 The value of this easement is $4,000, determined as follows: FMV of the property before granting easement:   $2,000 × 10 acres $20,000 FMV of the property after granting easement:   $1,500 × 8 acres $12,000   $2,000 × 2 acres 4,000 16,000 Value of easement   $4,000   If you later transfer in fee your remaining interest in the 8 acres to another qualified organization, the FMV of your remaining interest is the FMV of the 8 acres reduced by the FMV of the easement granted to the first organization. 2012 tax forms 1040 More information. 2012 tax forms 1040   For more information about qualified conservation contributions, see Publication 526. 2012 tax forms 1040 Appraisals Appraisals are not necessary for items of property for which you claim a deduction of $5,000 or less. 2012 tax forms 1040 (There is one exception, described next, for certain clothing and household items. 2012 tax forms 1040 ) However, you generally will need an appraisal for donated property for which you claim a deduction of more than $5,000. 2012 tax forms 1040 There are exceptions. 2012 tax forms 1040 See Deductions of More Than $5,000, later. 2012 tax forms 1040 The weight given an appraisal depends on the completeness of the report, the qualifications of the appraiser, and the appraiser's demonstrated knowledge of the donated property. 2012 tax forms 1040 An appraisal must give all the facts on which to base an intelligent judgment of the value of the property. 2012 tax forms 1040 The appraisal will not be given much weight if: All the factors that apply are not considered, The opinion is not supported with facts, such as purchase price and comparable sales, or The opinion is not consistent with known facts. 2012 tax forms 1040 The appraiser's opinion is never more valid than the facts on which it is based; without these facts it is simply a guess. 2012 tax forms 1040 The opinion of a person claiming to be an expert is not binding on the Internal Revenue Service. 2012 tax forms 1040 All facts associated with the donation must be considered. 2012 tax forms 1040 Deduction over $500 for certain clothing or household items. 2012 tax forms 1040   You must include with your return a qualified appraisal of any single item of clothing or any household item that is not in good used condition or better, that you donated after August 17, 2006, and for which you deduct more than $500. 2012 tax forms 1040 See Household Goods and Used Clothing, earlier. 2012 tax forms 1040 Cost of appraisals. 2012 tax forms 1040   You may not take a charitable contribution deduction for fees you pay for appraisals of your donated property. 2012 tax forms 1040 However, these fees may qualify as a miscellaneous deduction, subject to the 2% limit, on Schedule A (Form 1040) if paid to determine the amount allowable as a charitable contribution. 2012 tax forms 1040 Deductions of More Than $5,000 Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser, and you must attach Section B of Form 8283 to your tax return. 2012 tax forms 1040 There are exceptions, discussed later. 2012 tax forms 1040 You should keep the appraiser's report with your written records. 2012 tax forms 1040 Records are discussed in Publication 526. 2012 tax forms 1040 The phrase “similar items” means property of the same generic category or type (whether or not donated to the same donee), such as stamp collections, coin collections, lithographs, paintings, photographs, books, nonpublicly traded stock, nonpublicly traded securities other than nonpublicly traded stock, land, buildings, clothing, jewelry, furniture, electronic equipment, household appliances, toys, everyday kitchenware, china, crystal, or silver. 2012 tax forms 1040 For example, if you give books to three schools and you deduct $2,000, $2,500, and $900, respectively, your claimed deduction is more than $5,000 for these books. 2012 tax forms 1040 You must get a qualified appraisal of the books and for each school you must attach a fully completed Form 8283, Section B, to your tax return. 2012 tax forms 1040 Exceptions. 2012 tax forms 1040   You do not need an appraisal if the property is: Nonpublicly traded stock of $10,000 or less, A vehicle (including a car, boat, or airplane) for which your deduction is limited to the gross proceeds from its sale, Qualified intellectual property, such as a patent, Certain publicly traded securities described next, Inventory and other property donated by a corporation that are “qualified contributions” for the care of the ill, the needy, or infants, within the meaning of section 170(e)(3)(A) of the Internal Revenue Code, or Stock in trade, inventory, or property held primarily for sale to customers in the ordinary course of your trade or business. 2012 tax forms 1040   Although an appraisal is not required for the types of property just listed, you must provide certain information about a donation of any of these types of property on Form 8283. 2012 tax forms 1040 Publicly traded securities. 2012 tax forms 1040   Even if your claimed deduction is more than $5,000, neither a qualified appraisal nor Section B of Form 8283 is required for publicly traded securities that are: Listed on a stock exchange in which quotations are published on a daily basis, Regularly traded in a national or regional over-the-counter market for which published quotations are available, or Shares of an open-end investment company (mutual fund) for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States. 2012 tax forms 1040 Publicly traded securities that meet these requirements must be reported on Form 8283, Section A. 2012 tax forms 1040   A qualified appraisal is not required, but Form 8283, Section B, Parts I and IV, must be completed, for an issue of a security that does not meet the requirements just listed but does meet these requirements: The issue is regularly traded during the computation period (defined later) in a market for which there is an “interdealer quotation system” (defined later), The issuer or agent computes the “average trading price” (defined later) for the same issue for the computation period, The average trading price and total volume of the issue during the computation period are published in a newspaper of general circulation throughout the United States, not later than the last day of the month following the end of the calendar quarter in which the computation period ends, The issuer or agent keeps books and records that list for each transaction during the computation period the date of settlement of the transaction, the name and address of the broker or dealer making the market in which the transaction occurred, and the trading price and volume, and The issuer or agent permits the Internal Revenue Service to review the books and records described in item (4) with respect to transactions during the computation period upon receiving reasonable notice. 2012 tax forms 1040   An interdealer quotation system is any system of general circulation to brokers and dealers that regularly disseminates quotations of obligations by two or more identified brokers or dealers who are not related to either the issuer or agent who computes the average trading price of the security. 2012 tax forms 1040 A quotation sheet prepared and distributed by a broker or dealer in the regular course of business and containing only quotations of that broker or dealer is not an interdealer quotation system. 2012 tax forms 1040   The average trading price is the average price of all transactions (weighted by volume), other than original issue or redemption transactions, conducted through a United States office of a broker or dealer who maintains a market in the issue of the security during the computation period. 2012 tax forms 1040 Bid and asked quotations are not taken into account. 2012 tax forms 1040   The computation period is weekly during October through December and monthly during January through September. 2012 tax forms 1040 The weekly computation periods during October through December begin with the first Monday in October and end with the first Sunday following the last Monday in December. 2012 tax forms 1040 Nonpublicly traded stock. 2012 tax forms 1040   If you contribute nonpublicly traded stock, for which you claim a deduction of $10,000 or less, a qualified appraisal is not required. 2012 tax forms 1040 However, you must attach Form 8283 to your tax return, with Section B, Parts I and IV, completed. 2012 tax forms 1040 Deductions of More Than $500,000 If you claim a deduction of more than $500,000 for a donation of property, you must attach a qualified appraisal of the property to your return. 2012 tax forms 1040 This does not apply to contributions of cash, inventory, publicly traded stock, or intellectual property. 2012 tax forms 1040 If you do not attach the appraisal, you cannot deduct your contribution, unless your failure to attach the appraisal is due to reasonable cause and not to willful neglect. 2012 tax forms 1040 Qualified Appraisal Generally, if the claimed deduction for an item or group of similar items of donated property is more than $5,000, you must get a qualified appraisal made by a qualified appraiser. 2012 tax forms 1040 You must also complete Form 8283, Section B, and attach it to your tax return. 2012 tax forms 1040 See Deductions of More Than $5,000, earlier. 2012 tax forms 1040 A qualified appraisal is an appraisal document that: Is made, signed, and dated by a qualified appraiser (defined later) in accordance with generally accepted appraisal standards, Meets the relevant requirements of Regulations section 1. 2012 tax forms 1040 170A-13(c)(3) and Notice 2006-96, 2006-46 I. 2012 tax forms 1040 R. 2012 tax forms 1040 B. 2012 tax forms 1040 902 (available at www. 2012 tax forms 1040 irs. 2012 tax forms 1040 gov/irb/2006-46_IRB/ar13. 2012 tax forms 1040 html), Relates to an appraisal made not earlier than 60 days before the date of contribution of the appraised property, Does not involve a prohibited appraisal fee, and Includes certain information (covered later). 2012 tax forms 1040 You must receive the qualified appraisal before the due date, including extensions, of the return on which a charitable contribution deduction is first claimed for the donated property. 2012 tax forms 1040 If the deduction is first claimed on an amended return, the qualified appraisal must be received before the date on which the amended return is filed. 2012 tax forms 1040 Form 8283, Section B, must be attached to your tax return. 2012 tax forms 1040 Generally, you do not need to attach the qualified appraisal itself, but you should keep a copy as long as it may be relevant under the tax law. 2012 tax forms 1040 There are four exceptions. 2012 tax forms 1040 If you claim a deduction of $20,000 or more for donations of art, you must attach a complete copy of the appraisal. 2012 tax forms 1040 See Paintings, Antiques, and Other Objects of Art, earlier. 2012 tax forms 1040 If you claim a deduction of more than $500,000 for a donation of property, you must attach the appraisal. 2012 tax forms 1040 See Deductions of More Than $500,000, earlier. 2012 tax forms 1040 If you claim a deduction of more than $500 for an article of clothing, or a household item, that is not in good used condition or better, that you donated after August 17, 2006, you must attach the appraisal. 2012 tax forms 1040 See Deduction over $500 for certain clothing or household items, earlier. 2012 tax forms 1040 If you claim a deduction in a tax year beginning after August 17, 2006, for an easement or other restriction on the exterior of a building in a historic district, you must attach the appraisal. 2012 tax forms 1040 See Building in registered historic district, earlier. 2012 tax forms 1040 Prohibited appraisal fee. 2012 tax forms 1040   Generally, no part of the fee arrangement for a qualified appraisal can be based on a percentage of the appraised value of the property. 2012 tax forms 1040 If a fee arrangement is based on what is allowed as a deduction, after Internal Revenue Service examination or otherwise, it is treated as a fee based on a percentage of appraised value. 2012 tax forms 1040 However, appraisals are not disqualified when an otherwise prohi
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Understanding your 2801C Letter

You received this letter because we determined that you’re not entitled to claim exempt status or more than a specified number of withholding allowances. Generally, your employer bases the amount of withholding for federal income tax on your Form W-4, Employee's Withholding Allowance Certificate. However, we can review whether you are entitled to claim exempt status or a certain number of withholding allowances.

What you need to do

  • You can ask us to change our decision. Please call us at the number shown below within 30 days from the date of the letter. We will consider your explanation of why you believe you are entitled to a different withholding rate or number of withholding allowances (or exempt status)
  • When you call, have the following information available. If you file jointly, you must have the same information available for your spouse
    • Form W-4 and worksheets. (You must complete the "Two Earners Multiple Jobs Worksheet" on the back of the Form W-4, if you have more than one job or your spouse works.)
    • Most current pay stubs for all jobs
    • Number of withholding allowances you (and your spouse) are claiming on your Form(s) W-4.
    • The social security number and date of birth for any dependent you are entitled to claim
    • A copy of the current tax return due, including all schedules, forms, and attachments

  • If you prefer you can write us at the address below and ask for a redetermination. You must send the information listed above to support your claim that you’re entitled to a different withholding rate (marital status) or number of withholding allowances (or exempt status)

You may want to…

  • Search keyword “withholding compliance” for more information on income tax withholding
  • Download the following materials:
    • Form W-4, Employee’s Withholding Allowance Certificate
    • Publication 505, Tax Withholding and Estimated Tax
  • Use the IRS Withholding Calculator to figure your correct amount of federal income tax withholding. The calculator is particularly helpful if you've had too much or too little withheld in the past, your situation has changed, or you’re starting a new job.

Answers to Common Questions

What happens if the IRS determines that I do not have adequate withholding?
We can tell your employer to withhold federal income tax at an increased rate. We do this by issuing a “lock-in letter.” At that point, your employer must disregard any Form W-4 that decreases the amount of your withholding. You’ll receive a copy of the lock-in letter, and we’ll give you some time before the lock-in rate is effective to submit a new Form W-4. This form must include a statement that explains why you believe you’re entitled to a different withholding rate or number of withholding allowances. You should send your Form W-4 and supporting documents to the IRS address as shown on this webpage. Once we issue a lock-in letter, you won’t be able to decrease your withholding unless we approve it.

What if I don’t want to submit a Form W-4 to my employer?
Your employer must withhold income tax from your wages as if you’re single with zero allowances.

How to get help

  • Call toll free 1-855-839-2235 weekdays between 8:00 a.m. and 8:00 p.m.
  • Send a fax to 1-855-202-8300
  • Write to:

    Internal Revenue Service
    Compliance Services
    Withholding Compliance Unit
    P.O. Box 9047, Stop 837
    Andover, MA 01810-0
Page Last Reviewed or Updated: 26-Sep-2013

The 2012 Tax Forms 1040

2012 tax forms 1040 4. 2012 tax forms 1040   Deductions Table of Contents Standard DeductionStandard Deduction for Dependents Itemized DeductionsMedical and Dental Expenses Most taxpayers have a choice of taking a standard deduction or itemizing their deductions. 2012 tax forms 1040 You benefit from the standard deduction if your standard deduction is more than the total of your allowable itemized deductions. 2012 tax forms 1040 If you have a choice, you should use the method that gives you the lower tax. 2012 tax forms 1040 Standard Deduction The standard deduction amount depends on your filing status, whether you are 65 or older or blind, and whether an exemption can be claimed for you by another taxpayer. 2012 tax forms 1040 Generally, the standard deduction amounts are adjusted each year for inflation. 2012 tax forms 1040 In most cases, you can use Worksheet 4-1 to figure your standard deduction amount. 2012 tax forms 1040 Persons not eligible for the standard deduction. 2012 tax forms 1040   Your standard deduction is zero and you should itemize any deductions you have if: You are married and filing a separate return, and your spouse itemizes deductions, You are filing a tax return for a short tax year because of a change in your annual accounting period, or You are a nonresident or dual-status alien during the year. 2012 tax forms 1040 You are considered a dual-status alien if you were both a nonresident alien and a resident alien during the year. 2012 tax forms 1040   If you are a nonresident alien who is married to a U. 2012 tax forms 1040 S. 2012 tax forms 1040 citizen or resident alien at the end of the year, you can choose to be treated as a U. 2012 tax forms 1040 S. 2012 tax forms 1040 resident. 2012 tax forms 1040 See Publication 519, U. 2012 tax forms 1040 S. 2012 tax forms 1040 Tax Guide for Aliens. 2012 tax forms 1040 If you make this choice, you can take the standard deduction. 2012 tax forms 1040 Decedent's final return. 2012 tax forms 1040   The amount of the standard deduction for a decedent's final tax return is the same as it would have been had the decedent continued to live. 2012 tax forms 1040 However, if the decedent was not 65 or older at the time of death, the higher standard deduction for age cannot be claimed. 2012 tax forms 1040 Higher standard deduction for age (65 or older). 2012 tax forms 1040   If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. 2012 tax forms 1040 You are considered age 65 on the day before your 65th birthday. 2012 tax forms 1040 Therefore, you can take a higher standard deduction for 2013 if you were born before January 2, 1949. 2012 tax forms 1040 Higher standard deduction for blindness. 2012 tax forms 1040   If you are blind on the last day of the year and you do not itemize deductions, you are entitled to a higher standard deduction. 2012 tax forms 1040 You qualify for this benefit if you are totally or partly blind. 2012 tax forms 1040 Not totally blind. 2012 tax forms 1040   If you are not totally blind, you must get a certified statement from an eye doctor (ophthalmologist or optometrist) that: You cannot see better than 20/200 in the better eye with glasses or contact lenses, or Your field of vision is not more than 20 degrees. 2012 tax forms 1040   If your eye condition will never improve beyond these limits, the statement should include this fact. 2012 tax forms 1040 You must keep the statement in your records. 2012 tax forms 1040   If your vision can be corrected beyond these limits only by contact lenses that you can wear only briefly because of pain, infection, or ulcers, you can take the higher standard deduction for blindness if you otherwise qualify. 2012 tax forms 1040 Spouse 65 or older or blind. 2012 tax forms 1040   You can take the higher standard deduction if your spouse is age 65 or older or blind and: You file a joint return, or You file a separate return and can claim an exemption for your spouse because your spouse had no gross income and an exemption for your spouse could not be claimed by another taxpayer. 2012 tax forms 1040    You cannot claim the higher standard deduction for an individual other than yourself and your spouse. 2012 tax forms 1040 Example. 2012 tax forms 1040 This example illustrates how to determine your standard deduction using Worksheet 4-1. 2012 tax forms 1040 Bill and Lisa are filing a joint return for 2013. 2012 tax forms 1040 Both are over age 65. 2012 tax forms 1040 Neither is blind, and neither can be claimed as a dependent. 2012 tax forms 1040 They do not itemize deductions, so they use Worksheet 4-1. 2012 tax forms 1040 Because they are married filing jointly, they enter $12,200 on line 1. 2012 tax forms 1040 They check the “No” box on line 2, so they also enter $12,200 on line 4. 2012 tax forms 1040 Because they are both over age 65, they enter $2,400 ($1,200 × 2) on line 5. 2012 tax forms 1040 They enter $14,600 ($12,200 + $2,400) on line 6, so their standard deduction is $14,600. 2012 tax forms 1040 Standard Deduction for Dependents The standard deduction for an individual for whom an exemption can be claimed on another person's tax return is generally limited to the greater of: $1,000, or The individual's earned income for the year plus $350 (but not more than the regular standard deduction amount, generally $6,100). 2012 tax forms 1040 However, the standard deduction may be higher if the individual is 65 or older or blind. 2012 tax forms 1040 If an exemption for you (or your spouse if you are filing jointly) can be claimed on someone else's return, use Worksheet 4-1, if applicable, to determine your standard deduction. 2012 tax forms 1040 Worksheet 4-1. 2012 tax forms 1040 2013 Standard Deduction Worksheet Caution. 2012 tax forms 1040 If you are married filing separately and your spouse itemizes deductions, or if you are a dual-status alien, do not complete this worksheet. 2012 tax forms 1040 If you were born before January 2, 1949, and/or blind, check the correct number of boxes below. 2012 tax forms 1040 Put the total number of boxes checked in box c and go to line 1. 2012 tax forms 1040 a. 2012 tax forms 1040 You   Born before  January 2, 1949     Blind b. 2012 tax forms 1040 Your spouse, if claiming  spouse's exemption   Born before January 2, 1949     Blind c. 2012 tax forms 1040 Total boxes checked             1. 2012 tax forms 1040 Enter the amount shown below for your filing status. 2012 tax forms 1040               Single or married filing separately — $6,100 Married filing jointly or Qualifying widow(er) — $12,200 Head of household — $8,950   1. 2012 tax forms 1040           2. 2012 tax forms 1040 Can you (or your spouse if filing jointly) be claimed as a dependent on someone else's return?  No. 2012 tax forms 1040 Skip line 3; enter the amount from line 1 on line 4. 2012 tax forms 1040   Yes. 2012 tax forms 1040 Go to line 3. 2012 tax forms 1040         3. 2012 tax forms 1040 Is your earned income* more than $650?               Yes. 2012 tax forms 1040 Add $350 to your earned income. 2012 tax forms 1040 Enter the total   3. 2012 tax forms 1040         No. 2012 tax forms 1040 Enter $1,000 4. 2012 tax forms 1040 Enter the smaller of line 1 or line 3 4. 2012 tax forms 1040   5. 2012 tax forms 1040 If born before January 2, 1949, or blind, multiply the number in box c by $1,200 ($1,500 if single or head of household). 2012 tax forms 1040 Enter the result here. 2012 tax forms 1040 Otherwise, enter -0- 5. 2012 tax forms 1040   6. 2012 tax forms 1040 Add lines 4 and 5. 2012 tax forms 1040 This is your standard deduction for 2013. 2012 tax forms 1040 6. 2012 tax forms 1040   * Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. 2012 tax forms 1040 It also includes any amount received as a scholarship that you must include in your income. 2012 tax forms 1040 Generally, your earned income is the total of the amount(s) you reported on Form 1040, lines 7, 12, and 18, minus the amount, if any, on line 27 (or the amount you reported on Form 1040A, line 7). 2012 tax forms 1040 Itemized Deductions Some individuals should itemize their deductions because it will save them money. 2012 tax forms 1040 Others should itemize because they do not qualify for the standard deduction. 2012 tax forms 1040 See the discussion under Standard Deduction , earlier, to decide if it would be to your advantage to itemize deductions. 2012 tax forms 1040 You may be subject to a limit on some of your itemized deductions if your adjusted gross income is more than $150,000. 2012 tax forms 1040 For more information, see Overall limitation, later. 2012 tax forms 1040 Medical and dental expenses, some taxes, certain interest expenses, charitable contributions, casualty and theft losses, and certain other miscellaneous expenses may be itemized as deductions on Schedule A (Form 1040). 2012 tax forms 1040 You may benefit from itemizing your deductions on Schedule A (Form 1040) if you: Cannot take the standard deduction, Had uninsured medical or dental expenses that are more than 10% of your adjusted gross income (or more than 7. 2012 tax forms 1040 5% of your adjusted gross income if either you or your spouse is age 65 or older), Paid interest on your home, Paid real estate or personal property taxes, Paid mortgage insurance premiums, Paid state and local income or general sales taxes, Had large unreimbursed employee business expenses or other miscellaneous deductions, Had large uninsured casualty or theft losses, Made large contributions to qualified charities (see Publication 526, Charitable Contributions), or Have total itemized deductions that are more than the standard deduction that applies to you. 2012 tax forms 1040 See the Schedule A (Form 1040) instructions for more information. 2012 tax forms 1040 Overall limitation. 2012 tax forms 1040   You may not be able to deduct all of your itemized deductions if your adjusted gross income is more than: $150,000, if married filing separately, $250,000, if single, $275,000, if head of household, or $300,000, if married filing jointly or qualifying widow(er). 2012 tax forms 1040  If your adjusted gross income exceeds the applicable amount, you will use the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040) to figure your total itemized deductions. 2012 tax forms 1040 Medical and Dental Expenses You can deduct certain medical and dental expenses you paid for yourself, your spouse, and your dependent(s) if you itemize your deductions on Schedule A (Form 1040). 2012 tax forms 1040 Table 4-1 shows some common items that you can or cannot include in figuring your medical expense deduction. 2012 tax forms 1040 For more information, see the following discussions of selected items, which are presented in alphabetical order. 2012 tax forms 1040 A more extensive list of items and further details can be found in Publication 502, Medical and Dental Expenses. 2012 tax forms 1040 Table 4-1. 2012 tax forms 1040 Medical and Dental Expenses Checklist You can include: You cannot include: Bandages Capital expenses for equipment or improvements to your home needed for medical care (see Publication 502) Certain weight-loss expenses for obesity Diagnostic devices Expenses of an organ donor Eye surgery—to promote the correct function of the eye Guide dogs or other animals aiding the blind, deaf, and disabled Hospital services fees (lab work, therapy, nursing services, surgery, etc. 2012 tax forms 1040 ) Lead-based paint removal (see Publication 502) Long-term care contracts, qualified (see Publication 502) Meals and lodging provided by a hospital during medical treatment Medical and hospital insurance premiums Medical services fees (from doctors, dentists, surgeons, specialists, and other medical practitioners) Medicare Part D premiums Oxygen equipment and oxygen Part of life-care fee paid to retirement home designated for medical care Prescription medicines (prescribed by a doctor) and insulin Psychiatric and psychological treatment Social security tax, Medicare tax, FUTA, and state employment tax for worker providing medical care (see Publication 502) Special items (artificial limbs, false teeth, eyeglasses, contact lenses, hearing aids, crutches, wheelchair, etc. 2012 tax forms 1040 ) Special education for mentally or physically disabled persons (see Publication 502) Stop-smoking programs Transportation for needed medical care Treatment at a drug or alcohol center (includes meals and lodging provided by the center) Wages for nursing services (see Publication 502) Contributions to Archer MSAs (see Publication 969) Bottled water Diaper service Expenses for your general health (even if following your doctor's advice) such as: —Health club dues —Household help (even if recommended by a doctor) —Social activities, such as dancing or swimming lessons —Trip for general health improvement Flexible spending account reimbursements for medical expenses (if contributions were on a pretax basis) (see Publication 502) Funeral, burial, or cremation expenses Health savings account payments for medical expenses (see Publication 502) Illegal operation or treatment Life insurance or income protection policies, or policies providing payment for loss of life, limb, sight, etc. 2012 tax forms 1040 Medical insurance included in a car insurance policy covering all persons injured in or by your car Medicine you buy without a prescription Nursing care for a healthy baby Prescription drugs you brought in (or ordered shipped) from another country, in most cases (see Publication 502) Surgery for purely cosmetic reasons (see Publication 502) Toothpaste, toiletries, cosmetics, etc. 2012 tax forms 1040 Teeth whitening Weight-loss expenses not for the treatment of obesity or other disease You can deduct only the amount of your medical and dental expenses that is more than 10% of your adjusted gross income (or that is more than 7. 2012 tax forms 1040 5% of your adjusted gross income if you or your spouse is age 65 or older). 2012 tax forms 1040 What to include. 2012 tax forms 1040   Generally, you can include only the medical and dental expenses you paid this year, regardless of when the services were provided. 2012 tax forms 1040 If you pay medical expenses by check, the day you mail or deliver the check generally is the date of payment. 2012 tax forms 1040 If you use a pay-by-phone or online account to pay your medical expenses, the date reported on the statement of the financial institution showing when payment was made is the date of payment. 2012 tax forms 1040 You can include medical expenses you charge to your credit card in the year the charge is made. 2012 tax forms 1040 It does not matter when you actually pay the amount charged. 2012 tax forms 1040 Home Improvements You can include in medical expenses amounts you pay for home improvements if their main purpose is medical care for you, your spouse, or your dependent. 2012 tax forms 1040 Only reasonable costs to accommodate a home to your disabled condition (or that of your spouse or your dependent(s) who live with you) are considered medical care. 2012 tax forms 1040 Additional costs for personal motives, such as for architectural or aesthetic reasons, are not medical expenses. 2012 tax forms 1040 Publication 502 contains additional information and examples, including a capital expense worksheet, to assist you in figuring the amount of the capital expense that you can include in your medical expenses. 2012 tax forms 1040 Also, see Publication 502 for information about deductible operating and upkeep expenses related to such capital expense items, and for information about improvements, for medical reasons, to property rented by a person with disabilities. 2012 tax forms 1040 Household Help You cannot include in medical expenses the cost of household help, even if such help is recommended by a doctor. 2012 tax forms 1040 This is a personal expense that is not deductible. 2012 tax forms 1040 However, you may be able to include certain expenses paid to a person providing nursing-type services. 2012 tax forms 1040 For more information, see Nursing Services , later. 2012 tax forms 1040 Also, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. 2012 tax forms 1040 For more information, see Qualified long-term care services under Long-Term Care, later. 2012 tax forms 1040 Hospital Services You can include in medical expenses amounts you pay for the cost of inpatient care at a hospital or similar institution if a principal reason for being there is to receive medical care. 2012 tax forms 1040 This includes amounts paid for meals and lodging. 2012 tax forms 1040 Also, see Meals and Lodging , later. 2012 tax forms 1040 Long-Term Care You can include in medical expenses amounts paid for qualified long-term care services and premiums paid for qualified long-term care insurance contracts. 2012 tax forms 1040 Qualified long-term care services. 2012 tax forms 1040   Qualified long-term care services are necessary diagnostic, preventive, therapeutic, curing, treating, mitigating, rehabilitative services, and maintenance and personal care services (defined later) that are: Required by a chronically ill individual, and Provided under a plan of care prescribed by a licensed health care practitioner. 2012 tax forms 1040 Chronically ill individual. 2012 tax forms 1040    An individual is chronically ill if, within the previous 12 months, a licensed health care practitioner has certified that the individual meets either of the following descriptions. 2012 tax forms 1040 He or she is unable to perform at least two activities of daily living without substantial assistance from another individual for at least 90 days, due to a loss of functional capacity. 2012 tax forms 1040 Activities of daily living are eating, toileting, transferring, bathing, dressing, and continence. 2012 tax forms 1040 He or she requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment. 2012 tax forms 1040 Maintenance and personal care services. 2012 tax forms 1040    Maintenance or personal care services is care which has as its primary purpose the providing of a chronically ill individual with needed assistance with his or her disabilities (including protection from threats to health and safety due to severe cognitive impairment). 2012 tax forms 1040 Qualified long-term care insurance contracts. 2012 tax forms 1040   A qualified long-term care insurance contract is an insurance contract that provides only coverage of qualified long-term care services. 2012 tax forms 1040 The contract must: Be guaranteed renewable, Not provide for a cash surrender value or other money that can be paid, assigned, pledged, or borrowed, Provide that refunds, other than refunds on the death of the insured or complete surrender or cancellation of the contract, and dividends under the contract must be used only to reduce future premiums or increase future benefits, and Generally not pay or reimburse expenses incurred for services or items that would be reimbursed under Medicare, except where Medicare is a secondary payer, or the contract makes per diem or other periodic payments without regard to expenses. 2012 tax forms 1040   The amount of qualified long-term care premiums you can include is limited. 2012 tax forms 1040 You can include the following as medical expenses on Schedule A (Form 1040). 2012 tax forms 1040 Qualified long-term care premiums up to the following amounts. 2012 tax forms 1040 Age 40 or under – $360. 2012 tax forms 1040 Age 41 to 50 – $680. 2012 tax forms 1040 Age 51 to 60 – $1,360. 2012 tax forms 1040 Age 61 to 70 – $3,640. 2012 tax forms 1040 Age 71 or over – $4,550. 2012 tax forms 1040 Unreimbursed expenses for qualified long-term care services. 2012 tax forms 1040 Note. 2012 tax forms 1040 The limit on premiums is for each person. 2012 tax forms 1040 Meals and Lodging You can include in medical expenses the cost of meals and lodging at a hospital or similar institution if your main reason for being there is to receive medical care. 2012 tax forms 1040 You may be able to include in medical expenses the cost of lodging (but not meals) not provided in a hospital or similar institution. 2012 tax forms 1040 You can include the cost of such lodging while away from home if all of the following requirements are met. 2012 tax forms 1040 The lodging is primarily for, and essential to, medical care. 2012 tax forms 1040 The medical care is provided by a doctor in a licensed hospital or in a medical care facility related to, or the equivalent of, a licensed hospital. 2012 tax forms 1040 The lodging is not lavish or extravagant under the circumstances. 2012 tax forms 1040 There is no significant element of personal pleasure, recreation, or vacation in the travel away from home. 2012 tax forms 1040 The amount you include in medical expenses for lodging cannot be more than $50 per night for each person. 2012 tax forms 1040 You can include lodging for a person traveling with the person receiving the medical care. 2012 tax forms 1040 For example, if a parent is traveling with a sick child, up to $100 per night can be included as a medical expense for lodging. 2012 tax forms 1040 (Meals are not included. 2012 tax forms 1040 ) Nursing home. 2012 tax forms 1040   You can include in medical expenses the cost of medical care in a nursing home or a home for the aged for yourself, your spouse, or your dependent(s). 2012 tax forms 1040 This includes the cost of meals and lodging in the home if a main reason for being there is to get medical care. 2012 tax forms 1040   Do not include the cost of meals and lodging if the reason for being in the home is personal. 2012 tax forms 1040 However, you can include in medical expenses the part of the cost that is for medical or nursing care. 2012 tax forms 1040 Medical Insurance Premiums You can include in medical expenses insurance premiums you pay for policies that cover medical care. 2012 tax forms 1040 Policies can provide payment for: Hospitalization, surgical fees, X-rays, Prescription drugs and insulin, Dental care, Replacement of lost or damaged contact lenses, and Qualified long-term care insurance contracts (subject to the additional limits included in the discussion on qualified long-term care insurance contracts under Long-Term Care , earlier). 2012 tax forms 1040 If you have a policy that provides payments for other than medical care, you can include the premiums for the medical care part of the policy if the charge for the medical part is reasonable. 2012 tax forms 1040 The cost of the medical portion must be separately stated in the insurance contract or given to you in a separate statement. 2012 tax forms 1040 Medicare Part A. 2012 tax forms 1040   If you are covered under social security (or if you are a government employee who paid Medicare tax), you are enrolled in Medicare Part A. 2012 tax forms 1040 The payroll tax paid for Medicare Part A is not a medical expense. 2012 tax forms 1040 If you are not covered under social security (or were not a government employee who paid Medicare tax), you can enroll voluntarily in Medicare Part A. 2012 tax forms 1040 In this situation you can include the premiums you paid for Medicare Part A as a medical expense. 2012 tax forms 1040 Medicare Part B. 2012 tax forms 1040   Medicare Part B is a supplemental medical insurance. 2012 tax forms 1040 Premiums you pay for Medicare Part B are a medical expense. 2012 tax forms 1040 If you applied for it at age 65 or after you became disabled, you can include in medical expenses the monthly premiums you paid. 2012 tax forms 1040 If you were over age 65 or disabled when you first enrolled, check with your local Social Security Administration office, or go to their website at www. 2012 tax forms 1040 SSA. 2012 tax forms 1040 gov, to find out your premium. 2012 tax forms 1040 Medicare Part D. 2012 tax forms 1040   Medicare Part D is a voluntary prescription drug insurance program for persons with Medicare Part A or Part B. 2012 tax forms 1040 You can include as a medical expense premiums you pay for Medicare Part D. 2012 tax forms 1040 Prepaid insurance premiums. 2012 tax forms 1040   Insurance premiums you pay before you are age 65 for medical care for yourself, your spouse, or your dependents after you reach age 65 are medical care expenses in the year paid if they are: Payable in equal yearly installments, or more often, and Payable for at least 10 years, or until you reach age 65 (but not for less than 5 years). 2012 tax forms 1040 Medicines You can include in medical expenses amounts you pay for prescribed medicines and drugs. 2012 tax forms 1040 A prescribed drug is one that requires a prescription by a doctor for its use by an individual. 2012 tax forms 1040 You can also include amounts you pay for insulin. 2012 tax forms 1040 Except for insulin, you cannot include in medical expenses amounts you pay for a drug that is not prescribed. 2012 tax forms 1040 Imported medicines and drugs. 2012 tax forms 1040   If you import medicines or drugs from other countries, see Medicines and Drugs From Other Countries, under What Expenses Are Not Includible, in Publication 502. 2012 tax forms 1040 Nursing Services You can include in medical expenses wages and other amounts you pay for nursing services. 2012 tax forms 1040 The services need not be performed by a nurse as long as the services are of a kind generally performed by a nurse. 2012 tax forms 1040 This includes services connected with caring for the patient's condition, such as giving medication or changing dressings, as well as bathing and grooming the patient. 2012 tax forms 1040 These services can be provided in your home or another care facility. 2012 tax forms 1040 Generally, only the amount spent for nursing services is a medical expense. 2012 tax forms 1040 If the attendant also provides personal and household services, amounts paid to the attendant must be divided between the time spent performing household and personal services and the time spent for nursing services. 2012 tax forms 1040 However, certain maintenance or personal care services provided for qualified long-term care can be included in medical expenses. 2012 tax forms 1040 See Maintenance and personal care services under Qualified long-term care services, earlier. 2012 tax forms 1040 Additionally, certain expenses for household services or for the care of a qualifying individual incurred to allow you to work may qualify for the child and dependent care credit. 2012 tax forms 1040 See Child and Dependent Care Credit , later, and Publication 503, Child and Dependent Care Expenses. 2012 tax forms 1040 You can also include in medical expenses part of the amount you pay for that attendant's meals. 2012 tax forms 1040 Divide the food expense among the household members to find the cost of the attendant's food. 2012 tax forms 1040 Then divide that cost in the same manner as in the preceding paragraph. 2012 tax forms 1040 If you had to pay additional amounts for household upkeep because of the attendant, you can include the extra amounts with your medical expenses. 2012 tax forms 1040 This includes extra rent or utilities you pay because you moved to a larger apartment to provide space for the attendant. 2012 tax forms 1040 Employment taxes. 2012 tax forms 1040   You can include as a medical expense social security tax, FUTA, Medicare tax, and state employment taxes you pay for a nurse, attendant, or other person who provides medical care. 2012 tax forms 1040 If the attendant also provides personal and household services, you can include as a medical expense only the amount of employment taxes paid for medical services as explained earlier under Nursing Services. 2012 tax forms 1040 For information on employment tax responsibilities of household employers, see Publication 926, Household Employer's Tax Guide. 2012 tax forms 1040 Transportation You can include in medical expenses amounts paid for transportation primarily for, and essential to, medical care. 2012 tax forms 1040 Car expenses. 2012 tax forms 1040    You can include out-of-pocket expenses, such as the cost of gas and oil, when you use a car for medical reasons. 2012 tax forms 1040 You cannot include depreciation, insurance, general repair, or maintenance expenses. 2012 tax forms 1040   If you do not want to use your actual expenses for 2013, you can use the standard medical mileage rate of 24 cents a mile. 2012 tax forms 1040   You can also include parking fees and tolls. 2012 tax forms 1040 You can add these fees and tolls to your medical expenses whether you use actual expenses or use the standard mileage rate. 2012 tax forms 1040 You can also include:    Bus, taxi, train, or plane fares or ambulance service, and Transportation expenses of a nurse or other person who can give injections, medications, or other treatment required by a patient who is traveling to get medical care and is unable to travel alone. 2012 tax forms 1040 Do not include transportation expenses if, for purely personal reasons, you choose to travel to another city for an operation or other medical care prescribed by your doctor. 2012 tax forms 1040 Prev  Up  Next   Home   More Online Publications